The carrot-and-stick approach is a well-established motivational theory that consists of penalties and incentives. It is present in animal training, infant upbringing, and management techniques to a certain extent. In contemporary business environments, reward systems, particularly those that operate on a pay-for-performance model, are more prevalent than sanctions. Incentive programs are implemented by numerous organizations, including those with non-executive responsibilities, in order to motivate and inspire their employees. For instance, sales representatives frequently receive commissions that are directly proportional to their sales figures, in addition to their base salary.
These programs are predicated on the principle that incentive plans typically yield higher levels of performance than hourly or fixed compensation, which is consistent across industries. What is the primary justification? With the expectation of receiving compensation. The mere existence of an incentive program is a powerful allure. The generation of anticipation regarding imminent rewards is the process of inspiring employees to exert a marginally greater effort. It is sufficient for the future benefit to be sufficiently desirable to outweigh the cost of the necessary effort.
WHAT IS THE EFFECT OF PAST AND FUTURE REWARDS ON PERFORMANCE?
However, what happens after employees have received the anticipated incentives? When employees grip the symbolic fruit, do they exhibit signs of sloth? Does it offer an additional advantage? In contrast, do these compensations absolve personnel of any sense of obligation or injustice, thereby encouraging consistent performance?
The latter appears unlikely when contemplating stock option sales or discretionary incentives, which may have unpredictable values and irregular occurrences. For example, it is more probable that employee performance will remain stable when incentive payments are consistent and predictable, and there is a clear correlation between anticipated compensation and employee performance. The focus of our recent study, which was published in the Journal of Management, was a highly predictable work environment in which personnel are fully informed of the potential compensation for each successful task they complete.
We conducted an investigation to ascertain the extent, rationale, and impact of consistent incentive payments on employee performance. What was the outcome? In light of our discoveries, human resources may be directed toward interventions that are more prudent. What are the potential consequences of offering incentive payments? Our initial hypothesis posits that employees are prudent decision-makers who, albeit with a restricted level of concentration, assess the advantages and disadvantages of the time and effort they allocate to their responsibilities.
Subsequently, we suggested that incentive payments could be characterized as “recurring temporal indicators,” which are ephemeral events that capture the attention of employees. They propose that intermittent incentive payments could serve to underscore the advantages and disadvantages of exerting effort in the workplace by integrating these two concepts. It serves as a recurring reminder of the marginal cost associated with electricity consumption, similar to the receipt of an electricity bill. In other words, incentive payments serve as the stimuli that increase the level of “salience” that employees exhibit toward the incentive plan.
We proposed that employees could potentially respond to the increased prominence in one of two ways: The process of refocusing: The employees are merely asked to recall the responsibilities that led to the incentive payment and the bonus. Consequently, personnel experience a temporary enhancement in their performance with respect to the aforementioned responsibilities. Employees express gratitude for the incentive, which in turn sets off a series of positive sentiments. They demonstrate their appreciation for the employer by committing additional effort beyond the designated responsibilities, which is acknowledged and compensated. A hypothesis was proposed that employees would temporarily exhibit both behaviors, following which they would return to their prepayment performance level.
THE RESULT OF A COMPANY’S CUSTOMER-SUPPORT EMPLOYEE SURVEY
Our hypothesis was evaluated by evaluating the performance of the customer service staff at an online organization headquartered in Greece that provided web hosting services to a global clientele of over 60,000. The dataset encompassed both qualitative and quantitative performance indicators, such as the number of phone calls attended, sales revenues, and customer feedback. The data was collected over a three-year period, from 2011 to 2014.
During this period, the organization implemented a program of motivational incentives for its customer service personnel. In recognition of their accomplishments in fulfilling a variety of duties, they were granted periodic incentives. There was no evidence found to indicate that employees refocused on the rewarded duties after receiving the incentive payment. At first glance, this may imply that the incentives’ effects are not due to the responses elicited by the rewards collected. The employees’ expectation of future incentives is one potential explanation for their emergence. Nevertheless, we observed an incidental positive impact of incentive payments on sales performance that could not be directly attributed to the incentives.
Additionally, the repercussions were of significant economic significance. The 1.8% increase in sales was attributable to the cascading effects of incentive payments, as per our educated estimate. Furthermore, in the days that followed incentive payments, there was a temporary enhancement in metrics that were not incentivized. For instance, the sale of products that were priced higher, in conjunction with an increase in sales volume, resulted in increased revenues. The incentive payment resulted in a temporary increase in the duration of subsequent phone conversations between customer support representatives and clientele.
Moreover, a transient increase in the likelihood that customer support staff would seek the help of back-office technology specialists in order to enhance customer solutions was observed. The investigation pertains to the development of patterns in unincentivized measures subsequent to incentive payments. Despite the inherent challenge associated with its quantification, it was evident from our interviews that employees were aware of the essential importance of service quality.
Furthermore, the employees harbored reservations regarding their employer. The incentive payment receipt served as a moving reminder of the employees’ good fortune in working for a company that regularly uses performance-driven incentives. These discoveries have immediate practical implications. Initially, they assist managers in optimizing the timing of informal feedback and commitment-building activities, among other HR interventions.
When an employee’s level of engagement with a recurring incentive payment is at its lowest, employers may elect to implement these incentives. Furthermore, they propose that it is advantageous for organizations to foster the social component of the employer-employee relationship. Employees exhibit a higher likelihood of dedicating additional effort to non-incentive but consequential aspects of their work after receiving regular incentive payments.
