The fear of loss was a better motivator than the prospect of gain (which worked too, but less well). And the difference persisted over time: the results were not simply a consequence of workers’ misunderstanding of the system. Economists have always been advocates of using carrots and sticks. But they may not have emphasised appearances enough. Carrots, this research suggests, may work better if they can somehow be made to look like sticks.
Monday, January 18, 2010
Using Behavioral Economics to motivate workers
If you are going to adopt incentive compensation, try the following. Instead of promising workers increased pay for performance, tell them that they have been "provisionally" awarded a bonus, but that the bonus will be taken away if they do not perform. As predicted by prospect theory,