Organizational openness and relative performance information:

An investigation of the relationship between organizational design, accounting information

systems, and employee performance

Andrew H. Newman
University of South Carolina

Bryan R. Stikeleather
University of South Carolina

Nathan J. Waddoups*
University of South Carolina

This draft is current as of June 20, 2016.

Your comments are welcome. Please note this is an early draft and subject to substantial future
revision. We gratefully acknowledge the financial support provided by the Darla Moore School
of Business at the University of South Carolina.

Electronic copy available at: http://ssrn.com/abstract=2798191

 Organizational openness and relative performance information:
An investigation of the relationship between organizational design, accounting information
systems, and employee performance

ABSTRACT

This study investigates the relationship between organizational design, accounting information
systems, and employee performance. Firms are increasingly transitioning from closed
workplaces to more open ones that remove physical and social barriers that hinder employees’
ability to observe and interact with each other. We investigate whether an open workplace can
benefit firms by leading employees to choose better strategies to perform their tasks. Further, we
also examine whether the speed with which the benefits of openness are realized depend upon
how the firm’s accounting system disseminates performance feedback to employees. We predict
and find that openness increases employees’ propensity to choose better-performing strategies.
However, we find it takes time to realize benefits of openness. Importantly, we find that this
time can be reduced if the firm’s accounting system disseminates public RPI to employees
because this helps employees to more quickly identify better-performing strategies. Thus, our
study suggests that the effect of organizational design on employees’ job performance depends
upon the type of performance feedback employees receive from the firm’s accounting
information system. We discuss this and several other implications of our results.

Key words: Openness, relative performance information

Electronic copy available at: http://ssrn.com/abstract=2798191

 I. INTRODUCTION

This study investigates the relationship between organizational design, accounting

information systems, and employee performance. Firms are increasingly transitioning from

closed workplaces to more open ones that remove physical and social barriers that hinder

employees from observing and interacting with each other (IFMA; 2010; Teknion 2011; Herman

Miller 2013; Hok 2014). For example, many firms have replaced individual offices with

common work areas that are used by all employees (IFMA 2010; Kaufman 2014; Frankel 2015).

As firms move to more open workplaces it is important to understand the benefits of openness,

the processes by which openness can improve firm welfare, and what factors could moderate

such improvement. However, prior research tends to highlight the negative effects of openness

on employee performance (Oldham 1988; Shalley 1995; Evans and Johnson 2000; Smith-

Jackson and Klein 2009; Kim and de Dear 2013; Evans, Moser, Newman, and Stikeleather

2015). In contrast, we investigate whether having an open workplace leads employees to adopt

more effective strategies to complete their tasks, thus improving their overall performance.

Further, we also examine whether the speed with which performance improvement occurs

depends upon the way in which the firm’s accounting information system disseminates

performance feedback to employees.

We define a strategy as an employee’s method of expending a given level of effort in

order to complete a task (Earley, Connolly, and Lee 1989). Often, there are several possible

strategies that employees can use to complete a task. For example, to pitch prospective clients,

which is a sales task, a salesperson must choose a sales strategy, which could take the form of

using a soft-coercive sales pitch (e.g., by providing suggestions or using personal appeal) or a

hard-coercive sales pitch (e.g., by creating pressure using threats or intimidation) (McFarland et

1
al. 2006; Plouffe et al. 2016). Although the use of either strategy could enable the salesperson to

meet the firm’s minimum performance requirements (e.g., sales quotas) one strategy could

outperform the other.

In practice, employees can learn about new strategies in several ways, but one key way is

through a process referred to as observational learning whereby employees learn by watching

others, listening to them, and interacting with them, (Bandura 1977; 1986; Eraut 2004; Miller,

Zhao, and Calantone 2006; Cross 2007; Berg and Chyung 2008). As Eraut (2004) notes,

“Working alongside others allows people to observe and listen to others at work…and hence to

learn some new practices and new perspectives, to become aware of different kinds of

knowledge and expertise, and to gain some sense of other people’s tacit knowledge.”

By reducing the physical and social barriers that inhibit observation and interaction, open

workplaces facilitate more observational learning than closed workplaces (Herman Miller 2013).

Based on prior research, we expect that when employees in open workplaces learn about a new

possible strategy from observing its use by their co-workers, they will try the strategy in order to

determine whether it out-performs their existing strategy. We predict that, over time, this

experimentation will help these employees to identify better-performing strategies and ultimately

lead them to out-perform employees in closed workplaces who have less ability to observe co-

workers and thus cannot readily learn about new possible strategies from them. Critically,

however, the performance improvement from an open workplace can take a long time to

materialize because employees could observe many possible strategies being used by co-workers

that they themselves could try, each of which could be either superior or inferior to the

employee’s existing strategy.

2
 We predict that the way in which a firm’s accounting information system disseminates

performance feedback to employees in open workplaces can affect the speed with which they

identify strategies that are most likely to out-perform their existing strategy and thus increases

the extent to which openness improves employee performance. Firms have discretion in

deciding whether the accounting system will disseminate performance feedback about a specific

employee privately to that employee (e.g., during a one-on-one performance evaluation) or also

to other employees (e.g., via a posting of each salesperson’s monthly sales on a public board).

Public dissemination facilitates employees’ ability to make relative comparisons of how their

performance compares to their co-workers, and thus we refer to it as public relative performance

information, or “public RPI.” Firms commonly provide public RPI to their employees even

when it is not linked to compensation (Nordstrom, Lorenzi, and Hall 1990; O’Connell 2008;

Silverman 2011; Hannan, McPhee, Newman, and Tafkov 2013; Tafkov 2013). Providing public

RPI within an open workplace helps employees draw causal links between the strategies they

observe their co-workers using and those co-workers’ performance outcomes.1

By providing employees with accurate information about the performance of a co-worker

who used the alternative strategy, public RPI reduces an employee’s need to test for themselves

whether a possible strategy will out-perform the employee’s existing strategy. In contrast,

employees who do not receive RPI cannot easily draw these causal links and still must rely on

experimentation to identify better-performing strategies. As such, we predict that providing

employees who work in an open workplace with public RPI as opposed to no RPI will cause

1
As discussed in Section II, public RPI adds value because employees who learn about a possible strategy from
observing a co-worker using it can struggle in the absence of RPI to accurately assess the co-worker’s performance
due to the fact that performance measurement is not their core competency, causing them to find it too costly,
difficult, and/or distracting to correctly measure, record, and analyze performance data by themselves.

3
them to more quickly identify better-performing strategies and thereby ultimately improve their

overall performance.

We design a multi-period experiment to test our predictions, and our results are consistent

with our hypotheses. First, we find that average employee performance in an experimental open

workplace exceeds a theoretical benchmark for employee performance in a closed workplace.

Second, the performance improvement associated with the open workplace materializes

gradually over time as employees identify and implement better-performing strategies. Third,

we find that providing employees in an open workplace with public RPI further improves their

performance and that this effect is mediated by the fact that providing public RPI helps

employees to identify better-performing strategies more quickly.

