Creating an inspired workplace

Study Finds That Money Alone Doesn’t Motivate Employees
November 12, 2015
Written by Karlsruhe Institute of Technology
This experiment allowed researchers to observe both individual responses and the interaction of the motivation tools.
This experiment allowed researchers to observe both individual responses and the interaction of the motivation tools.
December 2015 — Even small gestures of appreciation have a significant influence on the output and quality of work by employees.

A recent study by Karlsruhe Institute of Technology (KIT) economist Petra Nieken and two colleagues revealed that performance-oriented piecework combined with motivational comments by supervisors increases employee performance by 20 per cent and reduces the error rate by 40 per cent.

“Our results are relevant to entrepreneurial practice,” Nieken said. She holds the chair for Human Resources Management of KIT’s Institute of Management. She also works as an associate professor at the University of Stavanger and has been conducting experimental economics research for 10 years.

How can staff members be motivated? The common school of thought lists two philosophies:
  • Financial incentives, such as bonuses or piecework.
  • The capability of executives to motivate their staff members.
The question of whether and/or how these two ideas complement, strengthen or weaken each other, however, is not clearly answered by common theory. That is why this question was the focus of the study performed at Bonn University.

The research team included Nieken and her colleagues Anja Schöttner, Humboldt-Universität Börlin, and Ola Kvalø, University of Stavanger, Norway.

In the experiment, 139 students were hired to electronically acquire data for a research project. (Their job was to enter data from ice hockey game reports into a database.)

Data acquisition by itself was simple, but it did require a certain degree of attention and care. The students were all paid the same basic salary, but one group received an additional, but small, performance-dependent piecework incentive.

Some of the students in each of these groups – the base salary only, and those with the piecework incentive – were told how much their work was appreciated and that their work results would have positive impacts.

This experiment allowed researchers to observe both individual responses and the interaction of the motivation tools.
  • It was found that receiving a few motivational comments resulted in an improvement of performance, but only if the comments were accompanied by a performance-based payment.
  • If extra performance-based payment was made, but motivating comments or feedback were not used, the result was a decrease in performance and more errors.
This loss or weakening of intrinsic motivation is comparable to children losing interest in drawing without been given a reward if they had repeatedly received money for drawing a picture before.

In the study, the combination of receiving words of appreciation with an extra salary in the amount of about 10 per cent of the total wage resulted in a performance increase of 20 per cent and a parallel reduction in the error rate by 40 per cent.

“We hoped to obtain such a result, but we did not expect it to be so clear,” said Nieken.

The scientists recently reported the results of their study at the meeting of the European Economic Association, the largest association of economists in Europe, in Mannheim. The study was recently published in the European Economic Review under the heading, “Hidden benefits of reward: a field experiment on motivation and monetary incentives,” by Ola Kvalø, Petra Nieken and Anja Schöttner.

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