What do researches say about monetary incentive?
Some researches suggest that there is a positive correlation between monetary incentive and employees’ performance. The research conducted by Stajkovic and Luthans (2001) shows that systematic monetary incentive has a more powerful impact on employees’ performance than the routine pay, and there is a strong correlation between money and performance. Locke (cited in Cieri, 2003, p.475) found monetary incentives can rise thirty percent of productivity.
However, according to Kohn (1998), a systematical analysis of those researches indicates that those positive correlations tend to be limited into these three points. Firstly, financial incentive only can improve employees performance in short term. Secondly, the effect is positive only when the subjects are given simply tasks. Thirdly, financial incentive only can make people do things faster.
The limitation of monetary incentive seems to be not only those three points. The research conducted by Matsumura (2003) shows that monetary incentive will be effective in the following three cases only: high productivity, low intrinsic motivation and low uncertainty of output. Otherwise, if the situation is converse, monetary incentive does not tend to be effective. Furthermore, the effectiveness of monetary incentive even depends on the people. In Chiu, Luk & Tang (2002)’s survey, although money is considered as the most important motivator in Hongkong and China, Hongkong people would like to think that annual leave (non-monetary incentive) is one of important factors, which can motivate people. The difference between Hongkong and China, Probably, is because Hongkong people are richer than Chinese people to some extend.
According to one of the largest reviews of how monetary incentive programs affect employees’ productivity (cited in Kohn 1993), although the results of those researches indicate a positive correlation between financial incentives and productivity, statistical tests show that effect is not significant overall. Some researches even claim that there is no correlation or even negative correlation between them. Kohn (1993) notes that there are over 20 studies over the last thirty years have indicated that employees expecting a monetary reward for doing their tasks can not do the jobs as well as those expecting no monetary reward.
Money can destroy the interest of task (Kohn, 1998; Fehr & Falk, 2002; Fessler, 2003). Kohn (1998) states there are more than 70 studies showing monetary incentive undermine the interest in the task or itself. Fehr (2002) find that the tasks which are interesting are undertaken even there are no monetary incentives in their research. Fessler (2003) conducted an experiment indicating incentive reward results in a decrease of task interest. In addition, the research also shows that there is a positive relationship between task performance and task interest. Therefore, it can be proved that monetary incentive decrease employees’ performance.
Many researches point out that monetary incentive can not increase people’s motivation. Fehr (2002) conducted an experiment to prove that there are three important human intrinsic motives interact with economic incentives. They are the motive to reciprocate, the desire for social approval and the desire to work on interesting tasks. Therefore, because of the importance of these three motive, monetary incentives my backfire and decrease employees’ motivation. Moreover, a study shows (Arocena & Villanueva, 2003) people’s internal motivation can be activated by providing minimal money. However, the positive intrinsic motivation will be decreased with increasing money incentive.
Furthermore, in a study of some economic theory of motivation (Sorauren, 2000), using money to motivate people is not always successful and has converse consequence. There are more reasons why people work more than just to make money. The best method to reward people is to treat them as human being.
Conclusion
This paper explores the practitioners’ thought about monetary incentive and the previous researches that have done on this topic. Although some people and researches suggest that monetary incentive can improve employees’ performance, monetary incentive has a lot of limitations. Moreover, money can destroy the attractiveness of tasks, and decrease the intrinsic motivation of people’s.
List of references
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