Incentive payments only boost performance short-term

A new study has shown that while incentive payments may boost overall employee performance, this is only for a short period of time.

The ESCP Business School research, compiled by Argyro Avgoustaki, Professor of Management at ESCP and co-authored with Hans Frankort of Bayes Business School, found that after receiving payments for performance in incentivized tasks, members of staff only temporarily put more effort into such tasks.

According to the authors, one reason for this is that, as an act of reciprocity, workers may be motivated to attend to the broader needs of the organisation, even if such tasks do not bring them immediate returns.

Professor Avgoustaki, explained, “Both economic and psychological theories have long suggested that tying employees’ pay to performance constitutes one viable way of increasing the alignment of interests between employees and their employers.”

However, there was no evidence found that employees perform better at incentivized tasks in the wake of obtaining incentive payments.

Professor Avgoustaki, said, “This is because workers are motivated to improve their productivity due to the belief that their current hard work will generate matching rewards in the future.”

She believes that understanding how employee performance fluctuates in response to incentive payments is useful for employers who want to maintain a consistent level of motivation in their workforce.

And, they can use this information to determine the best timing for alternative motivators, such as informal feedback or commitment-building activities, during the trough after an employee receives a periodic incentive payment.

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