Team governance: Empowerment or hierarchical control

We investigate the costs and benefits of managerial interventions with a team in which workers care to different degrees about output. We show that if there are complementarities in production and if the team manager has some information about team members, interventions by the manager may have destructive effects: they can distort how workers perceive their co-workers and may lead to a reduction of effort by those workers who care most about output. Moreover, interventions may hinder the development of a cooperative organizational culture in which workers trust each other.

Research highlights► A manager can intervene in a team in which workers may or may not be committed to their work output. ► The manager has private information about workers’ commitment ► Managerial intervention distorts worker's perception about each other. ► Workers may then reduce their effort. ► Welfare effects of interventions depend on the importance of non-verifiable tasks, and on the expected commitment in the pool of workers.