In general, prior empirical research documents negative effects of openness. For

instance, openness has been found to be negatively correlated with employee job performance

and satisfaction (Sundstrom, Town, Rice, Osborn, and Brill 1994; Haapakangas, Helenius,

Keekinen, and Hongisto 2008; Kim and de Dear 2013) and positively correlated with the

perceived level of workplace distractions (Oldham 1988; Evans and Johnson 2000; Smith-

Jackson and Klein 2009; Kim and de Dear 2013) and with the level of employee collusion

against employers (Evans et al. 2015). However, survey data indicate that despite these potential

costs many employers are nonetheless transitioning to more open workplaces because they

believe the firm will benefit from doing so (IFMA; 2010; Teknion 2011; Herman Miller 2013;

Hok 2014). Thus, there are likely benefits that help offset these negative effects, but to date

these benefits have gone undocumented in the empirical research on openness. Our study

provides novel empirical evidence about one such benefit: specifically, we predict and find that

open workplaces can improve employee performance by leading employees to implement better

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strategies to perform tasks. Further, we also demonstrate that the benefit of an open

organizational workplace on employees’ job performance depends upon the nature of the firm’s

accounting information system. Specifically, we show that public RPI speeds up the use of

better-performing strategies in open workplaces. Ultimately, the speed at which employees learn

in an open workplace is important to firm success because firms that identify better strategies

more quickly are likely to have a strong competitive advantage in today’s complex business

environments (Sprinkle 2000; Jaber 2011).

Our study also makes two contributions to research on RPI, which can help accountants

better fulfill their key function of determining how information affects employee behavior

(Hannan et al. 2013). First, we document that providing workers in open workplaces with public

RPI can convey a unique informational benefit to them that enhances performance. Specifically,

providing public RPI provides employees with information that helps them link the possible

strategies they observe co-workers using to co-worker performance. This helps them quickly

identify strategies that are likely to out-perform their existing strategies and exclude strategies

that are likely to under-perform, thereby leading to improved performance relative to when they

do not receive RPI. This informational value is specific to open workplaces because in closed

workplaces public RPI only provides employees with performance feedback about how well co-

workers are performing but not about the strategies they are using. Thus, we document that open

workplaces and public RPI are complements. Because prior research has focused on the

presence of RPI in closed workplaces, in which employees cannot observe others’ inputs, it has

not considered this additional, important informational role that RPI can play in improving

employee performance.

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 Second, prior research shows that providing RPI in closed workplaces can have

detrimental effects on lower-ranked employees (Hannan, Krishnan, and Newman 2008; Newman

and Tafkov 2014). In contrast, we provide supplemental analysis that suggests providing

employees in open workplaces with RPI can actually help lower-performing employees by

allowing them to quickly identify and implement better strategies. This suggests that concerns

about the detrimental effect of providing RPI to lower-performing employees are likely to be

more relevant when considering closed workplaces rather than open workplaces.

II. DEVELOPMENT OF HYPOTHESES

One key component of employees’ job performance on a task is the overall effectiveness

of the strategy they use (Earley, Connolly, and Lee 1989; Earley, Connolly, and Ekegren 1989;

Locke and Latham 2002; 2013). There are often multiple strategies employees could use to

perform a given task that would allow the employee to meet minimum performance

requirements. However, holding the amount of effort exerted constant, employees using better

strategies will on average outperform their co-workers. Because employees’ base pay,

promotions, and raises often depend on how well they perform (Bonner and Sprinkle 2002), they

have incentives to identify strategies that will out-perform their existing strategy.

Firms are increasingly adopting open workplaces that remove physical and social barriers

to employee interactions because managers and consultants believe that increasing such

interactions improves employee performance (IFMA; 2010; Teknion 2011; Herman Miller 2013;

Hok 2014). Relative to closed workplaces, open workplaces allows employees to gain more

knowledge about workplace strategies by facilitating their ability to watch others while they

work, listen to them, and interact with them. We refer to such acquisition of knowledge as

observational learning (Bandura 1977; 1986). It is a unique and important way of learning as it

6
helps employees gain knowledge about the existence of alternative strategies and/or how to

implement them (Bandura 1977; 1986; Eraut 2004; Miller et al. 2006; Cross 2007; Berg and

Chyung 2008).

The effect of openness on performance via observational learning likely depends on two

factors. First, performance improvements likely depend upon whether employees implement the

new strategies they learn about or instead continue using their existing strategy. Even upon

observing an alternative strategy employees can struggle to accurately assess the strategy’s

performance due to the fact that performance measurement is not employees’ core competency,

causing them to find it too costly, difficult, and/or distracting to correctly measure, record, and

analyze performance data by themselves. Given such uncertainty, employees may be hesitant to

implement an alternative strategy. However, prior research on social influence finds that

individuals tend to copy the behavior of those around them, especially when they do not know

the best course of action (Banerjee 1992; Bikhchandani and Sharma 2000; Rao, Greve, and

Davis 2001; Laland 2004; Aronson, Wilson, and Akert 2006). Likewise, economic models of

learning generally indicate that, when confronted with uncertainty about the best course of

action, individuals will experiment with different approaches in order to obtain information that

will help them make better decisions and thereby improve their future payoffs (Sobel 2000;

Manso 2011). Consistent with the findings of prior research, we expect that as employees in an

open workplace learn about alternative strategies used by their co-workers, some will elect to try

these strategies. In contrast, employees in a closed workplace are less likely to observe their co-

workers perform tasks. Consequently, they have less awareness of alternative strategies, and

therefore are more likely to continue implementing their existing strategy.2

2
Even in closed workplaces, employees can still learn about new strategies in ways other than through observational
learning. For example employees can learn through training sessions, searching reference materials, taking on

7
 Second, the effect of openness on performance via observational learning also likely

depends upon whether implementing an alternative strategy leads employees to implement a

better or worse strategy than their existing strategy. After trying a new strategy, we expect

employees in an open workplace to compare their performance under the new strategy to

strategies they have tried in the past and to exclude from future consideration those strategies

they consider to be dominated. This experimentation will persist until employees either identify

a strategy that enables them to meet or beat their performance goals or until employees cease

their experimentation and simply select the best strategy from among those that they have tried.3

Critically, trying alternative strategies does not necessarily lead to immediate

improvements in performance because some of the alternatives tried could cause the employee to

perform worse than if the employee had remained with the existing strategy, thereby actually

causing a decrease in employee performance. However, employees will not be likely to

implement a strategy that they know to be dominated by another. Thus, any such decrease in

their performance from trying a new strategy is likely to be temporary because the employee will

abandon the strategy, will not use it again, and will ultimately implement the best-performing

strategy from among those tried. Thus, we predict that, over time, employees in an open

workplace will learn to make better strategy choices from among those they observe their co-

workers using. In contrast, employees in a closed workplace cannot readily observe their co-

workers and thus are less likely to learn about alternative strategies via observational learning.

challenging tasks, working with clients, and participating in group activities (Eraut 2004). However, these avenues
are beyond the scope of the current study.
3
Employees’ awareness of alternative possible strategies is a function of openness, which is our focus here. In
contrast, employees’ willingness to try the other possible strategies they learn about is a function of their subjective
estimate of whether it is worth trying new strategies. Among other things, this calculation depends upon the cost of
switching strategies, the time horizon of the employee, the employee’s risk preferences, and the number of
alternative strategies that could be tried. We discuss this further in Section III when describing our design choices.

