Attracting Creativity: The Initial and Aggregate Effects of Contract Selection on Creativity-Weighted Productivity

Abstract

Performance-based compensation contracts can affect productivity both by motivating effort and by attracting workers whose abilities align best with the offered contracts. Using an experiment in which participants design “rebus puzzles,” this study tests whether the incremental benefits of contract self-selection extend to a multi-dimensional performance environment in which participants choose between a contract that rewards both quantity and creativity versus a contract that rewards quantity only. Findings indicate that participants who choose a creativity-weighted pay scheme perceive themselves to have greater creative potential than those who choose a quantity-only scheme. This perceived creativity advantage manifests itself in the superior initial creativity ratings of such participants’ productive output. However, in the aggregate, participants paid only for quantity eventually surpass the creativity-weighted productivity scores of participants paid for creativity-weighted productivity, whether compensation contracts are self-selected or randomly assigned. Thus, the implications of contract selection on creativity-weighted productivity hinge on the importance of the initial advantage enjoyed by participants who self-select a creativity-weighted contract.

Performance measurement system use in generating psychological empowerment and individual creativity

“…Creativity is an important contributor to success in contemporary business settings (Davila et al ., ; Kachelmeier and Williamson, ). Amabile (, p. 35) provides a conceptual definition of creativity as including responses, ideas or products that have characteristics such as novelty, appropriateness and usefulness and are valuable to the task at hand.…”

“…Further, creativity occurs in individuals (including individuals working within groups), whereas innovation – the process of implementing creative ideas – typically occurs at an organisational or group level and therefore usually involves a great number of participants (Nystrom, ; Amabile, , ). While organisational innovation has attracted accounting research attention for some time now (Bisbe and Otley, ; Henri, ; Dunk, ), research into creativity is still emerging (recent examples include Kachelmeier and Williamson, ; Kachelmeier et al ., ; Adler and Chen, ). While management control system (MCS) research proposes that a key potential contribution of MCS is to manage the tensions between creativity and predictable goal achievement (Simons, ,b, ), the role of MCS in the generation of creativity is ambiguous (Davila et al ., ).…”

The Effects of Performance Incentives and Creativity Training on Creative Problem-Solving Performance

“…In my study, individuals were not allowed to choose their incentive schemes, but prior research shows that individuals sometimes made inaccurate predictions about their creative abilities; individuals who opted for less risky incentive schemes nevertheless did as well in a creative task as those who picked the creativity-based performance incentive (Kachelmeier & Williamson, 2010). Hence, offering recognition on top of fixed wage may also help attract capable but risk-averse individuals who may balk at piece-rate pay because the minimum guaranteed amount, if any, does not meet their reservation wages.…”

“…This is similar to prior studies that examined piece-rates or competitive pay (cf. Kachelmeier et al, 2008;Kachelmeier & Williamson, 2010).…”

“…In another study, Kachelmeier and Williamson (2010;KW) found that individuals may self-select into different incentive schemes based on perceived performance potential;…”