OrganizationScience

Vol. 19, No. 6, NovemberDecember 2008, pp. 876890

issn1047-7039 eissn1526-5455 08 1906 0876
informs

doi 10.1287/orsc.1080.0356
2008 INFORMS
Performance Implications of Peer Monitoring
Misty L. Loughry
Department of Management, Marketing, and Logistics, Georgia Southern University, Statesboro, Georgia 30460,
mloughry@georgiasouthern.edu
Henry L. Tosi
Department of Management, University of Florida, Gainesville, Florida 32611,
henry.tosi@cba.u.edu
P
eer monitoring, which occurs when individuals notice and respond to their peers behavior or performance results, is
an informal organizational control that has not been extensively studied. Agency theory suggests that peer monitoring
should be associated with higher performance because it allows workers whose interests are aligned with those of the
organization to encourage their peers to perform well and deters inappropriate behavior by increasing the chances that it
would be detected.
This paper considers two research questions. The rst is, What is peer monitoring? We found two types of peer
monitoring. Direct peer monitoring occurs when workers notice their peers behavior or results and respond in a forthright
way, such as correcting coworkers who make mistakes. Indirect peer monitoring occurs when workers gossip about or
avoid poorly performing peers. The second research question is, Is peer monitoring associated with higher work-unit
performance? We examined the effects of both types of peer monitoring on the performance of 67 theme park work units.
We considered supervisory monitoring, task interdependence, and cohesiveness as moderators.
We measured performance as the degree to which the work unit is free of employee behavior problems and found
a positive main effect of direct peer monitoring. The effect was stronger when supervisory monitoring was low or task
interdependence was high. Indirect peer monitoring did not have a main effect on work-unit performance, but when
supervisory monitoring or cohesiveness was high, indirect peer monitoring was associated with lower performance. We
discuss these results and suggest areas for future research.
Key words: peer monitoring; peer control; informal control; social control; agency theory
History: Published online in Articles in Advance May 30, 2008.
This paper focuses on informal, lateral control in orga-
nizations that occurs when peers act as agents of the
organization or its management. Control systems include
both formal controls, such as written policies, and infor-
mal controls, such as culture and peer control (Cardinal
et al. 2004). Although control systems are essential
for keeping organizational members working together to
accomplish organizational objectives, excessive reliance
on formal controls can increase the cost of control and
create conict and distrust between the organization and
its members (Sitkin and Bies 1994). Informal controls
are not always directed at organizational effectiveness,
but when they are, they may achieve enhanced perfor-
mance while increasing organizational members well-
being, trust in management, and perceptions about the
legitimacy of managements decisions relative to formal
controls (Sitkin and George 2005). Important effects of
informal peer control have been demonstrated in self-
managed work teams and high-reliability organizations,
in which social controls enhance the coordination of
tasks, employees agreement about goals and values, and
organizational learning (Manz and Sims 1987, Weick
et al. 1999). Furthermore, because an informal control
system is difcult for other rms to imitate, it can be a
source of sustainable competitive advantage if it facili-
tates better performance (Turner and Makhija 2006).
Organizational scholars have not yet done extensive
work to provide theoretical underpinnings for under-
standing informal peer control. There is a rich literature
on social inuence processes, such as social facilitation,
accountability, social comparison, social learning, social
information processing, social conformity, and subjec-
tive norms. However, these concepts do not focus exclu-
sively on work-related peer relationships, nor do they
examine implications for organizational control. There
is also research on peer ratings in performance appraisal
systems, but it has primarily assessed reliability and sat-
isfaction rather than control effects (Fedor et al. 1999).
Other studies that do focus on peer control describe how
it can restrict, rather than enhance, performance (Taylor
1916, Roethlisberger and Dickson 1939) and its dangers
for workers (Barker 1993, Ezzamel and Willmott 1998).
The most well-developed theoretical framework for
examining peer control as a functional aspect of organi-
zation control is contained in agency theory. What sep-
arates agency theorys concept of peer monitoring from
related constructs is its focus on peer monitoring as a
mechanism to align workers behavior with organiza-
tional interests (Alchian and Demsetz 1972; Fama and
876
Loughry and Tosi: Performance Implications of Peer Monitoring
Organization Science 19(6), pp. 876890, 2008 INFORMS 877
Jensen 1983a, b). Thus, peer monitoring serves a mon-
itoring function by giving organizations better informa-
tion about workers behavior and performance results
and reducing opportunities to engage in hidden action.
Peer monitoring can also serve an incentive function,
by motivating workers to engage in behaviors that are
benecial to the organization in order to earn rewards
or avoid negative consequences. In these ways, agency
theory suggests, peer monitoring can reduce behavior
problems and improve performance.
Agency theory has strengths and limitations as a the-
oretical lens for examining peer control. Strengths are
that it views peer monitoring as contributing to organi-
zational performance and has a stream of research on
which to build. A number of studies use mathematical
models to demonstrate how peer monitoring can benet
principals (e.g., Ma et al. 1988, Varian 1990). The lim-
ited empirical work includes studies of peer monitoring
in borrowing groups (e.g., Islam 1996, Stiglitz 1990),
an experiment (Towry 2003) and studies of how incen-
tive plans affect peer monitoring (Welbourne et al. 1995,
Knez and Simester 2001). Agency theory also carries
limitations, however, because it has not examined peer
monitoring extensively and because it has a strong focus
on rational economic reasoning and simplied assump-
tions about human behavior. Therefore, agency theory
does not describe psychological and social factors that
may play an important role in peer monitoring.
This study builds on the peer monitoring literature by
addressing two research questions. The rst is, What
is peer monitoring? We examine this question by inter-
viewing workers about how they notice and respond to
peer behaviors and performance, then developing a mea-
sure of peer monitoring. Our second research question
is, How does peer monitoring affect work-unit perfor-
mance? We examine this using a survey of workers and
their managers. Our focus is informal peer monitoring
rather than systems in which employees are required to
monitor one another as part of the organizations formal
structures, and, consistent with agency theory, peer mon-
itoring that encourages behavior consistent with organi-
zational interests, not that which encourages coworkers
to work against the organizations interests (such as per-
forming poorly or sabotaging the rm).
Theory and Research
Although peer monitoring has not been consistently
dened, the agency theory literature suggests that it
occurs when individuals notice and respond to their
peers behavior or performance results. Peer monitoring
involves setting standards, observing peers results, and
sanctioning coworkers if their efforts are below the mon-
itors standards, so that peers inuence one anothers
costs of engaging in desirable or undesirable actions
(Barron and Gjerde 1997, Varian 1990). Peer monitoring
allows principals to take advantage of information that
one agent reports about the others and inuences that
agents have over each other (Fischer and Hughes 1997,
Holmstrom 1982, Kandel and Lazear 1992).
Agency theory suggests that peer monitoring, like
other forms of monitoring and incentives, can solve the
agency problems of adverse selection and moral hazard
(Arnott and Stiglitz 1991). Agency problems arise when
owners or their designees (called principals) hire agents
to act in their interests and delegate work or decisions to
them. Adverse selection occurs when agents misrepresent
their skills or abilities. Moral hazard (shirking) occurs
when agents behave in ways that are contrary to the prin-
cipals interests, such as expending less effort than agreed
or engaging in other activities that reduce the principals
prots. These are problems because agents are assumed
to be risk and effort averse, and may be opportunistic in
the pursuit of their self-interests (Milgrom and Roberts
1992). In addition, agents often have better information
than principals, which allows them to engage in hidden
action.
To manage these problems, agency theory suggests
the use of incentive alignment and monitoring. Incentive
alignment creates goal congruence between the reward
system and the behavior desired by the principal. Mon-
itoring gives principals better information about the
agents abilities, efforts, or actions or about the states
of nature so that principals can better interpret agents
performance outcomes. There are various types of moni-
toring mechanisms, and many have been found to reduce
behavior problems such as employee theft, escalation
of commitment, social loang, and self-interested deci-
sions (Harkins and Petty 1992, Kirby and Davis 1998,
Tosi et al. 1999).
Peer monitoring reduces hidden action and allows
agents whose interests are more aligned with those of
the principal to detect adverse selection and moral haz-
ard among coworkers whose interests are less aligned.
Because peers often have better information about
coworkers than do managers, they can detect behav-
iors that other forms of monitoring might miss (Barron
and Gjerde 1997). For example, some monitoring mech-
anisms focus on easily measurable tasks, which can
encourage workers to devote less effort to tasks that are
hard to quantify, such as doing a fair share of dif-
cult or unpopular tasks (Jacobides and Croson 2001).
Furthermore, because peers usually understand their
