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There is a longstanding debate regarding the effectiveness of financial incentives in improving work performance. This study is motivated by seemingly conflicting theory and mixed research evidence, and advances the management accounting literature on pay-for-performance by examining the separate and joint effects of task attractiveness and monetary incentives on allocation of effort and on performance.

This study uses an online, multi-period, mixed design experiment with two independent groups of participants who receive either incentive pay or flat pay to perform a multidimensional job. The job tasks differ in complexity and participants can choose how to distribute effort between tasks. Observations are taken across two periods.

If the complex task is initially viewed as attractive it becomes less attractive over time, while the attractiveness of the simple task is stable. Participants who receive flat pay and who find the complex task attractive spent more time on working on that task than those compensated with incentives. Incentives caused higher initial performance than flat pay among participants who find the complex task to be attractive, but the differential is transient; dissatisfaction with initial performance seemingly contribute to a decline in attractiveness and deterioration in performance.

The results indicate that task attributes and personal preferences moderate the effects of incentives on performance and that further research is needed to examine strategies to mitigate spillover effects of deficient performance to subsequent periods. However, the findings may not be applicable to extremely complex work environments involving numerous tasks and/or group work.

Showing that incentives may have a positive but transitory effect on performance, because task attributes and personal preferences moderate the incentive-performance relationship, may have practical implications for hiring, job design and compensation systems design.

This paper contributes to the literature on pay-for-performance by using a setting that better represents contemporary work environments than prior studies have and introduces choice over effort allocation. Additionally, we contribute to theory by showing that economics and psychology theories should be viewed as complements in investigating the intricate relationship between incentives and performance.

The purpose of this paper is to examine the characteristics of teacher incentive pay programs used by midsize to large school districts in Missouri.

This study primarily used the Teacher Compensation Programs (TCP) survey data. The TCP survey was developed by the authors to understand the nature and characteristics of financial incentives that Missouri districts used to recruit, reward, and retain quality teachers.

The data showed that, during the 2009-2010 academic year, 32 percent of the districts offered at least one financial incentive to recruit or retain teachers. Districts were more likely to reward teachers for obtaining National Board certification and for assuming extra duties than for teaching in the subject areas of shortage or in hard-to-staff schools. Larger districts with higher teacher salary were more likely than small districts to offer a larger number of incentive pay programs.

The findings of this study advance our knowledge of local incentive pay policies. It also contributes to the global discourse of teacher compensation and incentives and can be informative to policymakers in the USA and around the world when designing and implementing incentive pay programs to teachers. Further, it sheds light on the important policy question of whether disadvantaged local educational agencies are more likely to use incentive pay programs to recruit and retain teachers and promote an equitable distribution of the teacher workforce. This informs the decision making of providing targeted support to those in need.

The purpose of this paper is to examine the relations of job insecurity with pay and incentive satisfaction and the role of overall justice in these relationships.

The authors surveyed employees of an industrial equipment sales firm located in the Southeastern USA. Surveys were completed by 151 employees using instruments assessing job insecurity, overall justice, pay satisfaction, and incentive satisfaction.

The study results indicated job insecurity is negatively related to both pay and incentive satisfaction. Further, the study found that overall justice mediated the job insecurity to pay satisfaction relationship, but not the job insecurity to incentive satisfaction relationship.

Because overall justice only explained the job insecurity-pay satisfaction relationship, future research should examine other potential mediators to better understand these disparate effects when compared with incentive satisfaction. Future research should also examine the model with a larger sample using a time-lagged design to further mitigate the limitations of the study.

The results of this study suggest that employees who contain a strong fear of job loss tend to experience reduced pay and incentive satisfaction levels. Managers should do what they can to limit the impact of job insecurity on these attitudes and provide additional training to employees in coping strategies so that they might better deal with the job insecurity stressor.

Integrating the literatures on stress appraisal and organizational justice, the empirical model provides understanding of how job stressors and perceptions of organizational justice influence pay and incentive satisfaction.

In this chapter we use data from industrial plants to find out whether seniority-based pay is used as a motivational device for production workers. Alternatively, seniority-based pay could simply be a wage-setting rule independent of incentives. Unlike previous papers, we use a direct measure of seniority-based pay as well as measures of monitoring devices and explicit incentives. We find that those firms that base their wages partly on seniority are less likely to offer explicit incentives. They are also less likely to invest in monitoring devices. We also discover that these companies are more likely to engage in other human resource management policies, which result in long employment relationships. Overall these results suggest that seniority-based pay is indeed used as a motivational device.

Organizations worldwide are faced with the challenge of motivating and retaining employees. In addressing this challenge, organizations may use a variety of incentive pay practices to align employee behavior with organizational objectives. The purpose of this paper is to empirically identify the incentive pay practice configurations or bundles adopted by private sector firms across 14 different countries from several geographic regions. The patterns of incentive pay configuration adoption for each country are evaluated.

Cluster analysis, ANOVA, and multilevel random-intercept logistic modeling are utilized on firms from the 2009 CRANET HRM survey.

Phase I of this study empirically identifies four different configurations (contingent rewarder, incentive minimizer, incentive maximizer, and profit rewarder) derived from three incentive pay practices (individual bonus, team bonus, and profit sharing practices) that firms adopt. Phase II evaluates adoption rates by country and finds striking differences in incentive configurations that firms avoid or adopt. Some countries have clear adoption preferences (e.g. Denmark, Sweden, Japan, and France). In other countries firms employ a variety of incentive bundles (e.g. USA, UK, and Germany) and seem to be less constrained by country-based institutional factors.

Incentive practices are typically studied independent of the configuration of practices that firms select. This research helps us understand the typical bundles in use.

