key topic

Motivation in the workplace

A motivated workforce is a valuable asset to any business; today’s businesses are striving for new ways to inspire their staff through the use of numerous incentives, ranging from office perks and social events to traditionally important opportunities for promotion.

  • Bonuses and performance evaluations

    Individual bonuses do not always raise performance; it depends on the characteristics of the job

    Dirk Sliwka, July 2020
    Economists have for a long time argued that performance-based bonuses raise performance. Indeed, many firms use bonuses tied to individual performance to motivate their employees. However, there has been heated debate among human resources professionals recently, and some firms have moved away from individual performance bonuses toward fixed wages only or collective performance incentive schemes such as profit-sharing or team incentives. The appropriate approach depends on each company's unique situation, and managers need to realize that individual bonus plans are not a panacea to motivate employees.
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  • Are workers motivated by the greater good? Updated

    Workers care about employers’ social causes, but the public sector does not attract particularly motivated employees

    Mirco Tonin, July 2020
    Employees are more willing to work and put effort in for an employer that genuinely promotes the greater good. Some are also willing to give up part of their compensation to contribute to a social cause they share. Being able to attract a motivated workforce is particularly important for the public sector, where performance is usually more difficult to measure, but this goal remains elusive. Paying people more or underlining the career opportunities (as opposed to the social aspects) associated with public sector jobs is instrumental in attracting a more productive workforce, while a proper selection process may mitigate the negative impact on intrinsic motivation.
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  • Internal hiring or external recruitment? Updated

    The efficacy of hiring strategies hinges on a firm’s simultaneous use of other policies

    Jed DeVaro, May 2020
    When an employer fills a vacancy with one of its own workers (through promotion or horizontal transfer), it forgoes the opportunity to fill the position with a new hire from outside the firm. Although firms use both internal and external hiring methods, they frequently favor insiders. Internal and external hires differ in observable characteristics (such as skill levels), as do the employers making the hiring decisions. Understanding those differences helps employers design and manage hiring policies that are appropriate for their organizations.
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  • Bosses matter: The effects of managers on workers’ performance

    What evidence exists on whether bad bosses damage workers’ performance, or good bosses enhance it?

    Kathryn L. Shaw, January 2019
    A good boss can have a substantial positive effect on the productivity of a typical worker. While much has been written about the peer effects of working with good peers, the effects of working with good bosses appear much more substantial. A good boss can enhance the performance of their employees and can lower the quit rate. This may also be relevant in situations where it is challenging to employ incentive pay structures, such as when quality is difficult to observe. As such, firms should invest sufficiently in the hiring of good bosses with skills that are appropriate to their role.
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  • Skill utilization at work: Opportunity and motivation

    Challenging jobs and work incentives induce workers to use their skills but make life difficult for managers

    Giovanni Russo, December 2017
    Organizational characteristics and management styles vary dramatically both across and within sectors, which leads to huge variation in job design and complexity. Complex jobs pose a challenge for management and workers; an incentive structure aimed at unlocking workers’ potential can effectively address this challenge. However, the heterogeneity of job complexity and the inherent difficulty in devising a correct set of incentives may result in misalignment between job demands and incentivized behaviors, and in complaints by employers about the lack of skilled workers.
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  • Should firms allow workers to choose their own wage?

    Delegating the choice of wage setting to workers can lead to better outcomes for all involved parties

    Gary B. Charness, January 2016
    Economists typically predict that people are inherently selfish; however, experimental evidence suggests that this is often not the case. In particular, delegating a choice (such as a wage) to the performing party may imbue this party with a sense of responsibility, leading to improved outcomes for both the delegating entity and the performing party. This strategy can be risky, as some people will still choose to act in a selfish manner, causing adverse consequences for productivity and earnings. An important issue to consider is therefore how to encourage a sense of responsibility in the performing party.
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