coworkers jobs and see their performance in real time,
while relevant contextual information is apparent, they
are often in the best position to understand if their
coworkers actions are appropriate for the circumstances
(Holmstrom 1982, Fama and Jensen 1983b).
There is evidence that work groups inuence work-
ers behaviors (Hollinger and Clark 1983, Robinson and
OLeary-Kelly 1998, Guzzo and Shea 1992). Therefore,
we expect that higher levels of peer monitoring will
Loughry and Tosi: Performance Implications of Peer Monitoring
878 Organization Science 19(6), pp. 876890, 2008 INFORMS
be associated with better work-unit performance. Peer
monitoring might positively affect performance in sev-
eral ways. It may create accountability for increased
effort, communicate the importance of certain tasks, and
motivate peers to focus on monitored tasks (Frink and
Klimoski 1998). In addition, peers can inuence cowork-
ers to conform to group expectations in order to obtain
peer acceptance and praise, which function as incentives
(Baker et al. 1988, Sewell 1998). Peer monitoring can
also detect opportunities to assist, motivate, or encour-
age poorly performing coworkers or to compensate for
their poor performance (LePine and Van Dyne 2001).
Hypothesis 1 (H1). Peer monitoring will be posi-
tively related to work-unit performance.
Peer monitoring will have stronger effects in some
contexts than others. It has been shown that leader-
ship (of which supervisory monitoring is one part), task
characteristics, cohesiveness, and norms are important
variables in models of effectiveness for ongoing work
groups in organizations (Goodman et al. 1987). We
therefore examine supervisory monitoring, task inter-
dependence, and cohesiveness as possible moderators
of the relationship between peer monitoring and work-
unit performance. We did not include norms because
our study focuses on peer monitoring that encourages
coworkers to behave in the organizations interests.
We focus on these three moderators for several rea-
sons. Supervisory monitoring limits workers discretion
to change their behavior in response to peer monitoring,
and the literature suggests that elements of the control
environment interact with one another. Interdependent
tasks should make peer monitoring more valuable
for group performance because when peer monitoring
improves individuals work, the effect on group perfor-
mance should be greater. Cohesiveness creates a stronger
social control environment so that workers will be more
likely to change their behavior in response to peer
monitoring.
Supervisory Monitoring
Both the agency theory and the leadership literatures
suggest that peer monitoring and supervisory monitor-
ing are substitutes (Arnott and Stiglitz 1991, Barron and
Gjerde 1997, Fama and Jensen 1983a, Lin 1991). The
positive relationship between peer monitoring and work-
unit performance should be weaker when supervisory
monitoring is high, because tight supervision constrains
the range of acceptable performance, limiting the abil-
ity of peer monitoring to impact performance (Goodman
et al. 1987, Kerr and Jermier 1978). Workers who are
closely supervised may already perform well to obtain
the rewards and avoid the punishments that supervisors
control (Hechter 1984). In addition, high supervisory
monitoring limits hidden action, so peer monitoring has
less value as a deterrent for opportunism. Furthermore,
when supervisory monitoring is high, any additional
information that peer monitoring provides about cowork-
ers is less likely to be uniquely valuable for improving
performance.
Hypothesis 2 (H2). Supervisory monitoringwill mod-
erate the relationship between peer monitoring and
work-unit performance so that the positive effect of peer
monitoring on work-unit performance will be stronger
when supervisory monitoring is low than when supervi-
sory monitoring is high.
Task Interdependence
Agents who perform interdependent tasks depend on
skills, effort, information, materials, or other resources
that coworkers control. Research has shown that task
interdependence is positively associated with work group
performance (Campion et al. 1993, Wageman and Baker
1997). Peer monitoring should have a stronger associ-
ation with work-unit performance in highly interdepen-
dent contexts because it enables workers to understand
what their peers are doing and reduces uncertainty about
how peers will perform. This should benet work-unit
performance more when workers must rely on one an-
other to accomplish tasks. Furthermore, reducing poor
performance should benet collective performance more
in highly interdependent groups in which failures by one
member can strongly hinder the other members ability
to perform (Cheng 1983). Peer monitoring should also
improve information exchange within groups, allowing
workers to better understand what needs to be done to
accomplish the work.
The relationship between peer monitoring and work-
unit performance should also be stronger in inter-
dependent contexts because compliance with peers
task-relevant expectations is likely to be higher. Work-
ers with interdependent tasks have a greater sense that
the entire job is everyones responsibility, and they feel
more responsible for everyones work getting accom-
plished (Sewell 1998, Wageman 1995). Furthermore,
because members of interdependent work units rely on
each other to achieve their individual goals, they may
have a greater desire for peers approval and ongoing
cooperation (Berkowitz 1957).
Hypothesis 3 (H3). Task interdependence will mod-
erate the positive relationship between peer monitoring
and work-unit performance so that the relationship will
be stronger when task interdependence is high than when
task interdependence is low.
Cohesiveness
Cohesiveness is the degree to which members are
attracted to the group and resistant to leaving the group
(Guzzo and Shea 1992). Research has found that cohe-
siveness has a small positive main effect on group per-
formance, but the relationship is complex (Mullen and
Copper 1994).
Loughry and Tosi: Performance Implications of Peer Monitoring
Organization Science 19(6), pp. 876890, 2008 INFORMS 879
Cohesiveness should strengthen the positive relation-
ship between peer monitoring and work-unit perfor-
mance, because workers in cohesive units would be more
likely to comply with peer monitors expectations than
to ignore or resist the peer monitoring. Cohesive groups
have more power to induce compliance from members
than do less-cohesive groups, because their members
place more value on obtaining group-controlled rewards
and avoiding group sanctions (Goodman et al. 1987,
Hackman 1992). Furthermore, in cohesive groups peer
monitoring may suppress workers desire to engage in
self-interested behavior and increase the intrinsic satis-
faction that they get from performing well because the
peer monitoring would inuence the meaning and val-
ues that coworkers attach to performing well and earning
organizational rewards (Salancik and Pfeffer 1978).
Hypothesis 4 (H4). Work-unit cohesiveness will mod-
erate the positive relationship between peer monitor-
ing and work-unit performance so that the relationship
will be stronger when cohesiveness is high than when it
is low.
Method
Our research involved three phases. In the rst phase, we
used interviews to learn what behaviors comprise peer
monitoring to develop items for a measure. In the sec-
ond phase, we administered a pool of potential items to
students and analyzed the data to select items for the
measures in our eld study. In the nal phase, we col-
lected eld survey data, which we analyzed to rene our
peer monitoring measure and to test our hypotheses.
Research Site and Sample
We collected most of our data at a large U.S. theme park
that was a good t for our study because it had intact
work units where performance could be compared on the
same criteria. In addition, the site allowed us to gather
qualitative information to help us develop a measure of
peer monitoring.
Surveyed employees worked in the operations (61%),
food (20%), and merchandise (19%) departments earn-
ing just above minimum wage. The work is highly
structured and observable, such as operating rides, serv-
ing food, and stafng gift shops. No special skills are
required to be hired for these jobs. Detailed written
policies and procedures are in place for all jobs, and
all workers are well trained in their jobs and in park
rules. The standards of appropriate behavior are well
known to all group members. Rewards and punishments
are also standardized. Employees are evaluated once per
year for small merit pay raises. Punishments for each
type of infraction are standardized by a detailed set of
written guidelines. These conditions hold constant many
factors that have important inuences on group perfor-
mance, such as adequate skills; training; role clarity;
and the organizations rewards, punishments, and con-
trol structure (Gladstein 1984). This increases the chance
that any observed differences in group performance are
caused by our hypothesized variables. Such work con-
texts allow peer monitoring to enforce established stan-
dards of appropriate behavior that are known to all group
members, but they restrict peers ability to provide sug-
gestions for innovative work methods that could improve
work-unit performance, which provides a conservative
test of our hypotheses.
Employees are assigned to a work unit (such as a
restaurant or roller coaster) and frequently rotate jobs
within the unit (such as checking the height of riders
as they enter the line versus loading passengers into
roller coaster cars). Most units have a supervisor and two
assistant supervisors who each supervise all employees
in their unit. Supervisors did not provide data for this
study, but employees rated the level of monitoring that
supervisors provide. The supervisors from multiple units
report to an area manager who usually has two assistant
managers. These managers and assistant managers rated
the task interdependence and performance of all of the
units that report to them.
We sent a letter and e-mails to all managers and super-
visors, telling them about the study and asking them to
share the information with their employees, who do not
have mailboxes or work e-mail addresses. All commu-
nication emphasized that individuals responses would
be kept condential. Five hundred ninety-eight (598)
employees completed surveys in groups of 112 (53%
