Goal Setting and Monetary Incentives: When Large Stakes Are Not Enough (original) (raw)

Wage Policies, Incentive Schemes, and Motivation

Handbook of Labor, Human Resources and Population Economics, 2020

This chapter reviews the literature on both financial incentives and nonmonetary motivations (social preferences) that affect effort and performance in the labor market. Neoclassical theory implies that higher levels of financial incentives should monotonically increase effort. While this is true over much of the wage

Hidden benefits of reward: A field experiment on motivation and monetary incentives

European Economic Review, 2015

We conducted a field experiment in a controlled work environment to investigate the effect of motivational talk and its interaction with monetary incentives. We find that motivational talk significantly improves performance only when accompanied by performance pay. Moreover, performance pay slightly reduces performance unless it is accompanied by motivational talk. These effects also carry over to the quality of work. Performance pay alone leads to more mistakes. Adding motivational talk makes the difference. In treatments with performance pay, motivational talk increases output by about 20 percent and reduces the ratio of mistakes by more than 40 percent.

Make it challenging : motivation through goal setting

2011

We study a principal agent model where agents derive a sense of pride when accomplishing production goals. As in classical models, the principal offers a pay-per-performance wage to the agent, determining the agent’s extrinsic incentives. However, in our setting, the principal does also want to set goals that affect the agents’ intrinsic motivation to work. Agents differ in their personal

Incentives to Motivate

2012

We present a model in which a motivator can take costly actions - or what we call motivational effort - in order to reduce the effort costs of a worker, and analyze the optimal combination of motivational effort and monetary incentives. We distinguish two cases. First, the firm owner chooses the intensity of motivation and bears the motivational costs. Second,

Individual variable pay for performance, controlling effects, and intrinsic motivation

Motivation and Emotion

A core question in research on compensation and motivation is whether individual variable pay for performance (IVPFP) can undermine intrinsic motivation in the workplace. We investigated the mediating role of a controlling effect on the relationship between the amount of IVPFP received and intrinsic motivation. In a three-wave study of 304 employees from eight European countries, we found that a controlling effect mediated the negative association between IVPFP and intrinsic motivation. These findings support the proposition from self-determination theory that financial rewards can have a controlling effect that decreases intrinsic motivation. Theoretical and practical implications for compensation and motivation in the workplace are discussed.

Goal Setting Theory: The Effect of Incentive Moderation on Individual Performance

Research In Management and Accounting, 2020

This study uses goal-setting theory and reinforcement theory to explain the formation of individual motivation in achieving goals. Testing the effect of goal specificity used the experimental method to test the impact of goal specificity, different goal difficulty on the same quota incentive system as the 2x2x1 experimental design. This study's findings confirm the goal-setting theory shown from the higher achievement of participants' goals when participants are given specific and challenging goals than participant goals in different variations of goal specificity and goal difficulty. This study found that participants have a greater focus on goal specificity in driving goal attainment behavior. The findings of this study confirm the reinforcement theory shown from achieving goals that exceed targets. Positive consequences become arguments for individuals to do the same action

Why Real Leisure Really Matters: Incentive Effects on Real Effort in the Laboratory

SSRN Electronic Journal, 2000

On-the-job leisure is a pervasive feature of the modern workplace. We studied its impact on work performance in a laboratory experiment by either allowing or restricting Internet access. We used a 22 experimental design in which subjects completing real-effort work tasks could earn cash according to either individual-or team-production incentive schemes. Under team pay, production levels were significantly lower when Internet browsing was available than when it was not. Under individual pay, however, no differences in production levels were observed between the treatment in which Internet was available and the treatment in which it was not. In line with standard incentive theory, individual pay outperformed team pay across all periods of the experiment when Internet browsing was available. This was not the case, however, when Internet browsing was unavailable. These results demonstrate that the integration of on-the-job leisure activities into an experimental labor design is crucial for uncovering incentive effects.

The Relation Between Financial Incentives, Motivation, and Performance

Journal of Personnel Psychology

To this day, researchers are debating the adequacy of using financial incentives to bolster performance in work settings. Our goal was to contribute to current understanding by considering the moderating role of distributive justice in the relation between financial incentives, motivation, and performance. Based on self-determination theory, we hypothesized that when bonuses are fairly distributed, using financial incentives makes employees feel more competent and autonomous, which in turn fosters greater autonomous motivation and lower controlled motivation, and better work performance. Results from path analyses in three samples supported our hypotheses, suggesting that the effect of financial incentives is contextual, and that compensation plans using financial incentives and bonuses can be effective when properly managed.

Can prosocial incentives and self-chosen goals improve performance? An online real-effort experiment

Oxford Economic Papers, 2023

We study incentive schemes that combine self-chosen goals with prosocial rewards. We design a real-effort task experiment with MTurk workers. Upon achieving self-chosen goals, rewards are paid to the worker in the monetary treatments or to charities in the prosocial treatments. To explore the mechanisms whereby rewards can improve performance with prosocial incentives, we develop a theoretical model with goal dependence and earning reference points. Our results show that when rewards are paid to charities, performance improvements happen through workers setting higher goals. This effect is stronger for those whose interests are matched with the charity’s mission. Our findings have important implications for incentivizing workers in the gig economy.