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Rewarding carrots and crippling sticks: Eliciting employee preferences for the optimal incentive design

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  • Pouliakas, Konstantinos
  • Theodossiou, Ioannis

Abstract

The effectiveness of conventional firm-specific incentive tools is assessed based on the perceptions of a unique sample of employees from seven European countries. A ‘menu’ of conditions likely to elicit optimal worker response to specific incentives is also revealed. The results suggest that the primary determinant of employee effort is job discretion, though monetary rewards and ‘gift exchanges’ are the most effective motivators. Monitoring and Taylor-type assembly lines are considered unproductive. The optimal incentive design by firms is shown to be shaped by a host of contextual factors and requires a “participative” management approach to achieve its maximal motivational potential.

Suggested Citation

  • Pouliakas, Konstantinos & Theodossiou, Ioannis, 2012. "Rewarding carrots and crippling sticks: Eliciting employee preferences for the optimal incentive design," Journal of Economic Psychology, Elsevier, vol. 33(6), pages 1247-1265.
  • Handle: RePEc:eee:joepsy:v:33:y:2012:i:6:p:1247-1265
    DOI: 10.1016/j.joep.2012.08.006
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    More about this item

    Keywords

    2240; 2430; 2630; 2650; Incentives; Effectiveness; Effort; Attitudes; Employees;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
    • M54 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Labor Management

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