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

Author

Listed:
  • 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.

Suggested Citation

  • Sebastian Goerg & Sebastian Kube, 2012. "Goals (th)at Work – Goals, Monetary Incentives, and Workers’ Performance," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2012_19, Max Planck Institute for Research on Collective Goods.
  • Handle: RePEc:mpg:wpaper:2012_19
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    File URL: http://www.coll.mpg.de/pdf_dat/2012_19online.pdf
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Zafer Akýn & Emin Karagözoðlu, 2015. "The Role of Goals and Feedback in Incentivizing Performance," IPEK Working Papers 1506, Ipek University, Department of Economics, revised Aug 2015.
    2. repec:eee:ireced:v:27:y:2018:i:c:p:34-44 is not listed on IDEAS
    3. Julian Conrads & Mischa Ellenberger & Bernd Irlenbusch & Elia Nora Ohms & Rainer Michael Rilke & Gari Walkowitz, 2017. "Team Goal Incentives and Individual Lying Behavior," WHU Working Paper Series - Economics Group 17-02, WHU - Otto Beisheim School of Management.
    4. Chen, Roy & Chen, Yan & Liu, Yang & Mei, Qiaozhu, 2017. "Does team competition increase pro-social lending? Evidence from online microfinance," Games and Economic Behavior, Elsevier, vol. 101(C), pages 311-333.
    5. Sebastian J. Goerg, 2015. "Goal setting and worker motivation," IZA World of Labor, Institute for the Study of Labor (IZA), pages 178-178, August.
    6. 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.
    7. Himmler, Oliver & Jaeckle, Robert & Weinschenk, Philipp, 2017. "Soft Commitments, Reminders and Academic Performance," MPRA Paper 76832, University Library of Munich, Germany.
    8. Wagner, Valentin, 2016. "Seeking risk or answering smart? Framing in elementary schools," DICE Discussion Papers 227, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    9. Alexander K. Koch & Julia Nafziger, 2017. "Motivational Goal Bracketing: An Experiment," Economics Working Papers 2017-06, Department of Economics and Business Economics, Aarhus University.
    10. Max van Lent & Michiel Souverijn, 2017. "Goal Setting and Raising the Bar: A Field Experiment," Tinbergen Institute Discussion Papers 17-001/VII, Tinbergen Institute.
    11. 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 for the Study of Labor (IZA).
    12. Kajackaite, Agne & Werner, Peter, 2015. "The incentive effects of performance requirements – A real effort experiment," Journal of Economic Psychology, Elsevier, vol. 49(C), pages 84-94.

    More about this item

    Keywords

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

    JEL classification:

    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
    • A12 - General Economics and Teaching - - General Economics - - - Relation of Economics to Other Disciplines
    • M52 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Compensation and Compensation Methods and Their Effects
    • D03 - Microeconomics - - General - - - Behavioral Microeconomics: Underlying Principles
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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