Spillover effects from competitive rank-and-yank systems on employees' other-regarding behavior

Organizations implement competitive, tournament-style mechanisms to select and retain employees. Under “ rank-and-yank ” systems, management evaluates the productivity of a group of workers, ranks them relatively, and then terminates some fraction of the lowest-ranked employees. Using two experimental studies, we tested how rank-and-yank systems impact employees' future other-regarding behaviors. Study 1 employed a unique two-stage design where all participants first completed a real-effort work task under a competitive, tournament-based compensation scheme. In the second stage, participants completed a series of interactive decision tasks serving as proxies for different measures of other-regarding behavior. In a baseline condition, all participants were retained for stage 2. In the primary rank-and-yank condition, the lowest-ranked employees were yanked, while only the retained top-ranked employees competed in stage 2. We hypothesize that while rank-and-yank systems improve short-term task performance, they will generally lead to less other-regarding future behavior. Consistent with our hypothesis, in the rank-and-yank condition, relative to the baseline, we observed evidence of (i) increased productivity in the initial task, but decreased other-regarding behavior in the form of (ii) decreased altruism, (iii) decreased cooperation, (iv) decreased trust and trustworthiness, and (v) increased sabotage behaviors. In Study 2, we examined potential mechanisms and found strong evidence that survivors of rank-and-yank perceived others as less other-regarding, more entitled, and more likely to have cheated to earn their performance rank.