Goals (Th)at Work – Goals, Monetary Incentives, and Workers’ Performance

46 Pages Posted: 11 Oct 2012

See all articles by Sebastian J. Goerg

Sebastian J. Goerg

Florida State University - Department of Economics; Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Research on Collective Goods

Sebastian Kube

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Research on Collective Goods; University of Bonn

Date Written: October 1, 2012

Abstract

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

Suggested Citation

Goerg, Sebastian J. and Kube, Sebastian, Goals (Th)at Work – Goals, Monetary Incentives, and Workers’ Performance (October 1, 2012). MPI Collective Goods Preprint, No. 2012/19. Available at SSRN: https://ssrn.com/abstract=2159663 or http://dx.doi.org/10.2139/ssrn.2159663

Sebastian J. Goerg (Contact Author)

Florida State University - Department of Economics ( email )

Tallahassee, FL 30306-2180
United States
+1 (850) 644-7083 (Phone)

HOME PAGE: http://www.s-goerg.de

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Research on Collective Goods

Kurt-Schumacher-Str. 10
D-53113 Bonn, 53113
Germany

HOME PAGE: http://www.coll.mpg.de

Sebastian Kube

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Research on Collective Goods ( email )

Kurt-Schumacher-Str. 10
D-53113 Bonn, 53113
Germany

University of Bonn

BWL 1
Adenauerallee 24-42
Bonn, D-53012
Germany

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