of the employees in the participating departments) dur-
ing their working hours. Participants were 56% female.
Their race was 51% white, 30% black, 14% Hispanic,
2% Asian, and 3% other. Their job status was 16% full
time, 60% part time, and 24% seasonal. Their mean
age was 27, mean tenure at the theme park 2.6 years,
and mean tenure in their work unit 1.7 years. Partic-
ipants education level was 5% bachelors degree, 8%
associates degree, 33% some college, 36% high school
diploma, and 18% less than high school diploma.
We distributed questionnaires pertaining to unit per-
formance and task interdependence to all (57) managers
and assistant managers and received responses from 49
(via a postage-paid return envelope). For the hypothe-
sis tests, which were at the work-unit level, our sample
was comprised of work units that had data from at least
two employees (571 of the 598 participating employees,
an average of 8.5 per unit) and at least one manager
(an average of 2.7 per unit). The resulting sample was
67 work units.
Measure Development Study
Development of Item Pool. We began our empirical
research with our rst research question: What is
peer monitoring? We sought to develop a measure
Loughry and Tosi: Performance Implications of Peer Monitoring
880 Organization Science 19(6), pp. 876890, 2008 INFORMS
that would have content validity, criterion-related valid-
ity, construct validity, and internal consistency. We
rst reviewed the agency theory literature to under-
stand what peer monitoring means in theory. We then
obtained descriptions of peer monitoring from 28 exec-
utive MBA students. We next gathered information at
the theme park. We met with park administrators, con-
ducted 14 three-hour interviews with park managers and
assistant managers and 33 half-hour interviews with park
employees and supervisors, and spent time in the park
and break rooms observing employees interactions. We
asked the informants how employees notice and respond
to their coworkers good, bad, and unspecied behavior
and performance results. We then wrote 55 items that
described noticing and responding to coworkers behav-
ior or performance.
Agency theory implies that peer monitoring is a multi-
dimensional construct because it involves noticing peers
behavior or results and responding in various ways.
Specically, agency theory suggests that peer monitoring
is what Law et al. (1998) call an additive aggregate model
in which the overall construct is a theoretically meaning-
ful sum of the dimensions that comprise the theoretical
domain. There is no requirement that the dimensions be
correlated. Because the focus of our study is the work
unit, we followed guidelines for climate research and
asked respondents to rate the characteristics of their work
unit, not individual behavior or attitudes (Schneider and
Reichers 1983).
After reviewing the literature on supervisory moni-
toring and cohesiveness, we felt that existing measures
needed to be modied for our study and that these
are multidimensional constructs having additive aggre-
gate models. We generated 25 potential items to mea-
sure supervisory monitoring, including the 16-item scale
developed by Bryant and Gurman (1996) and 9 items
based on our interviews (we asked how supervisors at
the park notice and respond to employees behavior and
performance results). Mullen and Copper (1994) argued
persuasively that cohesiveness includes attraction to the
task and attraction to the people in the group, but the
only measure that we could locate that measured both
of these (Zaccaro 1991) had a coefcient alpha lower
than 0.7. Therefore, we pretested 11 items from Zaccaro
(1991), OReilly and Caldwell (1985), and items that we
wrote based on the cohesiveness literature.
Item Selection Using Exploratory Factor Analysis. To
select items for the nal measures, we administered
potential items to three samples of business students. We
asked students to think about their current job or a job
that they had held in the past as they answered the ques-
tions. We performed exploratory factor analysis using
principal components extraction and varimax rotation.
In the rst round, we administered items to 161 stu-
dents and performed separate factor analyses on the
55 peer monitoring and 25 supervisory monitoring items.
The criteria for factor retention were cutoff of eigenval-
ues greater than 1, analysis of the scree plot, and factor
interpretability (Nunnally and Bernstein 1994). In this
round, we retained items if the factor loading was greater
than 0.5 and the item did not have multiple high loadings
(as indicated by a difference of more than 0.2 between
factors).
In the second round, we administered 27 peer moni-
toring and 16 supervisory monitoring items to 213 stu-
dents. These included items that survived the rst round
and several reworded or new items to increase the relia-
bility of the factors found in round one. In addition, we
administered 11 items measuring the task and interper-
sonal aspects of cohesiveness and 17 items measuring
three additional variables (supervisors support for peer
monitoring, how monitored participants feel on the job,
and procedural justice). We conducted exploratory fac-
tor analysis hierarchically, entering the peer monitoring
items rst. Only items with factor loadings greater than
0.65 and no complex loadings were retained.
In the nal round of testing, we administered all the
items retained from round two to 555 students. We
added several new items to increase the reliability of
factors with coefcient alphas lower than 0.8. In addi-
tion, we included new and reworded items to describe
an employee taking action when a peer does something
incorrect. This behavior came up frequently in our inter-
views but did not emerge as a clean factor in the rst
two rounds. We also included the nine-item peer mon-
itoring scale developed by Welbourne et al. (1995) to
test for convergent validity of the new peer monitor-
ing scale. This scale asks how much respondents mon-
itor their peers, whereas our scale asks about the peer
monitoring in the work unit. We entered all the items
simultaneously and removed all items with factor load-
ings lower than 0.7 or with multiple high loadings. We
removed several additional items because shorter scales
provided adequate reliability. In the resulting solution,
all of the items loaded higher than 0.7 on the factor that
they measured, and the highest cross-loading was 0.25.
Table 1 shows the means, standard deviations, coef-
cient alpha reliabilities, and correlations for the factors
that we obtained.
Six peer monitoring factors emerged with alphas rang-
ing from 0.84 to 0.93, which we combined to form a
20-item multidimensional peer monitoring variable (the
items are listed in the appendix). This correlated 0.45
( - 0.01) with the Welbourne et al. scale, provid-
ing evidence of convergent validity. Evidence of diver-
gent validity was indicated because the peer monitoring
measure was distinguishable from related variables. It
correlated 0.28 with supervisory monitoring, 0.31 with
supervisory support for peer monitoring, and 0.30 with
the extent to which respondents feel monitored at work.
Loughry and Tosi: Performance Implications of Peer Monitoring
Organization Science 19(6), pp. 876890, 2008 INFORMS 881
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Conrmatory Factor Analysis. We administered the
20-item peer monitoring scale developed above to
598 employees as part of the theme park survey. We
then analyzed the items using conrmatory factor anal-
ysis (CFA) with the program EQS (Bentler 1995). We
removed item 4 because it loaded on multiple factors
(praise in addition to notice) in the theme park sam-
ple. The results are shown in Table 2. An inspection of
the modication indices, standardized residuals, and fac-
tor loadings showed that a better t could be obtained
by separating the ve items in the original gossip fac-
tor from the exploratory factor analysis into two factors,
discuss (items 14 and 15) and gossip (items 1618). We
reran the rst-order model with seven factors instead of
six and, as shown in Table 2; the model t improved
signicantly.
The new discuss factor pertains to employees dis-
cussing or talking about how coworkers do their jobs.
Employees might perceive discussion or talk about
coworkers performance as occurring for some legitimate
purpose. An example that came out in our interviews was
discussing the merits of one employees versus another
employees approach to some small aspect of a task.
The new gossip factor pertains to employees gossiping
about coworkers and their performance and all the items
included the word gossip. Employees in the study might
have interpreted the survey items referring to gossip as
conversation that is unrelated to work but interpreted the
talk and discussion items as being work related. The
term gossip has a negative connotation, and some peo-
ple consider it improper (Kurland and Pelled 2000). In
addition, coworkers who are the subject of discussion
might or might not be present, but gossip always occurs
when the person who is the subject of the gossip is
not present. For these reasons, separating the discuss
and gossip items into separate rst-order factors makes
sense theoretically, as well as being indicated by the
theme park data. The descriptive statistics and correla-
tions among the seven rst-order factors obtained in the
CFA are shown in Table 3.
Our examination of the correlations among the seven
rst-order peer monitoring factors showed that the gos-
sip and avoid factors each correlated negatively with
one of the other ve factors and were correlated 0.46
( -0.01) with each other. Gossiping about and avoid-
ing poorly performing coworkers are also different from
the other peer monitoring factors in three key ways.
First, gossiping about and avoiding people are both indi-
rect methods of peer monitoring because the target of
the monitoring is not present. Second, they both have
negative connotations, and some people would consider
them inappropriate or morally wrong. Third, both gos-
siping about and avoiding a peer are ways of rejecting
or ostracizing the person, also known as social distanc-
ing (Westphal and Khanna 2003). For these reasons, we
Loughry and Tosi: Performance Implications of Peer Monitoring
882 Organization Science 19(6), pp. 876890, 2008 INFORMS
Table 2 Goodness of Fit Indices for the Conrmatory Factor Analysis Models

