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On the trail of easy riders

AUTHOR: Lachlan Colquhoun   DATE: 14.12.06   ISSUE 2, 2006

Humans are not necessarily the most altruistic of species. While they might be happy enough to be organised into teams, some team members will –subconsciously or consciously – try to do less work than their colleagues but take an equal share of the benefits.

These “free riders” are everywhere. They are in sporting teams, social clubs and, of course, in corporate organisations, where the challenge for managers is to create the right incentives and motivation for them to contribute more wholeheartedly for the good of the company’s performance and, ultimately, the bottom line.

The psychology of these group dynamics is a major research interest for AGSM’s Dr Anna Gunnthorsdottir who, in a number of experiments, has been investigating how humans respond in various competitive and team situations.

Originally a psychologist who moved into economics and game theory, Dr Gunnthorsdottir describes her interest as “the human political process” and how it might be influenced by changing factors such as team structure and remuneration.

Dr Gunnthorsdottir’s free-rider experiments was designed to see the effects of like-mindedness on people’s willingness to contribute to a group effort.

Illustration: Gregory Baldwin

“Any organism which lives in groups has a similar conflict to humans,” says Dr Gunnthorsdottir.

“You want the group to do well but you are also competing against members of your group, and that is why humans both co-operate and cheat.

“Everybody has a price to changing their behaviour, from two neighbours in a condo to a firm, to a state and country, and what I am interested in is seeing how the environment behaviour.”

She gives a hypothetical example as a means of illustrating the dilemma.

The psychology of "free riders" is a major research interest for AGSM’s Dr Anna Gunnthorsdottir.

“Imagine I am working with a colleague on an academic paper and we promise each other that we’ll both work very hard,” says Dr Gunnthorsdottir. “But if I can separate myself from social norms and be purely self-interested, I can fool my colleague into working more than me. I can spend more time with my family or working on another paper and then I will be better off.

“In an organisation, what we see is that people will often take credit as part of a team, but will really have been spending time politicking and drinking coffee with the right people while the rest of the team has been working for them.”

Dr Gunnthorsdottir has constructed several experiments to investigate this phenomenon.

In one project, she and her colleagues created several groups which were competing with each other for a single prize, to be divided among them. Remuneration was divided both proportionately and also on an egalitarian basis to see how that variable might impact on behaviour.

"In this situation you benefit from being in the group, but you are also out for your own interest," says Dr Gunnthorsdottir. “This is the typical situation an organisation finds itself in when it competes. Think for example of the group being a firm competing against other firms.

“Being in a group gives you the benefit of potentially doing better than you would on your own, but the experiment adds an additional level of competition because you can be also competing against your own group members as well as others. As long as there is trust and reciprocal commitment between group members then a group can achieve a lot, but at the same time there is always this temptation on the individual level to free ride a little bit.”

One of the most interesting findings from the research was that the group effort was stronger in situations where remuneration was divided on an egalitarian, and not a proportionate basis.

Being in a group gives you the benefit of potentially doing better than you would on your own.

“We found that egalitarian rewards are a very effective way of getting group members to work together,” says Dr Gunnthorsdottir, who says this principal has also been applied to the workplace, but it needs to be applied with great care.

“For example, Levi Strauss [the clothing manufacturer] tried to create a system of team-based remuneration, but the problem for a manager is that while this can really draw the members of a group together they can become very hostile to other groups within the firm, and that an lead to sabotage of the overall profit goal.

“The issue is that you need to find the right boundaries for the group, because it can be very self-defeating when groups within the same organisation end up fighting with each other.”

In all her experiments about free-riding, the basic set-up is the same: participants are given 100 tokens and asked to invest in either a private account, which returns one percent to that person alone, or to a group account where the return is calculated according to the size of the contribution all group members have made.

AGSM’s Dr Anna Gunnthorsdottir has been investigating how humans respond in various competitive and team situations.

Another of Dr Gunnthorsdottir’s free-rider experiments was designed to see the effects of like-mindedness on people’s willingness to contribute to a group effort. Participants were sorted into groups of four – depending on the size of their contributions to the public account.

The exercise showed that those people who may initially have been of a disposition and made substantial contribution reduced their contributions over time when they were forced to interact repeatedly with people who were clearly free riders.

“What we see in this study is how co-operation decays as co-operators get discouraged by the presence of free riders, and the skill of the manager is to identify these different types and set the incentives right so that all members of an organisation keep cooperating,” says Dr Gunnthorsdottir.

One controversial finding from this latter series of experiments was that the segregation of the highest contributors created significantly higher performance overall, that is, when measured across all groups. “We call this a segregated meritocracy and we found that our ‘experimental organisations’ or ‘experimental minisocieties’ delivered a very high overall output with this kind of kind of segregation in place,” says Dr Gunnthorsdottir.

“We can show mathematically, with Game Theory, that this is bound to happen, and we can show empirically (with our experiments) that it does in fact happen exactly as mathematics predicts.

“Interestingly, human groups interact exactly as mathematics predicted even though the problem is mathematically so complex that it was only solved a year ago. This segregation has some controversial implications for public policy, of course, but this is what we find.”