To explore the effect of incentives, the Center for Advanced Hindsight worked with the tech company Intel to implement a short-term bonus program and measure its impact on worker productivity. We tested three incentive systems: cash, a family meal voucher, and verbal praise.
While all bonus types increased performance by over 5%, the non-monetary bonuses had a slight advantage over pure cash. Most notably, when productivity was measured in the post-bonus period, we saw a decrease in productivity for monetary bonuses – far below baseline productivity – but not for the verbal reward. However, this decrease only occurred when cash was offered as a default option, but not when it was a matter of choice.
Why it matters
These findings offer insights about the effect of short-term bonuses on intrinsic motivation. Managers, executives, and HR departments can leverage these findings in devising and executing bonuses to engage employees.
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