Goals (Th)at Work – Goals, Monetary Incentives, and Workers’ Performance
46 Pages Posted: 11 Oct 2012
Date Written: October 1, 2012
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.
Keywords: goal setting, monetary incentives, bonus payments, pay-for-performance contracts, workplace behavior, field experiment
JEL Classification: A12, C93, D01, D03, D24, J24, J33, M52
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