2
d|
2
,d| RMSEA CFI GFI NNFI l
2
ld| Sign. level
First-order six-factor model with discuss and 1,252.36 154 8.13 0.109 0.86 0.79 0.85
gossip items together on one factor
First-order seven-factor model with discuss and 1,026.08 153 6.71 0.098 0.89 0.83 0.88 226.28 1 0.000
gossip as separate factors
Second-order one-factor model 945.76 146 6.48 0.096 0.90 0.89 0.88 80.32 7 0.000
Second-order two-factor model 615.89 145 4.25 0.074 0.94 0.91 0.93 329.87 1 0.000
Notes. RMSEA =root mean-square error of approximation, CFI =comparative t index, GFI =Lisrel goodness of t index, NNFI =Bentler-
Bonett nonnormed t index.
decided that two peer monitoring variables were neces-
sary. We call these direct peer monitoring (the average
of notice, praise, correct, report, and discuss) and indi-
rect peer monitoring (the average of gossip and avoid).
These two variables are not signicantly correlated.
It thus appears that direct peer monitoring and indi-
rect peer monitoring are two different multidimensional
constructs that are part of the theoretical domain of
peer monitoring. To support this, we ran two alternative
second-order CFA models (reported in Table 2), a one-
factor model and a two-factor model. The model with
two second-order factors showed a signicant improve-
ment in t over the one-factor model, supporting our
decision to construct two multidimensional peer moni-
toring variables. Figure 1 presents the standardized fac-
tor loadings for this model.
We evaluated multiple indices of t. The compara-
tive t index (CFI) and the incremental t index (IFI)
compare the t of the model to a baseline model. Val-
ues closer to 1 indicate better t, and a value of 0.90 is
usually used as an indicator of good t (Colquitt 2001).
Both the CFI and IFI for the model were 0.94, indicat-
ing good t. The root mean-square error of approxima-
tion (RMSEA) has a value of 0 when there is perfect
t. The RMSEA was 0.07, which indicates reasonable
t (Browne and Cudeck 1993). For the Bentler-Bonett
nonnormed t index, values greater than 0.9 are desir-
able (Bentler 1995). The value obtained in this model
was 0.93.
Table 3 Individual Employee Data: Means, Standard Deviations, Zero-Order Correlations, and Coefcient Alpha Reliabilities
Variable M SD (1) (2) (3) (4) (5) (6) (7) (8) (9)
(1) Notice 3.99 0.79 0.81
(2) Praise 3.01 1.04 0.26

