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Creating Incentives For Knowledge Sharing

By Katlijn Haesebrouck, Ph.D.; Alexandra Van Den Abbeele, Ph.D.; and Michael G. Williamson, Ph.D.
February 1, 2022

Efficient organizations use subjective incentives to encourage employees to share their knowledge with their colleagues.

 

Employees who work at the same company for years acquire detailed knowledge about how to do their job, how the organization works, and how to get things done. If they share this knowledge and valuable experience with their colleagues, those colleagues will learn how to do their jobs more efficiently and effectively, and the entire organization will benefit. How can an organization encourage employees to share their knowledge with other (potentially less experienced) colleagues?

 

Our research (“Building Trust through Knowledge Sharing: Implications for Incentive System Design,” Accounting, Organizations and Society, August 2021) examined what motivates the sharing of knowledge. We focused on the role of trust. Our results show that experienced employees can be reluctant to share their knowledge, but knowledge can also foster trust when shared.

 

By sharing their knowledge, individuals believe that the recipients of their knowledge will feel a stronger psychological bond with them and will therefore be likely to give something in return. This prospect can motivate employees to share their knowledge. So how can organizations leverage this trust effect? Our results show that they can do so via the design of their incentive system.

 

TRUST VIA INCENTIVES

 

In theory, incentive contracts that link pay to specific performance measures can encourage knowledge sharing. In practice, however, it can be extremely difficult to write an incentive contract that motivates people to share their knowledge. Doing so would mean specifying beforehand what knowledge employees need to share and how much of a pay increase or bonus they’ll get for sharing it. The problem is that employees accumulate knowledge that’s very specific to the tasks they do, which makes it challenging for managers to know what knowledge needs to be passed on and which employees have value-enhancing knowledge. Creating an incentive contract that formalizes things is even more difficult.

 

Organizations can also encourage employees to share their knowledge using more subjective incentives. Rather than an ex ante statement in a formal contract regarding knowledge employees need to share to gain a pay raise, companies can offer a future reward. Interestingly, some companies that value knowledge sharing rely on the opinions of their employees in determining rewards.

 

For example, Siemens motivates knowledge sharing by tying rewards to the subjective evaluations of team members, while NASA links the bonuses and promotions of experienced employees to their knowledge-sharing and mentoring behavior as subjectively evaluated by the junior colleagues on their teams. These sorts of subjective, ex post incentives depend on trust for their effectiveness: Employees just have to trust that if they share their knowledge, they will be rewarded at some point in the future. There’s no guarantee of reward.

 

EXPLORING SUBJECTIVE INCENTIVES

 

If an organization wants to encourage its employees to share their knowledge, should it rely on subjective incentives? If so, how can it motivate trust? How can it ensure that these incentives are effective? Our research explored these questions and how knowledge sharing, trust, and rewards are connected. We investigated how the presence and absence of subjective incentives affect the willingness of employees to share their knowledge and whether knowledge sharing can enhance how well these incentives work.

 

Our starting point was a theory that people believe that knowledge acquired through their experiences is an important part of their identity. They consider help that involves knowledge sharing to be fundamentally different from help that isn’t based on self-generated knowledge. Because of this, they believe that sharing knowledge costs them something: It’s like giving up a part of yourself. And they’re unlikely to do that when motivated by only their own altruism.

 

Yet knowledge can foster trust when shared. By sharing their knowledge, individuals believe that they form a stronger bond with the recipient of their knowledge, and at some point, the recipient may somehow reciprocate and reward them for their knowledge. This prospect makes an experienced employee more inclined to share knowledge in the first place.

 

To test our theory, we designed a puzzle-solving experiment. We divided participants into two categories, “helpers” and “helpees,” and we ensured that providing help would cost the helpers financially and would benefit the helpees. Then we manipulated whether or not help involved sharing knowledge about how to solve the puzzles and whether or not helpees could reward helpers.

 

Our findings show that helpers are less likely to provide help that involves sharing their knowledge, but they’re more likely to share knowledge when they can expect a reward. And helpees are more likely to provide rewards when the helpers share their knowledge. Thus, our findings confirmed our theory. They suggest that knowledge sharing fosters trust: Helpers trust that helpees will reciprocate with a reward, and helpees trust and reward helpers who share their knowledge.

 

We also investigated the implications of our theory in practice. To do this, we conducted a scenario-based experiment in which we asked participants to play the role of an experienced employee with lots of knowledge about an important task within their organization. We told participants that the organization awarded annual bonuses based on subjective evaluations by supervisors and colleagues. Then we asked them to decide whether or not to help a new colleague with a variety of tasks, again manipulating whether or not providing help meant sharing knowledge (as opposed to, say, just completing the task for the new colleague).

 

Results showed that participants were likely to help a new colleague by sharing their knowledge but only when the new colleague influenced their bonus. When a supervisor determined the bonus, participants were reluctant to share. Moreover, we found that colleagues provide higher rewards for help that involves knowledge sharing than for help that doesn’t.

 

HOW TO INCENTIVIZE KNOWLEDGE SHARING

 

How should organizations incentivize knowledge sharing? While incentive contracts that link pay to ex ante performance measures might encourage knowledge sharing in theory, it can be extremely difficult to write such incentive contracts in practice. Instead, subjective rewards that offer no guarantee but rely on trust are more practical and can be highly effective.

 

Yet how an organization goes about determining those rewards is crucial. Our results show that there are important benefits to incorporating colleague evaluations when disseminating rewards. When the recipients of knowledge help to determine rewards, it builds trust and increases the chance that experienced employees will share their knowledge in the first place. Giving employees a say in who gets rewarded and how is key to incentivizing the sharing of knowledge.

 

Katlijn Haesebrouck, Ph.D., is an assistant professor in the School of Business and Economics at Maastricht University. She can be reached at k.haesebrouck@maastrichtuniversity.nl.
Alexandra Van den Abbeele, Ph.D., is a professor at the Faculty of Economics and Business at KU Leuven. She can be reached at alexandra.vandenabbeele@kuleuven.be.
Michael G. Williamson, Ph.D., is the A.C. Littleton Professor of Accountancy at the Gies College of Business at the University of Illinois Urbana-Champaign. He can be reached at migwilli@illinois.edu.
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