Distinguishing high-performing employees imposes choices on managers: Is recognition most effectively delivered publicly or privately? If delivered publicly, what setting is best? This paper broadens the accounting literature on the implications of these decisions. Via experiment, I examine how the social bond between recognized employees and those observing the recognition influences the effect of recognition visibility on employee behavior. I find that with weak social bonds, public recognition (versus private) does not result in more beneficial employee behavior. However, when social bonds are strong, employees provide greater pre-recognition effort and respond more positively to public recognition than to private recognition. Overall, my study supports the extensive use of public recognition in practice and helps clarify the collective results from prior accounting studies. My findings also have implications for implementing recognition programs—suggesting managers should consider employee relationships when deciding how and where to recognize their employees.

We examine whether and how a widely established finding—employees respond negatively to managerial monitoring—generalizes to different performance-evaluation systems. We predict that relative performance evaluations (RPEs), a common evaluation feature in multiagent settings, attenuate employees’ negative responses to managerial monitoring. The results of our experiment support our theory. Consistent with prior literature, we find that without RPE, employees respond significantly more negatively to managerial monitoring compared to no monitoring. However, we find that the effect of managerial monitoring on employee responses is moderated in the presence of RPE—employees respond similarly regardless of whether their manager implements a monitoring control. We provide robust analyses to support our theory-derived mechanisms, demonstrating that our results are driven by employees’ fairness perceptions of managers’ monitoring decisions. Collectively, this study aids in the understanding of how and under what circumstances managerial monitoring may be more or less beneficial. Data Availability: Available upon request.

Research suggests that employees work harder under penalty contracts than under economically equivalent bonus contracts. We build on this literature by examining how the motivational advantage of penalty contracts depends on a common aspect of real-world contracts: payoff ambiguity. With payoff ambiguity, employees provide effort without knowing how much pay they will receive for a given level of performance. According to our theory, this ambiguity opens the door for employee optimism, which has contrasting effects under each contract frame. Results from an experiment support this theory, with an increase in ambiguity leading to less employee effort with penalty contracts (as employees optimistically expect small penalties) and more effort with bonus contracts (as employees optimistically expect large bonuses). We also find that these effects are stronger for more dispositionally optimistic employees. Overall, our results suggest that bonus contracts may be more motivating and penalty contracts less motivating than previously thought.