From the Editor: Special Editon
Evidence-Based Lessons About Financial Incentives
and Pay Variations
By Nina Gupta, Ph.D., and Samantha Conroy, Walton College of Business, University of Arkansas
Despite contrary claims in popular literature, scientific research shows that financial incentives and the resulting variations in pay among employees can be powerful sources for improving workplace productivity. The authors review that research and present information on the effective design and implementation of financial incentive plans.
Negative Effects of Extrinsic Rewards on Intrinsic
More Smoke Than Fire
By Gerald E. Ledford, Jr., Ph.D., University of Southern California; Barry Gerhart, Ph.D., University of Wisconsin; and Meiyu Fang, Ph.D., National Central University, Taiwan
A recurring theme in the management press is that extrinsic rewards diminish intrinsic motivation, and this problem renders performance incentives ineffective or even counterproductive. This issue matters to reward professionals because the tools of their trade are extrinsic rewards, namely salary, incentives, benefits and recognition. However, this paper shows that extrinsic rewards do not undermine intrinsic motivation and extrinsic rewards clearly tend to increase performance, and this is because they increase total motivation (extrinsic plus intrinsic). The research underscores that the effects of rewards depend on the social context in which they are provided.
Gainsharing: Research and Practice
By Michael H. Schuster, Ph.D., United States Coast Guard Academy
Gainsharing or variable pay plans are organizational systems for rewarding groups of employees for improved productivity, cost reductions, quality, and overall financial performance in the form of regular cash bonuses. The practice of gainsharing began in the 1930s. Research has shown that gainsharing plans produce positive outcomes — productivity increases, improved employee loyalty and engagement, and added earnings for employees. However, the research has left many unanswered questions, such as whether there is a "shelf life" for gainsharing, how to avoid it becoming an entitlement, and the best settings to introduce it.
Can Compensation Design Issues be Resolved Better
by Having Organizations and Academics Combine Forces?
By Linda Barrington, Ph.D., and Kevin F. Hallock, Ph.D., Cornell University
A deluge of new data and analytical techniques offer expanded opportunities to study workplace challenges and HR practices. This paper outlines how practitioners and academic researchers can work together to take advantage of those opportunities. Practitioners should consider collaborating with academics who specialize in knowing how to get the most credible and useful information out of big data. And, researchers can improve the relevance of their empirical research by collaborating with practitioners who best understand the context, creation and usability of workplace data and metrics.
Published Research in Total Rewards