Abstract:We examine how worker productivity differs when performance-based compensation is based on measures of quantity, creativity, or the product of both measures. In an experimental task in which participants design "rebus puzzles," we find that quantitybased compensation increases the number of puzzles produced, and that creativity-based compensation improves average creativity ratings, as evaluated by an independent panel of raters. However, a weighted compensation scheme that rewards the product of quantity and average creativity ratings results in weighted productivity scores that are significantly lower than those generated by participants with quantity incentives alone. Follow-up analysis indicates that relative to participants compensated solely for quantity, participants in the weighted condition produce approximately the same number of high-creativity puzzles, but produce significantly fewer puzzles of mediocre creativity. This finding is consistent with the premise that participants rewarded for creativity-weighted output simplify their objective by restricting their production to high-creativity ideas, but are unable to translate this focus into a greater volume of high-creativity output. Implications address a possible explanation for why firms are reluctant to incorporate creativity measures within multi-dimensional performance measurement systems, notwithstanding published suggestions to do so.

We find that the effectiveness of piece-rate compensation relative to fixed pay in a laboratory letter-search task hinges on the presence or absence of a nonbinding statement to participants that the experimenter values correct responses. In the absence of the value statement, participants with piece-rate rewards for correct responses generate more correct and incorrect responses than do their counterparts with fixed pay, correcting errors as they go along to maximize compensation. Essentially, piece-rate compensation acts as an output control, incentivizing participants to maximize correct responses through a "produce-and-improve" strategy. The value statement suppresses this strategy because participants appear to perceive it as an input constraint, prompting greater initial care at the expense of lower overall productivity. As a result, the value statement eliminates the gains in correct responses that piece-rate incentivized participants otherwise realize. Thus, in settings in which individuals can gain efficiency by working expeditiously and improving quality when necessary, our results suggest the possibility that organizations could be better off just letting incentive schemes operate, rather than emphasizing quality in ways that could overly constrain productivity.Les valeurs communiqu ees a titre de contrôles informels : promouvoir la qualit e au prix de l' erosion de la productivit e?

Performance-based compensation contracts can affect productivity both by motivating effort and by attracting workers whose abilities align best with the offered contracts. Using an experiment in which participants design “rebus puzzles,” this study tests whether the incremental benefits of contract self-selection extend to a multi-dimensional performance environment in which participants choose between a contract that rewards both quantity and creativity versus a contract that rewards quantity only. Findings indicate that participants who choose a creativity-weighted pay scheme perceive themselves to have greater creative potential than those who choose a quantity-only scheme. This perceived creativity advantage manifests itself in the superior initial creativity ratings of such participants’ productive output. However, in the aggregate, participants paid only for quantity eventually surpass the creativity-weighted productivity scores of participants paid for creativity-weighted productivity, whether compensation contracts are self-selected or randomly assigned. Thus, the implications of contract selection on creativity-weighted productivity hinge on the importance of the initial advantage enjoyed by participants who self-select a creativity-weighted contract.

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In an environment where individual productivity can be increased through efforts directed at a conventional task approach and more efficient task approaches that can be identified by thinking outside-the-box, we examine the effects of productivity-target difficulty and pay contingent on meeting and beating this target (i.e., target-based pay). We argue that while challenging targets and target-based pay can hinder the discovery of production efficiencies, they can motivate high productive effort whereby individuals work harder and more productively using either the conventional task approach or more efficient task approaches when discovered. Results of a laboratory experiment support our predictions. Individuals assigned an easy productivity target and paid a fixed wage identify a greater number of production efficiencies than those with either challenging targets or target-based pay. However, individuals with challenging targets and/or target-based pay have higher productivity per production efficiency discovered, suggesting these control tools better motivate productive effort. Collectively, our results suggest that the ultimate effectiveness of these control tools will likely hinge on the importance of promoting the discovery of production efficiencies relative to motivating productive effort. In doing so, our results provide a better understanding of conflicting prescriptions from the practitioner literature and business press.