Pay Enough or Don’t Pay At All
Topic: The effect of monetary reward on performance
Researchers: Uri Gneezy (Professor of Management and Strategy, University of California, US) and Aldo Rustichini (Professor, University of Minnesota, US)
Published By: Quarterly Journal of Economics
Formal Reference: Uri Gneezy and Aldo Rustichini, “Pay Enough or Don’t Pay At All”, Quarterly Journal of Economics, Aug, pp. 791-810
Main Conclusion: When it comes to charity activity, monetary reward reduces performance; yet if reward is already presented, the higher the pay, the better the performance.
a. Participants were 180 Israeli school children (around the age of 16) used to do charity work of going from house to house collecting monetary donations that households make to societies for cancer research, assistance to disabled children, and other good causes. Participants used to work in couples.
b. Participants divided into 3 group:
Group A. control group working (as always) for free.
Group B. was promised 1% of collected donations.
Group C. was promised 10% of collected donations.
Group A. ₪ 239 collected on average, per couple.
Group B. ₪ 154 collected on average, per couple.
Group C. ₪ 219 collected on average, per couple.
It was made clear that the payments were financed by the researchers, and not by the societies donations were targeted for.
If we compare the treatment in which monetary compensation was not even mentioned with the one in which it was, then we may conclude that the monetary compensation produces a reduction in the performance.
But in the set of treatments in which a monetary compensation is offered, a higher monetary incentive produced a higher performance.
Comment: it seems as if the researchers regard the students work as mechanical, not creative or heuristic, stating that these students were used to do this work and that “students do not have to ‘‘sell’’ the donation, since most people are already familiar with it from television announcements and advertisements”.