0.90
(3) Correct 3.68 0.89 0.34

0.44

0.85
(4) Report 3.32 1.26 0.25

0.28

0.45

0.93
(5) Discuss 3.37 1.01 0.27

0.03 0.30

0.31

0.79
(6) Gossip 3.25 1.34 0.05 0.40

0.09

0.08 0.48

0.95
(7) Avoid 2.21 1.12 0.03 0.19

0.02 0.03 0.22

0.46

0.92
(8) Direct peer monitoring
a
3.48 0.66 0.60

0.61

0.76

0.75

0.58

0.02 0.00 0.87

(9) Indirect peer monitoring
b
2.73 1.05 0.02 0.35

0.07 0.04 0.42

0.88

0.83

0.01 0.88
Notes. Ns range from 585 to 598.
a
Computed by averaging variables 1, 2, 3, 4, and 5.
b
Computed by averaging variables 6 and 7.

p -0.05;

p -0.01.
Modication Based on the Measure
Development Study
We originally expected, consistent with agency theory,
that peer monitoring would be a single construct, but our
results showed otherwise. As a result, we included both
direct peer monitoring and indirect peer monitoring in
our regression equations and used two-tailed hypothesis
tests, which enabled us to test our original hypotheses
and allowed for possible negative effects of indirect peer
monitoring.
Variables
Managers and assistant managers rated their units per-
formance and task interdependence. Park employees
rated their work units direct and indirect peer monitor-
ing, supervisory monitoring, and cohesiveness (the items
for these scales are shown in the appendix).
Problem-Free Performance. The dependent variable
in this study is problem-free performance, which is the
degree to which the work unit is free of employee
behavior problems. This denition of performance is
consistent with the agency theory focus on reducing
behavior problems among agents. We interviewed man-
agers, supervisors, and theme park executives to develop
the measure. Managers and assistant managers rated how
frequently six problems occurred in each of their units
over the past month on a scale ranging from 1 (always)
to 7 (never), such that higher values represent fewer
problems and therefore better unit performance. The
Loughry and Tosi: Performance Implications of Peer Monitoring
Organization Science 19(6), pp. 876890, 2008 INFORMS 883
Figure 1 Results of Second-Order Conrmatory Factor Analysis
Direct peer
monitoring
Indirect peer
monitoring
Praise Gossip Avoid Report Discuss Correct
20 19 18 17
Notice
16 3 2 1 7 6 5 10 9 8 13 12 11 15 14
0.76 0.86 0.70 0.85 0.88 0.90 0.76 0.82 0.85 0.82 0.96 0.93 0.82 0.81 0.93 0.92 0.94 0.95 0.90
0.48
0.54 0.86 0.59
0.43
0.50 1.00
0.036
items were absenteeism, tardiness, disciplinary prob-
lems, mistakes and accidents, employee bickering, and
overall frequency of problems (o =0.91).
Direct Peer Monitoring. Direct peer monitoring is
the degree to which employees notice their coworkers
efforts, accomplishments, or behavior; praise peers who
do good work; correct coworkers when they are doing
something wrong; report dishonest coworkers; and dis-
cuss how everyone performs. We computed the vari-
able score by averaging the means of the ve factors
to weight them equally (o = 0.88 for the 14 items).
This has the same effect as adding the score for each
dimension, as indicated in Law et al. (1998), but it keeps
the score range for the variable on the original scale,
which is easier to interpret. The response choices for
direct peer monitoring and indirect peer monitoring were
1 =almost never, 2 = rarely, 3 = sometimes, 4 =often,
and 5 =almost always.
Indirect Peer Monitoring. Indirect peer monitoring is
a type of peer monitoring in which employees gossip
about coworkers and avoid working or socializing with
poorly performing coworkers. We averaged the means of
the two factors to compute the variable score (o =0.90
for the ve items).
Supervisory Monitoring. Employees rated the level of
supervisory monitoring in their units on seven items
(o =0.88). The response choices ranged from 1 (almost
never) to 5 (almost always). The measure averaged the
means of the ratings on two dimensions, the degree
to which supervisors observe and ask about employee
performance.
Cohesiveness. Employees rated the level of cohesive-
ness in their units on six items (o =0.80) using a scale
ranging from 1 (strongly disagree) to 5 (strongly agree).
The measure averaged the means of the ratings of task
and interpersonal cohesiveness, as indicated by Mullen
and Copper (1994).
Task Interdependence. Managers and assistant man-
agers rated the task interdependence of their units
using a ve-point scale (1 = almost always true, 5 =
almost never true). We then reverse-coded the data so
that higher values indicate greater task interdependence.
We used four items from Mohr (1971), Pearce and
Gregersen (1991), and Campion et al. (1993) (o =0.85).
These were as follows: (1) Employees in the unit coor-
dinate their efforts with others in the unit; (2) members
of the unit depend on one another for information or
materials needed to perform their tasks; (3) it is hard
for members of this unit to perform their jobs well if
another employee in the unit doesnt perform his or her
job well (i.e., gives inaccurate information, poor service,
or low-quality products); and (4) to do their jobs prop-
erly, employees must collaborate extensively with others
in the unit.
Size. We controlled for size, measured as the total
number of employees assigned to the unit.
Analytic Procedure
Employees and managers rated characteristics of their
work units, and we aggregated their scores into group
scores. The ratings of work units should agree because
raters have access to similar information. We used the
interrater agreement index r
ng
(James et al. 1993) to
Loughry and Tosi: Performance Implications of Peer Monitoring
884 Organization Science 19(6), pp. 876890, 2008 INFORMS
support aggregation. This index measures the extent to
which unit members agree in their assessments of con-
textual variables. We calculated the r
ng
using the rect-
angular uniform distribution. A mean or median r
ng
of 0.70 or greater is often used as an arbitrary value
supporting aggregation (Klein et al. 2000). Nearly
all variables showed excellent agreement (mean r
ng
:
direct peer monitoring =0.86, supervisory monitoring =
0.77, cohesiveness =0.86, task interdependence =0.84,
problem-free performance =0.91). However, the r
ng
for
indirect peer monitoring was lower than 0.70 (mean =
0.54). The lower level of agreement about this type of
monitoring is not surprising because gossiping about and
avoiding coworkers are done behind the target cowork-
ers backs, and only some employees are likely to be
privy to any episode of these behaviors.
We centered the variables before we ran the regression
equations, which helps prevent multicollinearity prob-
lems when testing for interaction effects (Aiken and
West 1991). We controlled for size, supervisory monitor-
ing, task interdependence, and cohesiveness in the rst
equation because research has found that they have main
effects on group performance (Campion et al. 1996,
Gully et al. 1995, Wageman and Baker 1997). Because
67 work units did not provide a sufcient sample size to
include all interactive effects of both types of peer mon-
itoring in one model, we tested the hypothesized moder-
ators separately, entering the variables in the following
equations.
1. Size, supervisory monitoring, task interdepen-
dence, and cohesiveness
2. Direct peer monitoring and indirect peer monitor-
ing main effects (H1)
3. Supervisory monitoring interactions (H2)
4. Task interdependence interactions (H3)
5. Cohesiveness interactions (H4)
Results
Table 4 presents the means, standard deviations, and
bivariate correlations among the variables. Because there
are several signicant correlations among the variables,
we examined the variance ination factors (VIFs) in
Table 4 Theme Park Work-Unit Aggregated Data: Means, Standard Deviations, Zero-Order Correlations, and
Coefcient Alpha Reliabilities
Variable M SD (1) (2) (3) (4) (5) (6) (7)
(1) Size 26.49 20.69
(2) Supervisory monitoring 3.51 0.42 0.14 0.88
(3) Task interdependence 3.84 0.59 0.01 0.18 0.85
(4) Cohesiveness 3.77 0.34 0.20 0.20 0.14 0.80
(5) Direct peer monitoring 3.51 0.36 0.19 0.52

