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Goals (th)at Work – Goals, Monetary Incentives, and Workers’ Performance

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  • Sebastian Goerg

    ()
    (Florida State University, Department of Economics)

  • Sebastian Kube

    ()
    (University of Bonn, Department of Economics)

Abstract

In a randomized field experiment, we investigate the connection between work goals, monetary incentives, and work performance. Employees are observed in a natural work environment where they have to do a simple, but effort-intense task. Output is perfectly observable and workers are paid for performance. While a regular piece-rate contract serves as a benchmark, in some treatments workers are paid a bonus conditional on reaching a pre-specified goal. We observe that the use of personal work goals leads to a significant output increase. The positive effect of goals not only prevails if they are self-chosen by the workers, but also if goals are set exogenously by the principal – although in the latter case, the exact size of the goal plays a crucial role. Strikingly, the positive effect of self-chosen goals persists even if the goal is not backed up by monetary incentives. We propose a novel incentive contract where – through the choice of a personal work goal – workers themselves determine the risk and the size of their bonus payment at the same time.

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Bibliographic Info

Paper provided by Max Planck Institute for Research on Collective Goods in its series Working Paper Series of the Max Planck Institute for Research on Collective Goods with number 2012_19.

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Date of creation: Oct 2012
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Handle: RePEc:mpg:wpaper:2012_19

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Keywords: Field experiment; Goal setting; monetary incentives; bonus payments; pay-for-performance contracts; workplace behavior;

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