The Allocation of Incentives in Multi-Layered Organizations: Evidence from a Community Health Program in Sierra Leone

Abstract

Does the allocation of incentives across the hierarchy of an organization matter for its performance? In a field experiment with a large public-health organization in Sierra Leone, we find that healthcare provision is highly affected by how incentives are allocated between frontline workers and their supervisors. Sharing incentives equally between these two layers raises completed health visits by 61% compared to the unilateral allocations that are typical in public-health organizations. Also, the shared incentives uniquely improve overall health service provision and health outcomes. We provide reduced form and structural evidence that these results are driven by a combination of effort complementarities and contractual frictions, and we explore the implications of these forces for the optimal design of incentive policies in multi-layered organizations.