0.13 0.36

0.88
(6) Indirect peer monitoring 2.63 0.55 0.18 0.19 0.07 0.32

0.16 0.90
(7) Problem-free performance 4.02 0.72 0.45

0.15 0.22 0.07 0.30

0.17 0.91
Note. N =67.

p -0.05;

p -0.01.
the regression equations. VIFs greater than 10 indicate
that multicollinearity may unduly inuence the estimates
(Neter et al. 1990, p. 409). The VIFs were all lower than
two. The results of the hypothesis tests are shown in
Table 5. Our interaction results are graphed in Figure 2
for direct peer monitoring and in Figure 3 for indirect
peer monitoring.
H1, which predicted that peer monitoring would be
positively related to work-unit performance, was sup-
ported in that direct peer monitoring was positively
related to problem-free performance (p = 0.32, -
0.05, AR
2
=0.07, Model 2, Table 5). Indirect peer mon-
itoring did not have a signicant main effect.
H2 predicted that the relationship between peer mon-
itoring and performance would be stronger when super-
visory monitoring was low than when supervisory
monitoring was high. As shown in Model 3 of Table 5
and graphed in Figure 2(a), there was a signicant
interaction between direct peer monitoring and super-
visory monitoring on problem-free performance in the
predicted direction ( -0.01). Indirect peer monitoring
and supervisory monitoring interacted such that when
supervisory monitoring was high, high levels of indirect
peer monitoring were associated with signicantly lower
problem-free performance. This interaction result is
reported in Model 3 of Table 5 ( -0.01) and graphed in
Figure 3(a).
H3 predicted that the relationship between peer mon-
itoring and work-unit performance would be stronger
when task interdependence was high than when task inter-
dependence was low. As reported in Model 4 of Table 5
and graphed in Figure 2(b), the interaction between direct
peer monitoring and task interdependence was signicant
in the hypothesized direction ( -0.01, AR
2
= 0.08).
There was no signicant interaction between task interde-
pendence and indirect peer monitoring.
H4 predicted that the relationship between peer mon-
itoring and work-unit performance would be stronger
when cohesiveness was high than when cohesiveness
was low. There was no signicant interaction effect
between cohesiveness and direct peer monitoring on
problem-free performance (Model 5, Table 5). H4 was
not supported. However, indirect peer monitoring and
Loughry and Tosi: Performance Implications of Peer Monitoring
Organization Science 19(6), pp. 876890, 2008 INFORMS 885
Table 5 Effects of Monitoring on Problem-Free Performance (Standardized Coefcients)
Model (1) (2) (3) (4) (5) (5) RM
Size 0.45

0.42

0.46

0.42

0.40

0.40

Supervisory monitoring 0.15 0.00 0.08 0.02 0.02 0.01

Task interdependence 0.27

0.29

0.21

0.31

0.28

0.28

Cohesiveness 0.08 0.19 0.02 0.19 0.10 0.09

Direct peer monitoring 0.32

0.17 0.31

0.27

0.27

Indirect peer monitoring 0.09 0.01 0.12 0.08 0.07

Direct peer monitoringsupervisory monitoring 0.30

Indirect peer monitoringsupervisory monitoring 0.39

Direct peer monitoringtask interdependence 0.29

Indirect peer monitoringtask interdependence 0.06
Direct peer monitoringcohesiveness 0.04
Indirect peer monitoringcohesiveness 0.25

0.26

P
2
change 0.28

0.07

0.11

0.08

0.06

0.06

P
2
0.28 0.35 0.46 0.43 0.41 0.41
Adjusted P
2
0.23 0.28 0.39 0.35 0.33 0.34
Model F 6.01

5.36

6.24

5.37

5.01

5.80

Notes. N =67; signicance tests are two-tailed; RM=reduced model.

p -0.10;

p -0.05;

p -0.01;

p -0.001.
cohesiveness interacted such that when both were high,
problem-free performance was signicantly lower. This
result is shown in Model 5 of Table 5 ( -0.05, AR
2
=
0.06) and graphed in Figure 3(b). Because the 0.06
change in R
2
was not signicant in this model, we ran
Model 5 RM (reduced model) leaving out the nonsignif-
icant interaction term for direct peer monitoring and
cohesiveness. The 0.06 change in R
2
was signicant in
this equation.
Discussion
Types of Peer Monitoring
Our rst research question was, What is peer moni-
toring? We found two types of peer monitoring: direct
peer monitoring and indirect peer monitoring. Both
occur when peers want coworkers to perform well, but
these two types of monitoring had very different rela-
tionships with performance.
Direct peer monitoring involves noticing peers behav-
ior or results and responding directly and openly, such
as praising coworkers when they do a good job, cor-
recting coworkers when they make mistakes, report-
ing dishonest coworkers, and discussing how everyone
does the job. These monitoring methods create a tight
link between the coworkers behavior and the peer-
administered consequences.
In contrast, indirect peer monitoring involves gossip-
ing about and avoiding poorly performing coworkers,
behaviors that do not unambiguously link the coworkers
actions with the consequences. Poor performers may not
always realize that they have been the target of indi-
rect peer monitoring because they are being avoided and
gossiped about when they are not present; those who do
notice may attribute the indirect peer monitoring to char-
acteristics (mood or personality) of the person doing the
monitoring rather than to their own poor performance.
Indirect peer monitoring appears to be an act of rejecting
and distancing oneself from the peer rather than taking
responsibility for ones interactions with the peer. Indi-
viduals using indirect peer monitoring may be more con-
cerned about protecting their own interests than those of
coworkers, the work group, or the organization.
Direct peer monitoring also seems to carry greater
risks or costs for the person doing the monitoring than
does indirect peer monitoring. Coworkers who have not
performed well may resent peers who praise high achiev-
ers. Monitored peers may resist being observed and
being told that they are not performing well, and oth-
ers in the work group may side with them, leading to
an uncomfortable social climate for workers who use
direct peer monitoring. Workers who report serious prob-
lems to a supervisor could be called on to justify their
allegations to the supervisor, the peer, or others, which
could also be uncomfortable. In addition, some supervi-
sors may resent workers who engage in direct peer mon-
itoring (Welbourne and Ferrante 2008). Finally, workers
who use direct peer monitoring may feel rejected or
lose face if their attempts at inuence are unsuccessful.
Indirect peer monitoring, however, avoids these risks.
It expresses dissatisfaction without directly challenging
anyone.
Performance Effects of Direct Peer Monitoring
Direct peer monitoring has a positive relationship with
problem-free performance when supervisory monitoring
is low but no effect when supervisory monitoring is
high. This has important practical implications because
it suggests that in some cases, organizations may be able
to substitute direct peer monitoring in place of some
supervision to reduce total agency costs. This might also
increase employees intrinsic motivation if workers feel
Loughry and Tosi: Performance Implications of Peer Monitoring
886 Organization Science 19(6), pp. 876890, 2008 INFORMS
Figure 2 Effects of Direct Peer Monitoring on Problem-Free
Performance
3.3
3.4
3.5
3.6
3.7
3.8
3.9
4.0
4.1
4.2
4.3
Direct peer
monitoring low
P
r
o
b
l
e
m
-
f
r
e
e