8
Overall, we predict that, over time, the ability to engage in relatively more observational learning

will lead employees in an open workplace to out-perform employees in a closed workplace. We

state our prediction formally as follows:

H1: Employees in an open workplace will select better-performing strategies over

time, ultimately leading them to out-perform employees in a closed workplace.

As implied by H1, organizational openness can improve employee performance by

helping employees make better strategy choices over time. Further, as discussed below, we also

believe that the firm’s accounting information system plays an important role in determining the

speed with which this improvement occurs. A fundamental purpose of managerial accountants

and accounting systems is to provide information and feedback that facilitates learning and

performance, thereby improving employees’ abilities to make organizationally desirable

decisions (Atkinson, Banker, Kaplan, and Young 2001; Bonner and Sprinkle 2002; Sprinkle and

Williamson 2007). The firm assumes responsibility for this function because performance

measurement is not employees’ core competency, and thus can cause employees to find it too

costly, difficult, and/or distracting to correctly measure, record, and analyze performance data by

themselves.

Consequently, managers must decide what kind of feedback to provide their employees.

A manager could provide an employee with performance feedback in the context of a private,

periodic performance review. In such cases, employees learn how they have performed but not

how their co-workers have performed. In contrast, a manager could provide employees with

performance feedback that not only informs employees about their own performance but also

about how well their co-workers within the department performed. For example, a sales

manager could publicly post running sales figures for each salesperson in the department. In

these cases, employees not only know how well they have performed, but they can compare their

9
performance with that of their co-workers. We refer this type of performance feedback as public

relative performance information, or “public RPI.”

Prior research related to RPI documents that RPI can have a beneficial effect on

performance by promoting employee task engagement and motivation even if RPI is not linked

to employee compensation (Hannan et al. 2008; Tafkov 2013; Hannan et al. 2013; Newman and

Tafkov 2014). The behavioral theory underlying these performance improvements is that

individuals are motivated to distinguish themselves from their peers in order to increase social

status, enhance self-image and experience positive feelings such as pride (Festinger 1954;

Snyder and Fromkin 1980; Steele 1988; Smith 2000; Frey 2007). In order to do so, individuals

often engage in social comparison because it allows them to compare their own abilities with the

abilities of others (Festinger 1954; Suls and Wheeler 2000; Brown, Ferris, Heller, and Keeping

2007), which in turn motivates higher effort and performance.

In contrast, we predict that, separate from any motivational effect, the provision of public

RPI will also have an informational effect that improves performance by reducing uncertainty

regarding whether a strategy an employee observes a co-worker using is likely to over –perform

or under-perform their existing strategy. Specifically, we predict that within open workplaces,

providing employees with public RPI will significantly increase the speed at which they identify

the best-performing strategies from among those that they observe their co-workers using,

thereby leading to more rapid improvements in strategy choices relative to open workplaces that

do not provide public RPI. This is because public RPI facilitates the ability of employees within

an open workplace to link the task inputs they observe co-workers using (i.e., co-workers’

strategies) to the outputs that correspond to those inputs (i.e., the co-workers’ performance

level). That is, within open workplaces, providing employees with public RPI enables them not

10
only to observe how their co-workers are performing common tasks but also how well they are

performing them.

The ability to link inputs to outputs can help employees quickly determine whether a

given alternative strategy is likely to out-perform the employee’s existing strategy. In effect,

public RPI mitigates the need of employees to try alternative strategies for themselves. Rather,

they can observe how well their co-workers perform when using an alternative strategy to gauge

the likelihood that the strategy will out-perform their own and to eliminate dominated strategies.

Thus, the provision of public RPI allows employees to obtain simultaneous feedback about the

effectiveness of multiple strategies, whereas in the absence of such RPI employees can only

obtain feedback about the effectiveness of a single strategy at a time as they implement the

strategy for themselves.

In summary, providing RPI speeds up learning in an open workplace by sending an

informational signal to employees about the effectiveness of alternative strategies, thereby

increasing the speed with which they identify better-performing strategies. Further, the faster

that employees learn which alternative strategies, if any, are likely to out-perform their existing

strategy, the more time they have to implement these strategies. This in turn should increase the

overall frequency with which employees use high-performing strategies and improve their

overall performance. We state our prediction formally as follows:

H2: Employees in an open workplace will more quickly identify better strategies when they
receive public RPI relative to when they do not, thereby increasing their overall
performance.

In sum, H2 predicts that more quickly identifying better strategies mediates the positive effect of

providing public RPI on employee performance.

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 III. METHOD

Overview of Setting

Prior to describing our experiment, we first present an overview of the setting of interest.

In the natural setting, employee productivity is a function of the level and efficiency of the

employees’ effort. Effort level refers to how much effort an employee expends. Effort

efficiency refers to the level of output associated with a given effort level. Our focus here is on

the extent to which openness helps employees to “work smarter;” that is, we examine whether

openness improves employee efficiency as opposed to whether it induces employees to expend

more effort. Thus, we examine a setting in which any differences in employee performance arise

from differences in the efficiency of the strategies they implement rather than differences in the

level of effort they expend. To do this, we hold constant the level of employee effort (at zero)

required to implement any given strategy.

Within our setting, employees generate output for a firm by selecting a strategy to

implement each period.4 For simplicity, we assume there are two possible strategies, which we

refer to as strategy A and strategy B, and that the output associated with strategy A exceeds that

associated with strategy B. Though the output generated by implementing strategy A exceeds

that associated with strategy B, strategy B is nonetheless still “viable” because its use allows

employees to meet the firm’s minimum production requirements. As a reflection of the

heterogeneity in employees’ workplace strategies that occurs in the natural setting, we assume

4
We assume the firm allows employees to exercise discretion about the way they complete a task. One reason the
firm might do so is that any one of a multiple number of strategies could enable employees to meet the firm’s
performance standards and different strategies could play to the strengths of different employees. In addition,
employers could wish to avoid micro-managing employees, since prior research finds that allowing employees more
autonomy to do their jobs improves employee satisfaction, motivation, and performance (Deci and Ryan 1987; Ryan
and Deci 2000; Baard, Deci, and Ryan 2004; Christ, Emett, Summers, and Wood 2013). Finally, information
asymmetry between managers and employees can prevent employers from effectively monitoring the strategies that
employees use to perform all of their various tasks, and thus employers could simply pay employees based on output
and let employees choose inputs (i.e., strategies).

12
that the pre-existing (i.e., initial) strategy of half of the employees is strategy A and the pre-

existing strategy of the other half of the employees is strategy B. We assume that each employee

is also aware of the level of output generated from implementing his respective initial strategy.

