Here’s an age-old management conundrum: who should be rewarded for high performance, and how? As Diane Coyle, the economist and former adviser to the UK Treasury, recently observed in this newspaper, the answer to the question is usually self-serving. Simple and easily monitored jobs, such as flipping burgers, are natural candidates for performance incentives. Yet somehow it’s the inhabitants of the C-suite who tend to pick up bonuses, despite the fact that their complex, hard-to-measure jobs are poorly suited to the crude nature of performance-related pay.
But let’s assume that managers really want to answer the question. The answer is deliciously complex. Money matters, but sometimes we find financial incentives to be insulting or grubby. And we can respond keenly to non-financial rewards such as praise, status or the satisfaction in a job well done.
So managers might try running experiments to see what works in a particular situation. There is a long tradition of this, going back to Harvard professor Elton Mayo’s productivity trials at Western Electric’s Hawthorne works in the 1920s and early 1930s.