p
e
r
f
o
r
m
a
n
c
e
Supervisory
monitoring low
Supervisory
monitoring high
(a) Effects of direct peer monitoring and supervisory
monitoring on problem-free performance
(b) Effects of direct peer monitoring and task
interdependence on problem-free performance
3.4
3.5
3.6
3.7
3.8
3.9
4.0
4.1
4.2
4.3
4.4
4.5
P
r
o
b
l
e
m
-
f
r
e
e

p
e
r
f
o
r
m
a
n
c
e
Task interdependence low
Task interdependence high
Direct peer
monitoring high
Direct peer
monitoring low
Direct peer
monitoring high
less scrutinized by direct peer monitoring than super-
vision (Enzle and Anderson 1993). These results also
suggest that direct peer monitoring may have value for
reducing employee behavior problems when supervision
is difcult or expensive, such as when team production
methods, wide spans of control, or geographically dis-
persed work sites make it difcult to monitor individu-
als performance (Alchian and Demsetz 1972).
Direct peer monitoring has a positive effect on pro-
blem-free performance when task interdependence is
high but no effect when task interdependence is low.
We also found a positive main effect of task interdepen-
dence, which is consistent with past research (Campion
et al. 1996, Wageman and Baker 1997). Therefore, orga-
nizations that increase task interdependence may nd
performance benets from both the work structure and
the stronger performance-facilitating effects of direct
peer monitoring. Furthermore, workers may be comfort-
able with the peer monitoring if they perceive that it
occurs to accomplish interdependent work (Enzle and
Anderson 1993).
We had hypothesized that cohesiveness would
strengthen the relationship between peer monitoring and
Figure 3 Effects of Indirect Peer Monitoring on Problem-Free
Performance
(a) Effects of indirect peer monitoring and supervisory
monitoring on problem-free performance
3.5
3.6
3.7
3.8
3.9
4.0
4.1
4.2
4.3
4.4
Indirect peer
monitoring low
P
r
o
b
l
e
m
-
f
r
e
e

p
e
r
f
o
r
m
a
n
c
e
(b) Effects of indirect peer monitoring and
cohesiveness on problem-free performance
3.6
3.7
3.8
3.9
4.0
4.1
4.2
4.3
P
r
o
b
l
e
m
-
f
r
e
e

