How performance-based pay can motivate employees, but there are risks - EP177

Can we get people to work harder and perform better if we make their pay performance-related - e.g. with performance bonuses or commissions? Does this work? Are individual or group incentives better? What does the evidence say? We know that people respond to incentives, but, as Gene Tunny and Tim Hughes discuss this episode, getting those incentives right can be tricky. Please get in touch with any questions, comments and suggestions by emailing us at [email protected] or sending a voice message via https://www.speakpipe.com/economicsexplored. What’s covered in EP177What is performance-related pay? [0:41]The types of jobs in which performance-based pay works and doesn’t - e.g. fast food vs real estate [8:09]The importance of getting incentives right and having transparency [23:16]Performance-related pay is a difficult thing to put into practice [28:24]Group-based incentive schemes - evidence from a recent European study of the Hydrema manufacturing business [52:54]Links relevant to the conversationIZA World of Labor - Performance-related pay and productivityHow group-based incentives increase worker performance | CEPRDoes Group-Based Incentive Pay Lead To Higher Productivity? Evidence from a Complex and Interdependent Industrial Production ProcessThe Use of Reward and Incentive Systems: A Case Study of McDonald's - ToughNickelMcDonald's Restaurants puts motivation and reward at heart of business strategy - Employee BenefitsGive and Take – Adam GrantPerformance-related pay | The Economist   Real Estate Agent Commissions: How Does it Work and How Much Should You Be PayingLearn the Truth About Real Estate Commissions | PropertyNowCreditsThanks to Obsidian Productions for mixing the episode and to the show’s sponsor, Gene’s consultancy business www.adepteconomics.com.au. Full transcripts are available a few days after the episode is first published at www.economicsexplored.com. Economics Explored is available via Apple Podcasts, Google Podcast, and other podcasting platforms.