…our findings provide support to the idea that interplays between social relationships and incentives need to be taken into account, in order to understand how individuals respond to a given set of incentives, and to understand the optimal set of incentives within an organization.
And as with some other economic topics, it’s not a “one size fits all” explanation, but rather understanding that many workplace factors affect worker productivity. Managers who have favorites will increase the productivity of their connected workers, but the firm’s productivity will suffer on the whole. However, this does not happen if managers are paid on performance bonuses.
So, this may explain why performance bonus pay schemes could be on the rise.