Feedback and Incentives: Maintaining Motivated Employees

We will here present what we consider to be the main findings of the research project: - We develop a theoretical model in which a motivator can take costly actions - or what we call motivational effort - in order to reduce the effort costs of a worker. We find that the lower-powered the worker's monetary incentives, the higher are often the motivator's bonus. A low bonus to the worker may thus imply a higher pay-off to the motivator. Consequently, low-powered monetary incentives to the worker may be in the motivator's interest. - We present results from a field experiment designed to investigate the interaction between performance pay and motivational talk. We find that motivational talk significantly improves performance only when accompanied by performance pay. Moreover, performance pay reduces performance unless it is accompanied by motivational talk. This also carries over to the quality of work. Performance pay alone leads to more mistakes, but performance pay has a positive effect on quality if it is accompanied by motivational talk. The effects are strong. In treatments with performance pay, motivational talk increases output by about 20 percent and reduces the ratio of mistakes by more than 40 percent. - In a theoretical model, we find that firms may benefit from team incentives in relational contracts, and that team's efficiency may increase considerably with size if outputs are negatively correlated. We also find that if workers have bargaining power, firms may deliberately choose to organize production as a team where only aggregate output is observable. - We investigate experimentally how teams respond to relative performance feedback (RPF). We find that when subjects work under team incentives, then RPF on team performance increases the teams? average performance by almost 10 percent. The treatment effect is driven by higher top performance, as this is almost 20% higher when the teams receive RPF compared to when the teams only receive absolute performance feedback. - We analyze experimentally whether the provision of relative performance feedback differently affects the performance of subjects when provided in various feedback environments. We find that low ability workers reduce their performance when provided with the feedback, whereas high ability workers improve. - We study risk-taking behavior in tournaments where the optimal strategy is to take no risk. We find that subjects reduced their risk-taking when we removed feedback about winner?s decisions each round, and when we reduced the number of contestants in the tournaments. - We investigate a causal relationship between autonomy and performance in retail, utilizing store level weekly sales data from a large consumer electronics retail chain in Norway. In 2011 the retail chain made it a mandatory part of the job instruction to approach every customer who entered the store. We find that the change in management practice increased sales by 5.6 percent and transactions by 4.7 percent. The effect seems to be persistent, suggesting that a more detailed job instruction, combined with systematic feedback and control, may increase performance in low-skilled narrowly defined jobs. - We investigate a causal relationship between relative earnings and job separation by utilizing a unique information shock in Norway. In the fall of 2001 information about all Norwegians? taxable income from year 2000 was made available online. The empirical analysis demonstrates that this information shock increased the job separation rate by 2.84 percentage points for the low relative earners in comparison to the high relative earners. They see a corresponding 4.8 percent increase in earnings, suggesting that the information shock motivated the low relative earners to find better paying jobs. - In a real effort field experiment, we investigate how schools can increase students? perseverance in math by shaping students? beliefs in their abilities to learn. Using protocols adapted from psychology, we experimentally manipulate students? beliefs in their ability to learn. Three weeks after our treatment, we find persistent treatment effects on students? perseverance and academic performance in math. These results are strongest among students who, prior to the experiment, had less of a belief in their ability to learn. - We run a large scale experiment on the online labor market Amazon Mechanical Turk, testing the effect of performance pay and non-monetary motivation on 3600 workers. We study two types of non-monetary motivation: Praise and goal-setting. We find that praise had a significant negative effect on quantity ? and no effect on quality - irrespective of how the workers were paid. Goal-setting had no significant effect, neither on quantity or quality. Performance pay, however, had a strong positive affect on quantify, although we find no difference between high and low performance pay.

An important change in working life has been the introduction of information technology, software applications and new technological devices that has dramatically increased the scope for individual and relative performance feedback. Today, for example, ma ny firms extensively utilize technological devices that help employees formulate individual goals and help leaders to provide feedback on performance in relation to these goals. This project provides a theoretical and empirical investigation of how non-mo netary motivators affect employees' behavior and work satisfaction. We ask the following questions: Can the introduction of feedback technologies increase non-monetary motivation through the feeling of accomplishment or social esteem? Or can the technolog ies' focus on measuring performance make employees feel monitored and controlled and thereby become less motivated? Can such technologies lead to an unhealthy performance pressure that leads to sick leave and higher turnover? Can feedback technologies mak e colleagues more competitive and less willing to help each other? Can feedback technologies crowd out intrinsic motivation? Can feedback systems make individuals dependent on feedback, such that effort is exclusively driven by the expectation of appraisa l from the management? How do non-monetary motivators interact with monetary incentives? We organize our project in three sub-projects: 1) Theory: Develop theoretical models that will help us to better understand different mechanisms under which non-mone tary motivation affects behavior; 2) Evidence from the field: Empirically investigate how employees are affected by the introduction of new technologies that facilitate non-monetary rewards; 3) Evidence from the laboratory: Experimentally investigate the relative efficacy of different non-monetary motivators and how these interact with monetary incentives.