Date of Award
Doctor of Philosophy
Dr. Alyce M. Dickinson
Dr. Dale Brethower
Dr. Jack Michael
Dr. Robert Brinkerhoff
Several studies have shown that individuals working under pay conditions with monetary incentives have higher levels of productivity than individuals working for non-incentive pay, such as hourly wages (Abernathy, Duffy, & O’Brien, 1982; Dierks & McNally, 1987; Farr, 1976; Gaetani, Hoxeng, & Austin, 1986; George & Hopkins, 1989; London & Oldham, 1977; Orpen, 1982; Nebeker & Neuberger, 1985; Terborg & Miller, 1978; Yukl, Wexley, & Seymore, 1972). It has also been noted that a minimum of 30% incentive is generally accepted as necessary to affect (employee) motivation (Fein, 1970), and increasing incentives above this level will not result in appreciable increases in employee performance (Fein, 1970; Henderson, 1989).
The purpose of this study was: (a) to investigate the monetary incentive continuum to determine if increases in the percentage of incentives to base pay would result in increases in performance, as well as (b) to evaluate the accuracy of the accepted 30% incentive standard and determine the optimum level of percentage of incentives to base pay.
This study investigated the effects of five levels of % incentive to base pay, i.e., 0% (no-incentive), 10%, 30%, 60%, and 100%, on worker productivity. Seventy-five undergraduate subjects were randomly assigned to one of five % incentive/base pay conditions, using a between-groups experimental design. Subjects performed a simulated production task for pay as per their assigned condition. Task productivity and the amount of money earned were measured.
The results of this study support prior similar research in showing that pay with incentives resulted in observationally and significantly higher levels of performance (i.e., an average of 21% higher) than pay with no-incentives (e.g., hourly pay). Also, subjects receiving incentives continued to show gradual increases in performance throughout the study while the performance of no-incentive subjects stabilized after an initial level of task proficiency was attained.
These results build on prior research in showing that the different percentages of incentive to base pay did not result in significant differences in subject task performance. This study challenges the generally accepted 30% incentive standard showing that significant performance increases were obtained with as little as 5% incentive to base pay.
Frisch, Carol J., "Worker Productivity as a Function of the Percentage of Monetary Incentives to Base Pay" (1996). Dissertations. 1683.