p
e
r
f
o
r
m
a
n
c
e
Indirect peer
monitoring high
Indirect peer
monitoring low
Indirect peer
monitoring high
Supervisory
monitoring low
Supervisory
monitoring high
Cohesiveness low
Cohesiveness high
performance by increasing compliance with peers inu-
ence attempts, but we did not nd a signicant interaction
effect. However, the correlation between cohesiveness
and direct peer monitoring was 0.36. These results can be
explained if cohesiveness causes employees to engage in
more direct peer monitoring rather than increasing com-
pliance with any given level of direct peer monitoring.
Research on the effects of concertive control nds that
in highly cohesive work teams, peers can be even more
controlling than traditional supervisors (Barker 1993). It
is also possible that cohesiveness and peer monitoring
are mutually reinforcing.
Performance Effects of Indirect Peer Monitoring
We did not nd a main effect of indirect peer mon-
itoring on problem-free performance. However, when
there were high levels of either supervisory monitoring
Loughry and Tosi: Performance Implications of Peer Monitoring
Organization Science 19(6), pp. 876890, 2008 INFORMS 887
or cohesiveness, indirect peer monitoring was associated
with signicantly more employee behavior problems.
One reason for the interaction between indirect peer
monitoring and supervisory monitoring may be that
employees perceive that supervisors who knowingly tol-
erate indirect peer monitoring lack concern for their
employees. The effect, then, would be two social con-
trols that workers perceive as controlling and disrespect-
ful, resulting in employee negativity and an unpleasant
work climate that would decrease motivation and trigger
problem behaviors (Tosi et al. 2000).
Indirect peer monitoring also interacts with cohesive-
ness in a way that is associated with more behavior prob-
lems. This could be caused by cohesive subgroups that
do not work effectively with one another. For example,
our park interviews uncovered some resentment between
younger workers (perceived as lazy, disrespectful, and
unreliable) and older workers (perceived as slow and get-
ting easier jobs). An alternative explanation is that being
gossiped about and avoided are particularly upsetting to
members of cohesive groups, and they cope with the
rejection by being frequently absent or late and engaging
in other problem behaviors.
Our ndings lead us to conclude that indirect peer
monitoring is not a useful control mechanism and is
instead a behavior that is not in organizations inter-
ests. Workers may not always know how to appropriately
inuence their peers and might sometimes choose indi-
rect peer monitoring techniques that have unintended,
but harmful, effects. A practical implication is that orga-
nizations might benet from training workers about
appropriate and inappropriate ways to encourage their
peers to perform well. An implication for agency theory
is that it may need to take greater account of psycholog-
ical and social factors so that it can be more useful for
management practitioners. In the case of indirect peer
monitoring, these aspects of the agency control may cre-
ate, rather than reduce, behavior problems.
Generalizability and Future Research
It is important to consider the types of situations to
which the results might generalize. We studied informal
peer monitoring in an organization that does not require
peers to formally evaluate one another and focused only
on peer monitoring that encourages better performance.
Future studies should integrate peer monitoring research
into the broader control literature to examine the inter-
play of peer monitoring both for and against the organi-
zations interests and how formal and informal controls
coexist, interact, and inuence one another (Cardinal
2001). This is important because when the various for-
mal and informal control systems in an organization are
not balanced and integrated, they can erode performance
and breed destructive behavior (Cardinal et al. 2004).
Based on our research site, we can say that the results
may generalize to many types of entry-level work-
ers, where better control systems could reduce costs
and liability from inappropriate behavior, increase the
speed and efciency with which products and services
are delivered, and allow managers to focus on issues
of strategic importance instead of behavior problems.
An important question for future research is how our
results would generalize to other types of workers, such
as managers and professionals. Our nding that direct
peer monitoring reduces behavior problems more when
supervisory monitoring is low suggests that it might be a
useful control mechanism for higher-level workers, who
are usually supervised less closely than line workers.
For example, Sutton and Hargadon (1996) found that
engineers work hard to achieve higher status with their
peers. It may be important for this stream of research to
include peer monitoring that is both for and against the
organizations interests, because recent research shows
that members of corporate boards use social distanc-
ing similar to indirect peer monitoring to encourage fel-
low members to act against the organizations interests
(Westphal and Khanna 2003).
Peer monitoring may also be important in high reli-
ability organizations, such as air trafc control centers
(Edmondson 2002). In such organizations, any perfor-
mance failure could be catastrophic, so they use a vari-
ety of overlapping controls, socialize their members to
notice more, and rely on mutual readjustment and mon-
itoring among workers (Weick et al. 1999). Other useful
contexts for future research on peer monitoring would be
organizations in which employee theft is costly, such as
retailing, and organizations that serve vulnerable popula-
tions, such as the elderly, because direct peer monitoring
might reduce costs and liability and protect clients.
Future research could also examine whether direct
peer monitoring and indirect peer monitoring have orga-
nizational effects in addition to the work-unit effects
found here. Differences in organizational structure and
culture might create more variance in monitoring levels
than we found in one organization. It is also important
for peer monitoring research to examine outcomes in
addition to performance, such as employee well-being,
satisfaction, intrinsic motivation, stress, and turnover.
Barker (1993) found that self-management can increase
workers stress, suggesting that workers who do too
much direct peer monitoring might suffer personally,
even if the organization reaps performance benets. In
addition, it would not be surprising if indirect peer mon-
itoring has negative outcomes for workers well-being.
Because of its potential implications for organizational
members learning and heedfully relating to peers, peer
monitoring is likely to inuence the degree to which
organizational members thrive at work (Spreitzer et al.
2005).
Finally, future studies are needed to better understand
when supervisory monitoring is likely to affect perfor-
mance. We did not nd a main effect of supervisory
monitoring on performance. The employees in our study
Loughry and Tosi: Performance Implications of Peer Monitoring
888 Organization Science 19(6), pp. 876890, 2008 INFORMS
had well-dened jobs with explicit rules and good train-
ing, and their supervisors did not control rewards other
than praise and work schedules. These characteristics
reduce the ability of supervisors to inuence subordi-
nates performance (Kerr and Jermier 1978).
Limitations
Some limitations of the study should be noted. Our mea-
sures of direct and indirect peer monitoring should be
validated, and it is possible that other facets of direct or
indirect peer monitoring could emerge in other contexts.
For example, the dimension of direct peer monitoring
that focuses on reporting coworkers who are stealing
might need to include reporting other serious infrac-
tions in some contexts. Indirect peer monitoring may
also have additional manifestations in some contexts,
such as violence aimed at poor performers or their prop-
erty. The level of interrater agreement about indirect peer
monitoring is another limitation of our study. However,
low reliability generally reduces the chances of nding
signicant effects for a variable; we found that indi-
rect peer monitoring had signicant interactive effects.
Future researchers may also want to consider adding a
third item to the discuss and avoid dimensions of the
variables.
Another limitation of the research is that it was
cross-sectional and was conducted within one organiza-
tion, which limits generalizability and inferences about
causality. Also, the sample size was 67. Sample size is
a common problem in group-level research with intact
work units that limits the number of variables that can be
analyzed. We included the variables that we expected to
have the most important inuences based on the relevant
literature, and we chose a eld site that kept many fac-
tors constant that might otherwise explain performance
differences. However, there may be other relevant vari-
ables to consider in future studies.
Conclusion
Organizational controls have important inuences on
organizations and affect the quality of life for people
who work in them. Peer monitoring frequently occurs
in organizations even when managers do not purpose-
fully encourage it. Furthermore, organizations are imple-
menting wider spans of control and more self-managed
work groups, making interpersonal inuence and lateral
coordination among workers increasingly important for
directing and motivating work (Pfeffer 1997). We believe
that organizational scholars should do more research on
peer monitoring because it is highly relevant for manage-
ment practice but remains underdeveloped in the organi-
zational literature.
Acknowledgments
The authors thank Senior Editor Sim Sitkin and the three
anonymous reviewers for their helpful suggestions, which
greatly improved this paper. This paper was based on the rst
authors dissertation at the University of Florida. An earlier
version of the paper was presented at the Annual Meeting of
the Academy of Management.
Appendix. Items Included in Employee Survey
Direct Peer Monitoring
How often do coworkers in your [work unit] . . .
1. See what coworkers do on the job? (notice)
2. Notice what coworkers are doing at work? (notice)
3. Notice how coworkers behave at work? (notice)
4. Observe how coworkers do the job? (Item eliminated
based on CFA)
5. Congratulate coworkers if they are recognized for doing
good work? (praise)
6. Let others know that a coworker is doing good work?
(praise)
7. Tell coworkers that they did a good job? (praise)
8. Take action if a coworker is doing the job incorrectly?
(correct)
9. Correct coworkers when they make mistakes? (correct)
10. Let coworkers know if they are doing something
wrong? (correct)
11. Tell a supervisor if a coworker is stealing? (report)
12. Let someone know if a coworker is dishonest? (report)
13. Tell a supervisor if a coworker is dishonest? (report)
14. Talk about how coworkers do the job? (discuss)
15. Discuss how everyone performs at work? (discuss)
Indirect Peer Monitoring
How often do coworkers in your [work unit] . . .
16. Gossip about coworkers who perform poorly? (gossip)
17. Gossip about coworkers? (gossip)
18. Gossip about coworkers performance? (gossip)
19. Refuse to socialize with coworkers who perform
poorly? (avoid)
20. Avoid coworkers who perform poorly? (avoid)
Supervisory Monitoring
How often does a supervisor in your [work unit] . . .
1. Directly observe employees working? (observe)
2. Check the quality of employees work? (observe)
3. Check to see if employees are doing the job correctly?
(observe)
4. Observe whether employees are working efciently?
(observe)
5. Ask employees when they will be nished with a task?
(ask)
6. Ask if employees are nished with a task? (ask)
7. Ask employees how long it will take them to complete
a task? (ask)
Cohesiveness
Employees in my [work unit] like belonging to the group
because . . .
1. Being part of the group allows employees to do enjoy-
able work. (task)
2. They get to participate in enjoyable activities. (task)
3. They like the work that the group does. (task)
4. Employees in the group like each other. (interpersonal)
Loughry and Tosi: Performance Implications of Peer Monitoring
Organization Science 19(6), pp. 876890, 2008 INFORMS 889
5. Employees in the group get along well. (interpersonal)
6. Employees in the group enjoy spending time together.
(interpersonal)
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