Sunday, September 18, 2011

Are Gifts Better Bonuses Than Cash?

The Wall Street Journal reports on a new study published in the American Economic Review.  Sebastian Kube, Michel André Maréchal and Clemens Puppe conducted an experiment, in which they compared workers' productivity when given a bonus vs. those in a control group.   Actually, they set up two different types of bonuses:  a 7 Euro cash bonus and a gift of a thermos worth 7 Euros.   They found that the workers promised the gift as a bonus were significantly more productive than those given cash, whether told the value of the thermos or not.

Now, one could conclude that the researchers have shown that gifts might have a better incentive effect in the workplace than cash.  However, I think we need to proceed with caution - a great deal of caution!  Here we have a simple experiment with the bonus only worth 7 Euros.  Would the same effect hold in the workplace if the amount of the bonus were much more substantial?  That's not clear to me at all.  So, while the experiment may be thought-provoking, I'm not sure it provides us practical guidance as to how to design incentive schemes for the workplace. 


zedrec said...

Right now I am watching a video course by The Teaching Company - The Art of Teaching. I am in lecture 09 right now and right after I heard of your blog I couldn't resist, I just paused the video and came right away to your blog.
Now that I'm here I just want to say how much I like you even though I didn't know much about you in this course but from what I've seen you're a great teacher, enthusiastic and so cool. I'm considering the idea to start teaching soon and you're such an inspiration for me.

By the way I'm Algerian - North Africa that's why my English sounds a bit weird.

keep up the good work ^^

zedrec said...

I was looking at your blog and I am wondering if you have done any courses with the teaching company. I'm really into Business, leadership and everything that is related personal development so if you did any course with the teaching company please let me know :)

zedrec said...

Aha .. Transformational Leadership. I just found that by reading the about Me page of your blog. I'll definitely get this course and watch it as soon as I can :)

Michael Roberto said...

Zedrec, I've also created a Teaching Company course called The Art of Critical Decision Making. The link is on the front page of the blog. Thanks for your interest in my work! Good luck with your passion for teaching.

Andy Kaufman, PMP said...

Peter Bregman shares a story in his new book "18 Minutes" about Marc Manza, the CTO at Passlogix. They had a software problem that took an extended time to debug--like two years. At one point he even offered a $1,000 bonus for the person who fixed the problem, but no luck. Eventually Marc had an idea.... He bought a Nintendo Wii, placed it in a central, visible place in the office. The first person to solve the problem wins the Wii. Caveat: work that to be on their own time, not company time. It was solved in two weeks. The cost: $250. One of Bregman's points later: Money isn't fun.

(Here's a link to his post that is essentially the chapter from the book:

Your point about caution with these lessons is good, Michael. At some point the gift has to be sufficiently relevant to be motivating. But I think there's something to the idea....

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