In our setting, an employee’s compensation is increasing in the level of output the

employee generates (i.e., the level of output generated by the strategy the employee chooses to

implement). Employees receive feedback about their level of output at the end of each period

prior to implementing a strategy in the next period. Finally, to better isolate the effect of

observational learning on employees’ strategy choices, in our setting employees can learn about

the other strategy only by observing the strategy of their co-worker. Within this general setting,

we are interested in three kinds of workplaces: (i) a closed workplace in which employees cannot

observe their co-worker’s strategy, (ii) an open workplace in which they can do so, and (iii) an

open workplace in which employees receive feedback not only about their own output level but

also about their co-worker’s level of output for a period (i.e., receive public RPI).

In the closed workplace, employees do not observe the workplace strategy used by a co-

worker and thus cannot engage in observational learning that would allow them to implement a

new workplace strategy. Consequently, these employees continue to implement their pre-

existing strategy period after period: that is, employees with a pre-existing strategy of A continue

to implement A and those with a pre-existing strategy of B continue to implement B because

they do not know about the other strategy. Thus, because both strategy A and strategy B are

initially equally popular, the overall theoretical frequency with which employees in the closed

workplace implement the better-performing strategy (i.e., A) is 50%. Because there is no

variation in employee behavior in the closed workplace, we do not collect empirical data about

13
behavior in this setting and instead simply use it as a benchmark to assess changes in employee

performance in an open workplace over time.

In the open workplace, employees can engage in observational learning by observing the

strategy used by a co-worker. Thus, while these employees have a pre-existing strategy (A or

B), they also learn about the other strategy and could choose to implement it if desired. Notably,

an open workplace by itself does not allow employees to learn the performance outcome

associated with the co-worker’s strategy without implementing it themselves. While we assume

that both strategies are initially equally popular among employees, over time we would expect

that as employees try the other strategy they will ultimately gravitate toward using strategy A, as

they identify it is as the most efficient strategy. In contrast, if employees do not try the other

strategy or simply randomly implement strategies, then we would expect the theoretical

frequency with which they would select strategy A to equal the theoretical frequency in the

closed workplace (i.e., 50%). Note that it is not irrational for employees in an open workplace to

remain with their pre-existing strategy and never try the other workplace strategy; such behavior

could simply reflect an employee’s strong aversion to the uncertainty of whether the other

workplace strategy would generate more output than the pre-existing strategy, whose output is

known. However, if an employee does choose to implement the other strategy, they should

theoretically do so as soon as possible because the earlier that information about the other

strategy is obtained the more valuable it becomes.

We examine two kinds of open workplaces. In the first workplace (Open), employees

observe an alternative workplace strategy, but the firm’s accounting information system does not

provide them with public RPI, and thus they lack information that would enable them to link the

strategy they observe a co-worker using to the co-worker’s output. Thus, in order to acquire

14
information about a potential strategy’s relative effectiveness, employees must take the time to

implement the potential strategy for themselves. In the second workplace (Open+RPI),

employees still observe an alternative workplace strategy, but now the firm’s accounting

information system provides them with public RPI. Thus, these employees can link the strategy

they observe a co-worker using to the co-worker’s output. This allows them to more quickly

identify whether the strategy they observe their co-worker using is likely to outperform their

existing strategy because they do not need to take the time to implement the strategy in order to

acquire information about its relative effectiveness.5

Because employee behavior can vary in our open workplaces, we use an experiment to

collect empirical data about employee behavior in both types of open workplaces over the course

of three decision periods. We can then compare how employee performance in the Open

workplace compares to the closed theoretical benchmark. In our open workplaces, if employees

engage in observational learning, then we expect that, consistent with H1, the average proportion

of employees selecting strategy A over the three periods will exceed 50% (i.e., the closed

benchmark). Further, consistent with H2, we expect employees in the Open+RPI workplace to

more frequently implement strategy A (the better-performing strategy) than employees in the

Open workplace because they will more quickly identify strategy A as the better-performing

strategy. We now provide details about the procedures used to run our experiment.

Experimental Procedures

We recruited 62 undergraduate students at a large university to participate in our study at

the university’s behavioral lab. The mean age of the participants is 20 years, and 48.4 percent

are female. There are no significant age or gender differences across conditions (all p > 0.78,

5
As the number of alternative strategies that an employee observes co-workers using increases, the greater the
theoretical advantage of having public RPI.

15
two-tailed). Thirty-six individuals participated in one of three Open workplace sessions and 26

individuals participated in one of two Open+RPI workplace sessions. Participants assumed the

role of employees working at a hypothetical firm who generated output for the firm by selecting

a workplace strategy (A or B) to implement each period for three decision periods. Strategy A

yields output of 100, while strategy B yields output of 70.6

Half of the employees are instructed to assume that their pre-existing strategy (i.e., the

strategy used prior to the first decision period) is A and the other half are instructed to assume

that it is B, and each employee is also informed of his level of output generated in the pre-

existing period. Prior to the first decision period, each employee is paired with another

employee (the “co-worker”) whose pre-existing strategy differs from the employee (i.e., an

employee with a pre-existing strategy of A is paired with one with a pre-existing strategy of B).

To mirror openness, employees are able to observe not only their own pre-existing strategy but

also the pre-existing strategy of their co-worker. In the Open condition, employees do not

observe the level of their co-worker’s output for the pre-existing period, but in the Open+RPI

condition they do.

At the beginning of each decision period, each employee selects a strategy (A or B) to

use for the period and then receives performance feedback at the end of the period (more details

6
Prior to running our five experimental sessions, we randomly determined which condition would be associated
with each session (with the only qualifier being that there would be at least two sessions for each condition). We
had originally intended to use the fifth (last) session to supplement any significant imbalances in the sample sizes
across conditions from the prior four sessions. However, because our initial four sessions led to balanced sample
sizes across conditions, we decided to use the fifth session to run a third Open session that switched the outputs
yielded by selecting Strategy A versus B. That is, selecting Strategy A in this session yielded 70 while selecting B
yielded 100. We did this in order to determine if there was a significant effect of having the better-performing
strategy be strategy A as opposed to strategy B, since individuals might naturally be more inclined to implement a
strategy labelled as “A” than one labelled as “B.” We find no evidence that the fifth session, in which strategy B is
the better-performing strategy, differs significantly from the other Open condition sessions in which strategy A is the
better-performing strategy. Thus, we pool the three Open sessions together. Further, for ease in exposition, we
always refer to the better-performing strategy as “A” and the worse-performing strategy as “B.”

16
below). Employees are paid on the basis of the output they generate for one randomly selected

period. Their payoff function is as follows:

Employee Payoff = $0.20 * Level of Output for a random period

Implementing strategy A therefore yields a payoff to the employee of $20 (=$0.20 * 100), and

implementing strategy B yields $14 (= $0.20 * 70).

Each decision period in the study consists of two steps. First, employees use a form to

select a strategy to implement for the period (Strategy A or B). After all employees had selected

a strategy, the experimenters collected each employee’s form and privately recorded each

employee’s strategy choice in a log to ensure that employees could not alter their earlier choices.

