Monetary Incentives, Feedback, and Recognition—Complements or Substitutes? Evidence from a Field Experiment in a Retail Services Company

Abstract

This study investigates the performance effects of the combined use of three reinforcers, or incentive motivators, commonly used by companies: monetary incentives, feedback, and recognition. Using a field experiment in a retail services company, I test whether these incentives, which appeal to diverse motivation mechanisms—tangible payoffs, self-regulation, and social esteem—and, hence, have different utilities, are complements or substitutes. The results of the hard performance data collected, in the form of a ratio of sales relative to goals, show that monetary incentives and recognition are substitutes, while feedback is independent of the other incentives. The negative interaction between monetary incentives and recognition is evidence of crowding out between tangible payoffs and social esteem motivations. Individually, these two incentives have a positive impact on performance of about 13 percentage points, which corresponds to a 32.5 percent performance increase. Feedback interactions and main effects are not statistically significant, which suggests that, in this setting, providing feedback in the form of knowledge of results has no impact.

The Magic of the Personal Touch: Field Experimental Evidence on Money and Appreciation as Gifts*

“…There is a strand of literature in organizational psychology, however, that argues that monetary incentives do not work well in combination with recognition . This is in line with Lourenço () who finds in her field experiment with sales representatives that money and recognition (via awards) are substitutes. Both have a positive effect on performance when applied in isolation but the joint effect is not statistically distinguishable from the effect of money or recognition alone.…”

The burden of glory: Competing for nonmonetary incentives in rank‐order tournaments

“…Finance scholars have found that CEOs are willing to trade off social status from working for a publicly admired company (Focke, Maug, & Niessen-Ruenzi, 2017) or being awarded member of an order of merit (Siming, 2016) against additional monetary compensation. In accounting, advancements suggest that the combined used of nonmonetary and monetary incentives can produce a substitution effect (Lourenço, 2016). Strategy scholars have addressed how nonmonetary awards in corporations can be used strategically; for instance, using them to compensate prosocial behaviors and signal to employees that the firm values collaboration (Gallus & Frey, 2017).…”

The Effects of Financial and Recognition Incentives Across Work Contexts: The Role of Meaning

“…Stajkovic and Luthans () present a meta‐analysis of behavioral management studies, analyzing if and how different rewards (money, social recognition, and feedback) interact with one another. Similarly, Lourençco () reports the findings from a field experiment with retail sales representatives that looks at interaction effects among this same set of motivators (money, recognition, and feedback). Kvaloy, Nieken, and Schöttner () find that the effectiveness of piece rates interacts with motivational talk, and Bradler and Neckermann () show that gifts that combine recognition and money only work well when they come with a personal touch.…”