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Goal Setting and Monetary Incentives: When Large Stakes Are Not Enough

Author

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  • Joaquín Gómez-Miñambres

    () (Economic Science Institute, Chapman University)

  • Brice Corgnet

    () (Argyros School of Business and Economics, Chapman University)

  • Roberto Hernán González

    (Universidad de Granada, Department of Economic Theory and Economic History)

Abstract

The aim of this paper is to test the effectiveness of wage-irrelevant goal setting policies in a laboratory environment. In our design, managers can assign a goal to their workers by setting a certain level of performance on the work task. To establish our theoretical conjectures we develop a model where assigned goals act as reference points to workers’ intrinsic motivation, creating a sense of gain when attained and a sense of loss when not attained. Consistent with our theoretical framework, we find evidence that managers set goals that are challenging but attainable for an average-ability worker. Workers respond to these goals by increasing effort, performance and by decreasing on-the-job leisure activities with respect to the no-goal setting baseline. We study the interaction between goal setting and monetary rewards by considering different values for the monetary incentives involved in completing the task. Interestingly, we find that goal setting is especially effective when monetary incentives are strong. These results suggest that goal setting may foster workers’ intrinsic motivation and increase their level of performance beyond what is achieved using solely monetary incentives.

Suggested Citation

  • Joaquín Gómez-Miñambres & Brice Corgnet & Roberto Hernán González, 2012. "Goal Setting and Monetary Incentives: When Large Stakes Are Not Enough," Working Papers 12-24, Chapman University, Economic Science Institute.
  • Handle: RePEc:chu:wpaper:12-24
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    References listed on IDEAS

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    Cited by:

    1. repec:eee:joepsy:v:62:y:2017:i:c:p:155-172 is not listed on IDEAS
    2. Koch, Alexander K. & Nafziger, Julia, 2017. "Motivational Goal Bracketing: An Experiment," IZA Discussion Papers 10955, Institute of Labor Economics (IZA).
    3. Hoffman, Mitchell & Burks, Stephen V., 2017. "Training Contracts, Employee Turnover, and the Returns from Firm-Sponsored General Training," IZA Discussion Papers 10835, Institute of Labor Economics (IZA).
    4. Bhanot, Syon P., 2017. "Rank and response: A field experiment on peer information and water use behavior," Journal of Economic Psychology, Elsevier, vol. 62(C), pages 155-172.
    5. Goerg, Sebastian J. & Kube, Sebastian & Radbruch, Jonas, 2017. "The Effectiveness of Incentive Schemes in the Presence of Implicit Effort Costs," IZA Discussion Papers 10546, Institute of Labor Economics (IZA).
    6. repec:eee:eecrev:v:113:y:2019:i:c:p:23-45 is not listed on IDEAS
    7. repec:eee:ejores:v:264:y:2018:i:2:p:462-471 is not listed on IDEAS
    8. Victor H. Gonzalez-Jimenez, 2019. "Contracting Probability Distortions," Vienna Economics Papers 1901, University of Vienna, Department of Economics.
    9. Dalton, P.S. & Gonzalez Jimenez, V.H. & Noussair, Charles, 2016. "Self-Chosen Goals : Incentives and Gender Differences (revision of 2015-021)," Discussion Paper 2016-036, Tilburg University, Center for Economic Research.
    10. repec:kap:jrisku:v:56:y:2018:i:1:d:10.1007_s11166-018-9271-9 is not listed on IDEAS
    11. Albert, Philipp & Kübler, Dorothea & Silva-Goncalves, Juliana, 2019. "Peer Effects of Ambition," Rationality and Competition Discussion Paper Series 148, CRC TRR 190 Rationality and Competition.
    12. Brice Corgnet & Ludivine Martin & Peguy Ndodjang & Angela Sutan, 2015. "On the Merit of Equal Pay: When Influence Activities Interact with Incentive Setting," Working Papers 15-09, Chapman University, Economic Science Institute.
    13. Corgnet, Brice & Gómez-Miñambres, Joaquín & Hernán-González, Roberto, 2018. "Goal setting in the principal–agent model: Weak incentives for strong performance," Games and Economic Behavior, Elsevier, vol. 109(C), pages 311-326.
    14. Smithers, Samuel, 2015. "Goals, motivation and gender," Economics Letters, Elsevier, vol. 131(C), pages 75-77.
    15. Dalton, P.S. & Gonzalez Jimenez, V.H. & Noussair, C.N., 2015. "Paying with Self-Chosen Goals : Incentives and Gender Differences," Discussion Paper 2015-021, Tilburg University, Center for Economic Research.
    16. Max van Lent & Michiel Souverijn, 2017. "Goal Setting and Raising the Bar: A Field Experiment," Tinbergen Institute Discussion Papers 17-001/VII, Tinbergen Institute.
    17. Jordi Brandts & Brice Corgnet & Roberto Hernán-González & José M. Ortiz & Carles Solà, 2018. "A ‘threat’ is a ‘Threat’: Incentive Effects of Firing Threats with Varying Degrees of Performance Information," Working Papers 1023, Barcelona Graduate School of Economics.
    18. Brice Corgnet & Roberto Hernán-González, 2015. "Revisiting the Tradeoff between Risk and Incentives: The Shocking Effect of Random Shocks," Working Papers 15-05, Chapman University, Economic Science Institute.
    19. Burdina, Mariya & Hiller, R. Scott & Metz, Neil E., 2017. "Goal attainability and performance: Evidence from Boston marathon qualifying standards," Journal of Economic Psychology, Elsevier, vol. 58(C), pages 77-88.
    20. Gonzalez Jimenez, Victor, 2016. "Believe Me, You are (not) that Bad," Discussion Paper 2016-032, Tilburg University, Center for Economic Research.
    21. Colella, Fabrizio & Dalton, Patricio & Giusti, G., 2018. "You'll Never Walk Alone : The Effect of Moral Support on Performance," Discussion Paper 2018-026, Tilburg University, Center for Economic Research.
    22. Ismaël Rafaï & Mira Toumi, 2017. "Pay Attention or Be Paid for Attention? Impact of Incentives on Allocation of Attention," GREDEG Working Papers 2017-11, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), University of Nice Sophia Antipolis.

    More about this item

    Keywords

    Intrinsic motivation; incentives; goal-setting; reference dependent preferences; virtual organizations.;

    JEL classification:

    • C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • M54 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Labor Management

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