On each employee’s form, the experimenter provided performance feedback that informed the

employee of the level of his or her output for the period. In addition, employees were also

informed of the strategy that their paired co-worker had chosen for the period. In the Open

condition, employees were not told anything about the level of output their co-worker generated

for the period. In contrast, employees in the Open+RPI condition were informed of the level of

their co-worker’s output for the period. Each form was then handed back to its respective

employee for review, and then a new decision period commenced.

Employees completed a total of three decision periods. Following review of the final

decision period, a participant volunteered to roll a die to determine the payoff period for the

session. Next, the employees completed a post-experimental questionnaire (PEQ) as the

experimenters prepared the payoffs. After all employees had completed the PEQ, they were

dismissed individually to receive their payment in private.

In sum, the experiment is designed such that the average overall frequencies with which

employees select the better-performing strategy in the Open and Open+RPI conditions are

17
expected to equal the theoretical frequency that they would do so in the Closed workplace (i.e.,

50%) unless employees try the alternative strategy and learn which of the two strategies out-

performs the other. In addition, limiting the number of strategies to two biases against finding

significant performance differences between these two kinds of open workplaces (i.e., biases

against H2). The reason is that as the number of alternative strategies that an employee observes

co-workers using increases, it increases the amount of time required to identify the best-

performing strategy in the Open condition. However, the number of strategies has no influence

on the amount of time it takes employees to identify the best-performing strategy in the

Open+RPI condition because they have the capability of immediately linking each strategy to the

respective level of output that it generates. Therefore, increasing the number of strategies

increases the likelihood that employees identify the better-performing strategy more quickly in

the Open+RPI condition than in Open condition (biases in favor of H2).

To illustrate this point, because employees in the Open+RPI condition observe both their

co-worker’s pre-existing strategy and the level of output generated by the co-worker prior to the

first decision period, employees in the Open+RPI condition have the capability to identify

strategy A as the best-performing strategy prior to implementing a strategy in the first decision

period, though they must make this inference completely on their own. In contrast, the earliest

that employees in the Open condition could identify strategy A as the best-performing strategy is

prior to implementing a strategy in the second decision period. This one-period delay is because

employees in the Open condition must first implement an alternative strategy to assess its

effectiveness. If there were more than two strategies in the experiment then it would increase the

minimum time required for participants in the Open condition to identify Strategy A as the best-

18
performing strategy via trial and error while not altering the time required for participants in the

Open+RPI condition to identify strategy A as the best-performing strategy.

IV. RESULTS

Recall that in our setting, employee performance is a function only of the employee’s

strategy. Thus, an employee who selects strategy A more frequently will always outperform an

employee who selects strategy A less frequently. For example, an employee who selects strategy

A in all three periods will have an average output of 100 [ = (100 * 3)/3] whereas an employee

who only selected strategy A in one period will have an average output of 80 [ = (100*1 + 70*2)

/ 3]. Because output can only vary based on the employee’s strategy choices, we more directly

measure employee performance by comparing the frequency with which employees select the

best strategy across workplaces and over time.7

Descriptive Statistics

For each decision period, Table 1 reports the percentage of employees in the Open and

Open+RPI conditions who selected the best-performing strategy (A).

[Insert Table 1 Here]

Consistent with H1, employees in the Open condition on average selected strategy A 70.4% of

the time, which exceeds the 50% theoretical benchmark frequency for a closed workplace.

Further consistent with H1, employees appear to have selected strategy A more frequently over

time, with 63.9% selecting strategy A in Period 1 and 86.1% doing so in Period 3. Consistent

with H2, employees in the Open+RPI condition on average selected strategy A more frequently

than employees in the Open condition (84.6% vs. 70.4%), and, further, they did so in all three

7
An alternative performance measure would be the actual level of participant output in each period. Because, this
performance measure is more parameter driven we use the frequency with which employees select the best strategy
as our primary performance measure. However, the statistical inferences we report in this section remain the same if
we use this alternative performance measure to conduct our analysis.

19
decision periods. Finally, in the PEQ, we find that 96% of employees in the Open condition and

94% in the Open+RPI condition indicated that strategy A was the best performing strategy.

Neither percentage is significantly greater than the other (χ2 = .10, p = .76) and each is

significantly greater than 50% (i.e., random guessing between A and B) (both p-values < 0.01,

untabulated). This suggests that employees in both open conditions learned the optimal strategy

at some point during the study and that a similar amount of learning had taken place across the

two conditions by the end of the third decision period.8 We now proceed to our formal test of

H1.

Test of H1

H1 predicts that employees in an open workplace will make better strategy choices over

time, ultimately leading them to out-perform employees in a closed workspace. We conduct two

analyses to test H1. First, we test whether the overall average frequency with which employees

in the Open condition selected strategy A (70.4%) exceeds the 50% closed workplace benchmark

using a one-sample t-test.9 To conduct the t-test, we first calculate the mean frequency with

which each participant in the Open condition selected strategy A and then compute the overall

mean of the individual means (70.4%) and compare it to the 50% theoretical closed benchmark.

As shown in Panel A of Table 2, the mean frequency with which employees in the Open

condition selected strategy A significantly exceeds the closed benchmark (t = 4.29, p < .01, one-

tailed). This result is consistent with our H1 prediction that employees in an open workplace

would ultimately outperform employees in a closed workspace. Next, we examine if this

superior performance is a result of employees choosing better strategies over time.

8
Specifically, we asked participants, “What strategy do you believe yielded the highest level of output?”
Participants selected from “Strategy A; Strategy B; Both strategies yielded the same output; I do not know.”
9
Because employees in the Open condition made repeated strategy choices, the use of a chi-squared test is not
appropriate because this test cannot control for repeated measurements. Further, because the 50% frequency is a
hypothetical benchmark, we cannot compare these two frequencies using logistic regressions.

20
 [Insert Table 2 Here]

To test whether employees in the Open condition were more likely to select strategy A

over time, we run a logistic regression clustered by employee that regresses a variable indicating

whether the employee selects strategy A (StratA = 1 if employee selected strategy A and 0

otherwise) on a variable for the period in which the strategy was selected (Period). As shown in

Panel B of Table 2, Period has a significantly positive coefficient (β = .55, z = 2.14, p = .02, one-

tailed), indicating that, consistent with H1, the probability of selecting better-performing

strategies within the Open condition increases over time.

Following up on this result, we next investigate how participants’ selection of strategies

in the Open condition compared to the theoretical closed benchmark for each of the three

decision periods. Panel C of Table 2 reports the results of three separate chi-squared goodness of

fit tests comparing the period-by-period mean percentage of participants selecting strategy A in

the Open condition to the theoretical closed benchmark. We find that the percentage of

participants selecting strategy A in the Open condition is not significantly higher than the 50%

benchmark in period 1 (p = 0.10) or period 2 (p = 0.18) but is significantly higher in period 3 (p

< 0.01). These results are consistent with our prediction that it takes times for the benefits of

openness to materialize.

