Motivating Agents: How Much Does the Mission Matter?
AbstractEconomic theory predicts that agents will work harder if they believe in the "mission" of the organization. Well-identified estimates of exactly how much harder they will work have been elusive, however, because agents select into jobs. We conduct a real effort experiment with participants who work directly for organizations with clear missions. Weeks before the experiment, we survey potential participants for their organizational preferences. At the experiment, we randomly assign workers to organizations, creating either mission matches or mismatches. We overlay performance incentives to test whether they can make up for the motivational deficit caused by a mismatch. Our estimates suggest that matched workers produce 72% more than mismatched workers and that performance pay can increase output by 35% compared to workers who only receive a base wage. Considering matches and mismatches separately, we find that performance pay has only a modest effect on matched workers (a 13% increase) while it has a large effect (a 86% increase) on mismatches, an effect that erodes much of the performance gap caused by the poor match. Our results have broad implications both for those organizations already with well-defined missions (i.e., compensation and screening policies) as well as for those organizations strategizing about strengthening or clarifying their missions.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 7602.
Length: 53 pages
Date of creation: Aug 2013
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Find related papers by JEL classification:
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
- J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
- J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
- M52 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-09-26 (All new papers)
- NEP-CBE-2013-09-26 (Cognitive & Behavioural Economics)
- NEP-CTA-2013-09-26 (Contract Theory & Applications)
- NEP-EXP-2013-09-26 (Experimental Economics)
- NEP-HRM-2013-09-26 (Human Capital & Human Resource Management)
- NEP-LAB-2013-09-26 (Labour Economics)
- NEP-NPS-2013-09-26 (Nonprofit & Public Sector)
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