Increasing evidence indicates the importance of management in determining firms’ productivity. However, evidence regarding the effectiveness of management practices is scarce, especially for high-skilled workers in the developed world.

The authors of this paper measured the productivity of captains in the commercial aviation sector, testing four distinct management practices: performance monitoring; performance feedback; target setting; and prosocial incentives (donations by the employer to charity). They found that these management practices – particularly performance monitoring and target setting – significantly increase airline captains’ productivity with respect to fuel saving. These management practices also improved job satisfaction and, due to the fuel-saving effect, decreased carbon dioxide (CO2) emissions.

The authors suggest that in industries where employees’ behaviour is a determinant of fuel or energy use (e.g. shipping, trucking, aviation, retail and manufacturing), behaviour change strategies targeting workers rather than the firm as a whole may present a new and cost-effective way to combat firm-level externalities, including reducing greenhouse gas emissions in the fight against climate change.

Key points for decision-makers

  • The experiment was carried out in partnership with a major international airline, Virgin Atlantic Airways, with union-level authorisation. It covered 335 captains over eight months and collected data from 13 months prior to the experiment to six months following it (from 42,012 flights).
  • The researchers focused on commercial airline captains’ productivity, where productivity is defined as a function of fuel use, time delays, and safety.
  • The researchers observed fuel (in kg) on board the aircraft at departure, take-off, landing, and arrival, plus fuel passing through each of the aircraft’s engines during taxi, which provides a precise measure of fuel burned on the ground. This data was used to understand how different management practices ultimately affect fuel use.
  • Captains were randomly allocated to one of four study groups subject to: (i) performance monitoring (the control group); (ii) informational performance feedback (on performance related to fuel usage); (iii) target setting (encouragement to achieve personalised targets 25 percentage points above their pre-experiment attainment levels); and (iv) prosocial incentives (for each target achieved in a given month, £10 was donated to a charity chosen by the captain from five options).
  • The results showed that the performance of captains in the control group improved considerably upon announcement of behavioural monitoring. Providing captains with information on recent performance moderately improved their fuel efficiency. Including personalised targets significantly increased captains’ implementation of all three measured behaviours (pre-flight, in-flight, and post-flight). Adding a charitable component did not induce greater effort than providing targets alone.
  • Given the substantial behavioural change observed, the authors report economically significant fuel and cost savings: 7,769 metric tons of fuel (equivalent to US$ 6.1m) over the eight-month experimental period.
  • The authors calculated that the fuel savings prevented 24,472 tons of CO2 from entering the atmosphere, using a fixed emissions factor of 3.15 tons of CO2 per ton of fuel.
  • The study highlights the potential for additional benefits of such targeted management initiatives in terms of employee welfare and greenhouse gas emissions.

A previous version of this paper was published in January 2017 under the title ‘A new approach to an age-old problem: Solving externalities by incenting workers directly’.

A more recent version of this paper has been published in the Journal of Political Economy.

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