To illustrate how the beneficial effects of openness increase over time, Figure 1 plots the

frequency with which employees in the two open conditions selected strategy A for each of the

three decision periods. The figure also depicts how this frequency changed relative to the

starting point of 50% in the pre-decision period. Finally, for comparative purposes, Figure 1 also

plots the 50% frequency for the theoretical closed benchmark for each of the periods.

[Insert Figure 1 Here]

21
In sum, our results are consistent with H1: employees in the Open condition made better task-

strategy choices over time, which ultimately led them to out-perform the theoretical closed

workplace benchmark.

Test of H2

H2 predicts that employees in an open workplace will more quickly identify better

strategies when they receive public RPI relative to when they do not, thereby increasing their

overall performance. We test H2 in two stages; first we test whether employees’ overall

performance was higher in the Open+RPI verus Open condition and then we test whether, if so,

this is because they more quickly identified strategy A as the better strategy. To test whether

providing public RPI improves employee performance in open workplaces, we compare the

mean frequencies with which employees implemented strategy A in the Open and Open+RPI

conditions. We compute a mean frequency for each participant and then average these

individual mean frequencies to find the overall mean frequency for each condition. We find that

employees in the Open+RPI condition (84.6%, see Panel A of Table 1) selected strategy A more

often than employees in the Open condition (70.4%, see Panel A of Table 1) (t =1.98, p = .03,

one-tailed, untabulated). These results provide support for H2 by indicating that providing

public RPI in an open workplace increases the use of better-performing strategies.10

Next, after establishing that public RPI increases employee performance, we perform

mediation analysis (Hayes 2013) to test whether the reason providing public RPI improves

employee performance is because it helps employees to more quickly identify better strategies

(i.e., whether differences in the speed with which employees identify the best strategy mediates

the relationship between public RPI and employee performance). Recall that in the PEQ 96%

10
We use a t-test to be consistent with our testing of H1. Using a repeated measures logistic regression (e.g.,
P(StratA) = α + β * RPI + ε) leads to similar statistical inferences (p = .03, one-tailed).

22
(94%) of employees in the Open (Open+RPI) condition correctly indicated that strategy A yields

the highest level of output; however, our focus here is on determining when they first made this

determination and whether differences across conditions in the speed of this determination helps

explains performance differences. Figure 2 illustrates our mediation model.

[Insert Figure 2]

As shown in Figure 2, our model consists of three variables. The independent variable,

public RPI, takes the value of 1 for observations in the Open+RPI condition and 0 for

observations in the Open condition. The dependent variable, employee performance, is the mean

frequency with which each employee selected strategy A over the three periods. We compute

the mean frequency for each employee to control for repeated measurements and because our

mediating variable, speed of identification, is measured once per participant. Specifically speed

of identification reflects an employee’s response to the following PEQ question: “When did you

determine which strategy (A or B) would yield the highest level of output?” Participants could

indicate that they made this determination prior to the first period, prior to the second period,

prior to the third period, or they could indicate that they did not remember when they made the

determination or never determined the strategy that yielded the highest level of output.11 We

code individuals who indicated they determined the optimal strategy prior to the first period with

a value of 3, prior to the second period with a value of 2, and prior to the third period with a

11
A chi-squared test including all responses indicates that the distribution of responses to this PEQ question differs
between the two open conditions (chi-squared = 14.23, p < .01, untabulated). However, to conduct our tests, we
consider only the sub-sample of participants who indicated that they determined the best strategy within the first
three decision periods. In order to avoid spurious results, when performing our mediation analysis we exclude the
eight individuals who indicated that they never determined the best strategy or could not remember when they
determined the best strategy. Including those eight participants in the mediation analysis leads to inferentially
identical results.

23
value of 1. Thus, higher values reflect a greater speed of identification, and therefore we expect

public RPI to have a positive association with employees’ speed of identification.12

As Figure 2 illustrates, the regression coefficient between public RPI and speed of

identification is statistically significant (.79, p < .01, one-tailed), as is the coefficient between

speed of identification and employee performance (.13, p < .01, one-tailed). The indirect effect is

(.79)*(.13) = .10. To test whether this indirect effect is statistically significant, we compute a

95% bootstrap confidence interval based on 5,000 bootstrap samples (Hayes 2013). The 95%

confidence interval is entirely above zero (.02 to .22) indicating that the indirect effect is

significant. In sum, the mediation analysis supports our prediction (H2) that providing

employees in an open workplace with public RPI will facilitate quicker identification of better-

performing strategies, which subsequently improves overall employee performance.13

Consistent with H2’s prediction that public RPI will speed up the identification of better

performing strategies, Figure 1 illustrates that the largest period-to-period increase in the

percentage of employees implementing strategy A occurred earlier for employees in the

Open+RPI than in the Open condition. Specifically, there was a 26.9 percent increase in the

proportion of Open+RPI employees implementing strategy A between the pre-decision period

12
We find a significant positive correlation between participants’ perceptions about when they determined the
optimal strategy and when they first implemented the optimal strategy (Pearson correlation = 0.25, p = 0.03, one-
tailed), which supports the construct validity of the self-reported speed of identification.
13
Prior research has found that RPI creates a sense of competition amongst peers and motivates employees to be
concerned about how well they perform relative to their peers (e.g., Hannan et al. 2013). For our RPI condition, we
captured participants’ sense of competition and their concern about how well they performed relative to their peers
via two questions. First, we asked them to report (on a seven-point scale) “the extent to which you felt were
competing against your co-worker.” Second, we asked them to report (on a seven-point scale) “were you nervous
and concerned about how your level of output compared to your co-worker’s?”. Participants’ responses to these
questions are not correlated with their responses to the speed of identification question reported previously. This
provides evidence that our speed of identification measure is capturing something separate from participants’
competition or nervousness. We also re-run our mediation model so as to include our measures of competition and
nervousness as potential mediators in addition to and in lieu of our speed of identification measure. We find that
competition and nervousness never mediate the relationship between RPI and performance while speed of
identification continues to do so. This suggests that RPI is influencing performance through a mechanism separate
from competition or nervousness.

24
and Period 1 (76.9 percent in period 1 versus 50 percent in pre-decision period per Table 1). In

contrast, the largest percentage increase in the proportion of Open employees implementing

strategy A did not occur until later, between periods 2 and 3, when there was a 25 percent

increase (86.1 percent in Period 3 versus 61.1 in Period 2 per Table1).

Supplemental Analysis: The Cost and Benefit of Openness

Recall that implementing an alternative strategy could increase or decrease employee

performance because the alternative implemented could cause the employee to perform better or

worse than if the employee had remained with his existing strategy. Thus, openness could

impose a cost on employee performance or benefit it.

