At a 35 person IT company we did some well thought contract theory and game theory based interventions. We were able to motivate and coach employees by collecting coarse information on task completion times.

1. Collecting Coarse Information to Coach
Dr. Manish Gupte
(other authors will be added later, current goal is to get comments from field and academics)
Introduction
The founders of a 35 person Information Techonology company wanted to implement some type of
performance management and record keeping. As this is a very local company with many
employees as close friends standard approach was thought to be inadequate. So, we decided to use
game theory and contract theory.
We did some well thought interventions. Unlike an experiment where treatments are to some extend
randomized all our actions were the best actions at that time. Both me and the founders and the
manager thought it was the best thing to do at that time while doing the intervention. Through such
well thought actions we discovered that collecting coarse information is a good way to elicit
information on performance and that it is also a good technique to coach employees to gradually
improve their performance.
We always ensured the company was making progress due to this intervention and there was no
deception by us at any time.
Intervention 1:
The IT workers do specific tasks which take about 2 days to complete. We asked employees to
record the “planned time” and “actual time” to complete the task. Employees were aprehensive and
other than 3 or 4 tasks all other tasks had “planned time” same as “actual time”. Employees did not
want to share information. The founder during this time wanted to make sure all 8 hours of the day
were fully used for productive work and that agrevated the employees.
Itervention 2:
So, we decided to reward high performing employees based on this data. We also said we will
identify training needs using this data and give proper training. And, as the company would grow
due to increased performance employee will eventually get better income. We also said we will wait
for couple of weeks before evaluating to make sure delays and advances in task completion balance
out. We said will consider the average delay and not reprimand right away. We understood that
estimating completion time is an inaccurate process.

2. After initial excitement employees wanted to know the amount of bonus/rewards and were
unwilling to wait till the client of the projects liked the improvement and so more reveneue came in.
However, the aprehension on sharing information was less. The manager’s thoughts also got better
organized this way and his manual monitoring efforts were better used.
Itervention 3
We are now collecting coarse information which is as follows. The employees enter the “planned
time” and delay or advance. The delay/advance is being recorded in steps on 1 hour and not very
fine minute by minute details. So, all delays less than 1 hour will have a weight of 1 and all delays
between 1 hour and 2 hours will have weight of 2 and so forth. As the signal elicited from workers
has less information now the optimal contract places less weight on it. So, with a lower reward
structure we can elicit more effort than without any record keeping. This was possible as another
signal on performance can now be elicited. Also, reasons for delay are being recorded at a “high
level” and “too many questions” are not being asked.
The employees are much more positive this time and it is hoped this type of record keeping will
work.
We plan to make the information gather finer as employees get used to the system and their
productivity and skill improves. As the client also would be more willing at that time this finer
information collection would be justified by better reward structure.
Principal Agent Model
I am working on a principal agent model which motivated and explains the success of Intevention 3.
The fixed salary that employees currently get cannot be changed. So, the rewards are over and
above the earlier salary. Also, allowing some systematic delay or bias is not advisable as future
estimates of planned time are based on earlier completion times of similar tasks. Honesty is also
very important to maintain functioning of the company. Employees do not reveal the delay/advance
unless incentives are adequately powered. Coarse information collection is a way to lower the
reward requirement. Coarse information collection also allows honesty. The granularity of
information collected will be made finer as performance and budgets improve. This is coaching.