Measuring and Motivating Quantity, Creativity, or Both

Abstract

Abstract:We examine how worker productivity differs when performance-based compensation is based on measures of quantity, creativity, or the product of both measures. In an experimental task in which participants design "rebus puzzles," we find that quantitybased compensation increases the number of puzzles produced, and that creativity-based compensation improves average creativity ratings, as evaluated by an independent panel of raters. However, a weighted compensation scheme that rewards the product of quantity and average creativity ratings results in weighted productivity scores that are significantly lower than those generated by participants with quantity incentives alone. Follow-up analysis indicates that relative to participants compensated solely for quantity, participants in the weighted condition produce approximately the same number of high-creativity puzzles, but produce significantly fewer puzzles of mediocre creativity. This finding is consistent with the premise that participants rewarded for creativity-weighted output simplify their objective by restricting their production to high-creativity ideas, but are unable to translate this focus into a greater volume of high-creativity output. Implications address a possible explanation for why firms are reluctant to incorporate creativity measures within multi-dimensional performance measurement systems, notwithstanding published suggestions to do so.

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

“…First, I replicate prior findings that, without creativity training, performance incentives have no effect, or have negative effects on performance on creative tasks (Burroughs et al, 2011;Kachelmeier et al, 2008;Webb et al, 2013). I show that these result holds for creative insight tasks, which have received less attention than divergent thinking tasks from accounting research.…”

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

“…In the productbased approach, individuals are asked to generate an idea or solution for a context-rich problem (e.g., how to solve a human resource problem in a steel factory), and independent experts (or jurors) are asked to provide an overall rating of creativity (Amabile, 1979;Kachelmeier et al, 2008;Shalley, 1995). The logic behind this approach is that experts will understand contextual boundaries of their respective domains; as a result, they are in the best position to decide what is original and appropriate and what level of performance can be expected from the idea generators.…”

“…In particular, prior research shows that, in tasks that require creativity, individuals paid fixed wages perform at least as well as those who receive performance incentives (Kachelmeier, Reichert, & Williamson, 2008;Webb, Williamson, & Zhang, 2013).…”

Loss aversion and the quantity–quality tradeoff

“…3 For instance, Al-Ubaydli et al (2015) find increases in quality, while Johnson et al (2015) and Ederer and Manso (2013) find decreases in quality from pay-for performance compensation. There is also a new literature on incentives and creativity, documenting that financial incentives have a mixed effect on different dimensions of creative work, including quantity and quality (Kachelmeier et al, 2008;Charness and Grieco, 2014;Laske and Schröder, 2015;Erat and Gneezy, 2016). Some explanations for these results suggest that incentives may crowd out intrinsic motivation for performing certain tasks (Charness and Grieco, 2014;Erat and Gneezy, 2016), and that incentivizing quality may be difficult due to observability of quality (Kachelmeier et al, 2008;Al-Ubaydli et al, 2015).…”