We measure the cost of openness as follows. We refer to employees as “high-

performers” when they implement strategy A (the best strategy) and as “low-performers” when

they implement strategy B (the inferior strategy). In the theoretical closed workplace, high-

performers would always implement strategy A due to their lack of awareness of strategy B and

thus remain high-performing. In both of the open conditions, the initial proportion of high-

performers was 50% because we instructed half of the employees to assume that they had used

strategy A in the pre-decision period. However, in contrast to the theoretical closed workplace,

in our open conditions employees were aware of strategy B and could switch to it in a decision

period to see if it out-performed their pre-decision period strategy. Thus, while these employees

would have continued to be high-performers over time in a closed workplace, in an open

workplace they could become low-performers if they tried the alternative, inferior strategy B. In

such cases, openness is not beneficial but costly to employee performance.

To assess the cost of openness, for each employee in the Open condition who was a high-

performer in the pre-decision period, we compute the mean frequency that the employee selected

25
strategy B (i.e., made a worse strategy selection) across the three subsequent decision periods.

On average, these employees selected strategy B 24.1% of the time. We also conduct a similar

analysis of employees who were initially high-performers in the Open+RPI condition. On

average these employees selected strategy B 15.4% of the time. Thus, openness led high-

performers to make worse strategy selections than they would have theoretically made in a

closed workplace 24.1% of the time in the Open condition versus 15.4% of the time in the

Open+RPI condition. An untabulated t-test does not indicate a significant difference between

these mean frequencies (p = .16, one tailed, untabulated). In sum, providing employees with

public RPI does not appear to significantly mitigate the cost of openness.

Having assessed the cost of openness, we now assess the benefit. Just as 50% of the

employees in the open conditions were initially high-performers in the pre-decision period, the

other 50% were low-performers. However, while these employees would have continued to be

low-performers over time in a closed workplace, in an open workplace they were aware of

strategy A and could become high-performers if they chose to implement it. To assess the

benefit of openness, for each employee in the Open condition who was a low-performer in the

pre-decision period, we compute the mean frequency that the employee selected strategy A (i.e.,

made a better strategy selection) across the three decision periods. On average, these employees

selected strategy A 64.8% of the time. We also conduct a similar analysis of employees who

were initially low-performers in the Open+RPI condition. On average these employees selected

strategy A 84.6% of the time. Thus, openness led low-performers to make better strategy

selections than they would have theoretically made in a closed workplace 64.80% of the time in

the Open condition versus 84.6% of the time in the Open+RPI condition. An untabulated t-test

indicates a significant difference in the mean frequencies (p < .05 one-tailed, untabulated). In

26
sum, providing employees with public RPI does appear to significantly increase the benefit of

openness.

The prior analysis compared the cost and benefit of openness separately across the Open

and Open+RPI conditions. We now present a within condition summary that reflects how the

respective cost and benefit in each condition combines to reflect the average performance

amounts we originally reported in Table 1. As shown in Table 1, in the Open condition

employees on average selected the optimal strategy, A, 70.4% of the time, which exceeds the

50% theoretical benchmark for the closed workplace by 20.4%. This 20.4% improvement

reflects the net effect of the 24.1% deterioration in the performance of high-performers and the

64.8% improvement in the performance of low-performers (i.e., [-24.1+64.8] / 2 = 20.4%).

Likewise, Table 1 shows that employees in the Open+RPI condition selected strategy A 84.6%

of the time, which exceeds the 50% theoretical benchmark for the closed workplace by 34.6%.

The 34.6% average improvement in the Open+RPI condition compared to the closed benchmark

reflects the net effect of the 15.4% deterioration in the performance of high-performers and the

84.6% improvement in the performance of low-performers (i.e., [-15.4% + 84.6] / 2 = 34.6%).

V. CONCLUSION

Our study shows that openness can increase employees’ propensity to choose better-

performing strategies, thereby improving their performance. Further, we also document that it

can take significant time for the benefits of open workplaces to materialize as employees must

determine which strategies are better than others. Importantly, we find that this time can be

reduced if the firm’s accounting information system disseminates public RPI to employees, as

this helps employees to quickly identify better-performing strategies. Thus, we document that

the effect of organizational design on employees’ job performance depends upon the nature of

27
the accounting information system. Further, the results of our supplemental analysis provide

additional insights by highlighting that openness can impose costs or benefits on an employee

depending upon the pre-existing performance of the employee. However, we find that given

sufficient time the benefit of exposing low-performers to a better-performing strategy via an

open workplace more than offsets the cost of exposing high-performers to a worse-performing

strategy. Also, providing public RPI could benefit both high-performers and low-performers by

helping high-performers avoid trying inferior strategies and helping low-performers identify

better-performing strategies more quickly. Interestingly, our analysis suggests that the benefit of

providing employees with public RPI accrues primarily to low-performers and does not appear to

significantly help high-performers.

Importantly, our study highlights the importance of firms considering their organizational

structure and accounting information system decisions in conjunction. Firms are increasingly

transitioning from closed workplaces to more open ones. While survey data indicate that many

firms are doing so (IFMA; 2010; Teknion 2011; Herman Miller 2013; Hok 2014) because they

believe it will be beneficial to the firm, this idea is contentious (Elsbach and Pratt 2007; Kim and

de Dear 2013), and prior empirical research has instead documented costs of openness (Oldham

1988; Evans and Johnson 2000; Smith-Jackson and Klein 2009; Kim and de Dear 2013; Evans et

al. 2015). To our knowledge, our study is one of the first to provide empirical evidence that

open workplaces can benefit firms. We do so by providing insights about how openness

increases employees’ observational learning which ultimately leads to the use of better-

performing strategies. Additionally, we show that public RPI speeds up the use of better-

performing strategies by expanding employees observational learning, enabling them to not only

observe how their co-workers are performing common tasks but also how well they are

28
performing them. Ultimately, the speed at which employees learn in an open workplace is

important to firm success because firms that identify better strategies more quickly are likely to

have a strong competitive advantage in today’s complex business environments (Sprinkle 2000;

Jaber 2011). Practically, our results suggest that firms that are considering making the transition

to an open workplace (or have already done so) may benefit from considering how that decision

could interact with the design of their accounting information system.

With respect to RPI, one of the important functions of accountants is determining how

information affects employee behavior (Hannan et al. 2013). Along these lines, prior research

documents that providing RPI has effort-inducing effects on employees. This occurs for two

reasons. First, incorporating RPI into employees’ incentive contracts can improve incentive

alignment by reducing the environmental noise associated with the performance measures that

are contracted upon (see, e.g., Frederickson 1992). Second, even when not contracted upon, RPI

can motivate employees to expend more productive effort due to their desire to maintain a

favorable social image amongst their peers (Hannan et al. 2008; Tafkov 2013; Newman and

Tafkov 2014).

In contrast, our research highlights a role for RPI that is independent of its effort-

inducing properties. In doing so, we contribute to RPI-based research in two ways. First, we

highlight an additional informational role for RPI. That is, within open work workplaces,

providing public RPI helps employees to draw causal links between alternative strategies and

performance, which helps them quickly identify better-performing strategies, thereby leading to

improved performance relative to when they do not receive RPI. This informational value is

specific to open workplaces, because in closed workplaces public RPI only provides employees

with performance feedback about how well co-workers are performing but not about the

29
strategies they are using. Thus, we document that open workplaces and public RPI are

complements. Because prior research has focused on the presence of RPI in closed workplaces,

in which employees cannot observe others’ inputs, it has not considered this additional,

important informational role that RPI can play in improving employee performance.

