Peer effects are directly responsible for the work ethic of one team member mirroring that of another. Is your coworker setting a good example, or a bad one? And how is that affecting the teams’ productivity?

Those who have reading my posts for a while know that I have a special interest in the intersection of economics and business, as well as the intersection of neuroscience and business. Recently, I corresponded with Eyal Winter, a professor of economics at the Hebrew University of Jerusalam. In his excellent book, Feeling Smart: Why Emotions Are More Rational than We Think, Eyal asks this question:

“If our emotions are so destructive and unreliable, why has evolution left us with them? The answer is that, even though they may not behave in a purely logical manner, our emotions frequently lead us to better, safer, more optimal outcomes. There is emotion logic in emotion, and emotion in logic.”

A part of this phenomenon that’s relevant to managers is what Eyal calls “peer effects.” Apparently, employees will avoid putting much effort into their work if they know or believe that their co-workers are shirking their responsibilities or otherwise not living up to their full potential. On the flip side, when employees witness co-workers putting in extra effort, they will be motivated to do the same. So the answer to the central question in this post is yes, one lazy employee can and will destroy your team’s productivity, and that’s why you must engage in strategic teambuilding. Here are two examples from the economic literature to prove Eyal’s case.

Work Ethic Is Contagious In Italy

Italy, more than any other European Union country, is characterized by extreme cultural gaps between different geographical areas, especially the north of the country versus the south.

Two Italian researchers, Ichino and Maggi, studied a database containing information on the behaviors of thousands of employees at one of Italy’s largest banks. The collected data on each employee included detailed information on the number of times the employee came to work late or failed to show up entirely, promotions to higher ranks in the bank hierarchy, and transfers from one branch to another. Using this information it was possible to identify bank employees who had moved from bank branches in the north to branches in the south and vice versa.

Ichino and Maggi discovered that bank employees who moved, for example, from Milan in the north to Naples in the south, exhibited extreme changes in their work behavior. Once in Naples, they were frequently late to the office and missed a lot more days of work. Since only sick days are considered acceptable reasons for missing days of work at the bank, one might surmise that the move from one city to another led to deteriorations in the health of transferred employees, but the researchers found that employees transferred from Naples to Milan also exhibited different patterns of behavior, which in this case was expressed in lower rates of tardiness at work and fewer missed work days.

Further analysis of the database proved that the only reasonable explanation for these changes in behavior patterns was the phenomenon of peer effects. Employees transferred from Milan to Naples quickly learned that their colleagues in Naples had a weaker work ethic than the one they had been used to in Milan. This reduced their internal incentives to maintain high standards of work ethic.

In contrast, employees transferred from Naples to Milan learned (although apparently not as quickly as those moving in the opposite direction) that their new environment was one in which colleagues invested more time and energy at their jobs. This, of course, was an uncomfortable position for them, but it still created an incentive for them to adopt the work ethic of those around them.

Peer-Adjusted Pace At The Supermarket

Two Berkeley researchers, Mas and Moretti, studied peer effects among checkout counter workers at a large American supermarket. Many work actions conducted by checkout counter workers are routinely recorded in databases (such as the start and end times of scanning each customer’s checkout items, and the number and types of items that a customer has brought to checkout).

Using these figures, Mas and Moretti were able to estimate the efficiency of each worker in terms of number of items scanned during a given period of time. They discovered that when one worker ended a shift and was replaced by a different worker, the shift handover affected all the workers who were close enough to observe it. If the worker beginning a new shift was more efficient than the worker that he or she had replaced, nearby workers picked up the pace of their work. But if the new worker was slower, the others also slowed their pace accordingly.

These research studies show that individual effort is significantly affected by the work environment. Each individual’s motivation to work harder is increased if those around him are also working hard, but if one individual is lazy, his team members will be lazier too. Therefore, it’s imperative that managers encourage high performers to serve as role models, and do not allow low performers to coast simply because it’s the easy thing to do.