How to improve employee performance (without extra pay)

A group of economists have claimed to have discovered a ‘low-cost instrument to stimulate work effort’.

How to improve employee performance (without extra pay)
Wouldn’t it be a good idea to make use of cheaper non-monetary motivators more frequently instead of paying expensive bonuses?

That’s the question which the economists Michael Kosfeld, Susanne Neckermann, and Xiaolan Yang explored in a study which has been published on the economics commentary website VoxEU.

Their research involved splitting workers up into two groups.

For the 'high-meaning condition', workers were told that their work, which consisted of entering data into an electronic database, was of great importance for a research project.

For the 'low-meaning condition', workers were told that their work was a quality check that most likely would never be used.

The result was that the performance of those told that their work was of great importance ranked about 15% higher in the data entry task.

“Knowing that you matter really matters, which suggests that the provision of meaning can be a low-cost instrument to stimulate work effort,” said the study.

The research also found that monetary incentives in the form of piece rates also increase employee performance (by about 5-8%) independent of whether meaning of work is high or low.

Another key finding was that public recognition is a key motivator.

Among study participants in the group whose work had ‘low meaning’, a smiley button presented to the best-performing worker in front of peers boosted output by about 18%.

However, among the group doing work of great importance, public recognition had no effect on performance.

A total of 413 people were involved in the study, which took place in collaboration with a large social survey research centre in Hangzhou, China.

Meanwhile, a study earlier this year found that non-financial award programs actually have the potential to be costly to firms, primarily because they can upset the status quo and influence perceptions of equity and fairness.
Timothy Gubler, assistant professor of management in UCR's School of Business Administration, said the research is among the first to show that motivational awards can be costly, rather than beneficial.

"Conscientious internally-motivated employees who were performing well before the award program was introduced felt the program was unfair, as it upset the balance of what was perceived as equitable or fair in the organisation," he said.

"So their performance suffered - not just in terms of their attendance but also through a motivational spillover that affected other areas of their work - including productivity."

Gubler said firms should carefully consider not only the benefits but also the costs of implementing such programs, and realise an award can cause the same issues as a bonus or other compensation.

"Employees value workplace fairness and they care about how they're perceived relative to others in the organisation," said Gubler. 

"To be effective, companies offering award programs need to consider not only the group they are targeting - such as those that are coming late to work - but also those that are already doing the right thing, as there is a possibility of demotivating some of their best employees."

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