Organizations worldwide are faced with the need to motivate employees. This research maps the incentive bundles preferred in each of 14 countries.

Employees in different countries come to work with expectations about pay and these shape their perceptions of incentive fairness.

Research on incentives has tended to focus independently on specific practices and ignore the reality that organizations generally select multiple practices. This research identifies the combinations of incentive practices generally used and does so with firms from 14 countries from various world regions. These results also offer a map of the incentive bundles preferred in each country.

Managed care organizations use physician incentives to control costs and ensure their financial viability. While the efficacy of incentives may be questioned, substantial challenges exist for physicians who must balance the well-being of their patients and the focus of their professional training with organizational financial concerns. Many physicians experience difficulty in discussing incentive pay with patients (Pearson & Hyams, 2002), even though patients want to know (Pereira & Pearson, 2001) and tend to trust physicians more who are forthright about the issue (Levinson, Kao, Kuby, & Thisted, 2005). Of interest here are patients’ perceptions of the ethicalness of commonly used physician pay incentives. The results of our findings suggest that patients may view these incentives from a different perspective than health policy experts and physician executives. Specifically, our findings indicate that patients perceive incentives based upon patient satisfaction and clinical efficiency more ethically than incentives based upon revenue generation. These views are significantly related to physician visits. We offer suggestions for future research in light of recent pay disclosure regulations.

The purpose of this paper is to provide novel and rigorous evidence on the productivity effect of varying attributes of performance-related pay (PRP) and shows that the details of PRP indeed matter.

In doing so, the authors exploit the panel nature of the Finnish Linked Employer–Employee Data on the details of PRP.

The authors first establish that the omitted variable bias is serious, which makes the cross-sectional estimates on the productivity effect of the details of PRP biased upward substantially. Relying on the fixed effect estimates that account for such bias, the authors find: (first, group incentive PRP is more potent in boosting enterprise productivity than individual incentive PRP; second, group incentive PRP with profitability as a performance measure is especially powerful in raising firm productivity; third, when a narrow measure (such as cost reduction) is already used, adding another narrow measure (such as quality improvement) yields no additional productivity gain; and fourth, PRP with greater power of incentives (the share of PRP in total compensation) results in greater productivity gains, and returns to power of incentives diminishes very slowly.

Much of the empirical literature on PRP focuses on a question of whether the firm can increase firm performance in general and enterprise productivity in particular by introducing PRP and if so, how much. However, not all PRP programs are created equal and PRP programs vary significantly in a variety of attributes. This paper provides novel and rigorous evidence on the productivity effect of varying attributes of PRP and shows that the details of PRP indeed matter.

The purpose of this paper is to examine the effects of two key team‐based pay characteristics – namely reward allocation procedures (i.e. reward based on norms of equity, equality or some combination of the two) and incentive intensity – on both the amount and type of help given to one another among members of outcome‐interdependent teams.

A total of 180 undergraduate students participate in a laboratory simulation with a 2 × 3 experimental design. Servicing virtual “clients,” participants receive pre‐scripted requests for assistance from anonymous teammates. ANOVA and hierarchical regression analyses are used to test the hypotheses.

Relative to equity‐oriented group‐based pay structures, equality‐oriented pay structures are found to be associated with both significantly more help giving in general and more of the type of help likely to enhance group‐level competencies (i.e. autonomous help). Incentive intensity strengthens the effects of reward allocation on the amount (but not the type) of help giving.

While the short time frame of the simulation poses a significant threat to external validity, the findings suggest that team‐based compensation practices may provide organizational leaders with an important tool by which to shape critical, helping‐related team processes, with potentially important implications for both team learning and performance.

Managers interested in promoting capacity‐building and helping among team members should avoid allocating team rewards strictly on the basis of the individual contribution.

This paper provides the first empirical findings regarding how alternative modes of team‐based reward distribution may influence key group processes among members of outcome interdependent teams.

The purpose of this paper is to investigate the influence of national culture on the adoption of four different incentive pay bundles (incentive maximizer, contingent rewarder, profit rewarder, and incentive minimizer) using GLOBE national culture dimensions in 14 countries. It uses incentive pay bundles derived by Prince et al. (2016).

The study adopted multilevel random-intercept logistic modeling using firm incentive practice usage from the CRANET database and country culture scores from the GLOBE study.

Evidence suggests that in-group collectivism is associated with increased use of the incentive maximizer approach, in which firms use a combination of high levels of individual, team, and profit sharing incentives, and decreased use of the incentive minimizer approach (where firms minimally employ incentives) and the individual and team bonus focused contingent rewarder configuration. Higher uncertainty avoidance is linked to increased use of the profit rewarder approach (where only profit sharing is emphasized) and decreased use of the contingent rewarder approach. Performance-orientation cultures appear to support using the incentive maximizer and avoiding the incentive minimizer bundles.

This study investigates incentive practice bundles that firms use verses separate analysis of practices and use the GLOBE culture metrics. It utilizes multilevel modeling, which has been lacking in past studies of culture and incentives.

Incentives are effective at enhancing productivity, but research also suggests that performance incentives can have “unintended negative consequences” including increases in hazard/injuries, increases in errors, and reduction in cooperation, prosocial behaviors, and creativity. Relatively overlooked is whether, when, and how incentives can be designed to prevent such negative consequences. The authors review literature in several disciplines (construction, healthcare delivery, economics, psychology, and [some] management) on this issue. This chapter, in toto, sheds a generally positive light and suggests that, beyond productivity, incentives can be used to improve other outcomes such as safety, quality, prosocial behaviors, and creativity, particularly when the incentives are thoughtfully designed. The review concludes with several potential fruitful areas for future research such as investigations of incentive-effect duration.