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Hidden Benefits of Reward: A Field Experiment on Motivation and Monetary Incentives

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  • Ola Kvaløy
  • Petra Nieken
  • Anja Schöttner

Abstract

We conduct 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 if it is accompanied by performance pay. Moreover, performance pay reduces performance unless it is accompanied by motivational talk. By adding motivational sentences to an otherwise neutral explanation of the work task, the effect of performance pay goes from slightly negative to significantly positive. Hence, we find what we call a hidden benefit of monetary rewards: complementarity between performance pay and motivational talk.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 4393.

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Date of creation: 2013
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Handle: RePEc:ces:ceswps:_4393

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Keywords: verbal motivation; performance pay; field experiment;

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  1. Roland Bénabou & Jean Tirole, 2004. "Incentives and Prosocial Behavior," Working Papers, Princeton University, Woodrow Wilson School of Public and International Affairs, Discussion Papers in Economics. 137, Princeton University, Woodrow Wilson School of Public and International Affairs, Discussion Papers in Economics..
  2. Uri Gneezy & Stephan Meier & Pedro Rey-Biel, 2011. "When and Why Incentives (Don't) Work to Modify Behavior," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 25(4), pages 191-210, Fall.
  3. Bradler, Christiane & Dur, Robert & Neckermann, Susanne & Non, Arjan, 2014. "Employee Recognition and Performance: A Field Experiment," IZA Discussion Papers 8311, Institute for the Study of Labor (IZA).
  4. Jordi Brandts & David J. Cooper, 2007. "It's What You Say, Not What You Pay: An Experimental Study of Manager–Employee Relationships in Overcoming Coordination Failure," Journal of the European Economic Association, MIT Press, MIT Press, vol. 5(6), pages 1223-1268, December.
  5. Roland Bénabou & Jean Tirole, 2003. "Intrinsic and Extrinsic Motivation," Review of Economic Studies, Oxford University Press, vol. 70(3), pages 489-520.
  6. Anthony Marino & Jan Zabojnik, 2006. "Work-Related Perks, Agency Problems, and Optimal Incentive Contracts," Working Papers, Queen's University, Department of Economics 1107, Queen's University, Department of Economics.
  7. Tore Ellingsen & Magnus Johannesson, 2008. "Pride and Prejudice: The Human Side of Incentive Theory," American Economic Review, American Economic Association, American Economic Association, vol. 98(3), pages 990-1008, June.
  8. Sebastian Kube & Michel Andre Marechal & Clemens Puppe, 2012. "The Currency of Reciprocity: Gift Exchange in the Workplace," American Economic Review, American Economic Association, American Economic Association, vol. 102(4), pages 1644-62, June.
  9. Samuel Bowles & Sandra Polania-Reyes, 2012. "Economic Incentives and Social Preferences: Substitutes or Complements?," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 50(2), pages 368-425, June.
  10. Dur, Robert & Non, Arjan & Roelfsema, Hein, 2010. "Reciprocity and incentive pay in the workplace," Journal of Economic Psychology, Elsevier, Elsevier, vol. 31(4), pages 676-686, August.
  11. Michael Kosfeld & Susanne Neckermann, 2011. "Getting More Work for Nothing? Symbolic Awards and Worker Performance," American Economic Journal: Microeconomics, American Economic Association, American Economic Association, vol. 3(3), pages 86-99, August.
  12. Frey, Bruno S & Oberholzer-Gee, Felix, 1997. "The Cost of Price Incentives: An Empirical Analysis of Motivation Crowding-Out," American Economic Review, American Economic Association, American Economic Association, vol. 87(4), pages 746-55, September.
  13. Sliwka, Dirk, 2006. "Trust as a Signal of a Social Norm and the Hidden Costs of Incentive Schemes," IZA Discussion Papers 2293, Institute for the Study of Labor (IZA).
  14. Thomas Lemieux & W. Bentley MacLeod & Daniel Parent, 2009. "Performance Pay and Wage Inequality-super-," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 124(1), pages 1-49, February.
  15. Pokorny, Kathrin, 2008. "Pay--but do not pay too much: An experimental study on the impact of incentives," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 66(2), pages 251-264, May.
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