Abstract:
Helping colleagues builds up workplace relationships which have both productive and private benefits, at the cost of time that could otherwise be spent on one's own work. We model this trade-off to examine how the private value of workplace relationships affects reward design, team size, and leadership. Under individual rewards, helping is insufficient when the private value of relationships is low and excessive when it is high. More productive relationships can lead members to spend too much time helping, reducing team output even under an optimal reward scheme. When individual and team rewards are combined, the optimal weight on team performance is lower in teams whose members place greater private value on relationships, and higher in teams with greater common ability. Under individual rewards, expanding a team can curb excessive helping by weakening its mutual reinforcement, but also reduces the productive benefits of relationships. The optimal team size balances these effects and is larger when members place a higher private value on relationships. By committing to an effort allocation first, the leader induces more helping from the follower and strengthens social ties. This form of leadership can improve output when relationships are insufficiently developed, but lowers output when relationship formation is already at or beyond the output-maximizing level. Both members nevertheless gain in utility.