Second, prior research shows that in closed workplaces the presence of RPI increases the

perceived pressure employees feel to outperform co-workers, which in turn causes lower-ranked

employees to adopt riskier strategies that ultimately under-perform more conservative strategies

and thus harm their performance (Hannan et al. 2008; Newman and Tafkov 2014). In contrast,

we show that providing RPI to lower-performing employees in an open workplace can actually

benefit them by allowing them to identify better strategies. Thus, although firms may need to

worry about RPI leading to inferior strategy selection in closed workplaces this should be less of

a concern in open workplaces due to the informational effect of RPI having a positive effect on

employee strategy selection. Overall, this suggests that the openness of the workplace setting is

a critical determinant of how RPI influences the strategy selection and performance of lower-

performing employees.

There are several avenues for future research. First, whereas we focus on how openness

and RPI influence employees’ strategy selection, future research could examine if an open

workplace improves managers’ monitoring capabilities and, if so, how that influences their

design of accounting and feedback systems. Second, in order to best isolate the informational

effect of RPI on employees’ strategy choices, our experimental task required participants to

make strategy selections but did not require them to subsequently exert effort. Thus, we

intentionally limited any motivational effect of RPI in our setting. Future research could

examine settings in which RPI can produce both motivational and informational effects to

30
provide insights on the potential joint benefits that might arise and factors that might influence

such benefits. Third, we purposefully did not impose switching costs on participants in our

experiment because we would expect that the presence of switching costs would only increase

the value of providing RPI in open workplaces. Thus, in our experiment this would have biased

in favor of H2. In practice, however, employees may incur various types of costs associated with

switching strategies and future research could examine how the presence, type, or magnitude of

switching costs influences our findings. Finally, we document an informational effect of RPI

while examining a particular form of openness (strategy awareness with certainty) and a

particular form of RPI (detailed public RPI). Openness can take other forms such as employees

being able to observe co-workers’ reporting decisions or effort levels and the “noise” associated

with an open workplace can likely vary. Likewise, RPI can vary in its coarseness and frequency.

Future research could investigate whether the informational effect of RPI on performance varies

as the nature of openness in the workplace and/or the form of RPI varies.

31
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 FIGURE 1a
Percentage of Participants Selecting Strategy A by Period

Open+RPI
100.0%
Open
Percentage Selecting Strategy A

Closed

75.0%

50.0%

25.0% b
Pre-Decision Period 1 Period 2 Period 3

a
Figure 1 plots the frequency with which employees in the two open conditions selected strategy A for
each of the three decision periods. Figure 1 also plots the 50% frequency for the theoretical closed
benchmark for each of the periods.
b
Half of the participants (50%) were told to assume that prior to Period 1 they used strategy A—the
other half were told to assume that they used strategy B. We label this time period prior to Period 1 as
the Pre-Decision period.

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 FIGURE 2
Test of H2: Mediation Analysisa

Speed ofc
A = .79 Identification B = .13
(p < .01) (p < .01)

C = .20e
Public RPIb
(p < .01) Employeed
(Yes/No) Performance
C’ = .10e
(p = .08)

a
All tests are one-sided.
b
Participants receiving Public RPI receive performance feedback about their paired co-worker’s level of
output.
c
Speed of identification is measured by asking participants in the PEQ the following question: When did
you determine which strategy (A or B) would yield the highest level of output?”. Participants could
indicate that they learned prior to the first period, prior to the second period, prior to the third period, or
they could indicate that they did not remember or never learned the strategy that yielded the highest level
of output. We code individuals who responded learning prior to the first period with a value of 3, prior to
the second period with a value of 2, and prior to the third period with a value of 1. We assign higher
values to those who learned more quickly so that the relationship between public RPI and speed of
identification can be interpreted as positive instead of negative (i.e., public RPI has a positive effect on
speed of identification instead of a negative effect on time to identify.
d
Employee performance is measured by using the mean frequency over three periods in which the
employee selected strategy A.
e
C represents the total effect of Public RPI on Strategy Performance without considering the effect of the
mediating variable. C’ represents the direct effect of Public RPI on Strategy Performance when including
the effect of the mediating variable.

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 TABLE 1
Mean Percentage (Standard Error) of Participants Selecting Strategy Aa

Conditionb Period 1 Period 2 Period 3 Average

Openc (n = 36) 63.9% 61.1% 86.1% 70.4%

(8.12%) (8.24%) (5.85%) (4.75%)

Open+RPId (n=26) 76.9% 84.6% 92.3% 84.6%

(8.43%) (7.22%) (5.33%) (5.31%)
a
Reported percentage of the proportion of participants in each condition who selected strategy A, which was
the best performing strategy of the two strategies.
b
In a closed environment 50% is the theoretical benchmark for how frequently employees would select the
better-performing strategy A across all periods.
c
In the Open condition participants are asked to read information that identified the respective strategies that
they were to assume that they and a paired co-worker had implemented in the period preceding the first
decision period. Half of the participants were told that they previously implemented strategy A (strategy B)
and that their co-worker previously implemented strategy B (strategy A).
d
The Open+RPI condition mirrors the Open condition in every way except that, in addition to receiving
performance feedback about their own level of output for each decision period, each employee also receives
performance feedback about their paired co-worker’s level of output.

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 TABLE 2
Tests of H1a
Panel A: Implementation of Strategy A in Open Condition versus Closed Benchmarkb

Open Condition VS. Closed Benchmark

70.4% 50.0%

one-sample t = 4.29, p < .01

Panel B: Implementation of Strategy A in Open Condition over Timec,d

Expected Parameter
Independent Variables z-stat p-value
Sign Estimate
Intercept ? -.19 -.37 .71
Period + .55 2.14 .02

Overall Wald χ2 4.58, p = .03

Panel C: Implementation of Strategy A in Open Condition versus Closed Benchmark by

Periode

Period 1 Period 2 Period 3

Open (n = 36) 63.9% 61.1% 86.1%

VS. VS. VS.

Benchmark / Closed 50.0% 50.0% 50.0%

Goodness of Fit: χ2 2.78 1.78 18.78

p = .10 p = .18 p <. 01
a
All tests are one-tailed.
b
Panel A reports results of a one-sample t-test that compares the overall frequency with which participants in the
Open condition selected strategy A (70.4% per Table 1) to the theoretical closed benchmark frequency of 50%.
c
Panel B reports the results of a repeated measure logistic regression with StratA (StratA = 1 if employee selected
strategy A and 0 otherwise) as the dependent variable and Period (Period = 1, 2, or 3) as the independent variable.
d
The sample size consists of 108 observations, or three periods of observations for each of the 36 participants in
the Open condition.
e
Panel C reports the results of the three separate chi-squared goodness of fit tests comparing the period-by-period
mean percentage of participants selecting strategy A in the Open condition to the theoretical closed benchmark.

40