Attention-Getting and/or Effort-Inducing? Disentangling How Incentive Compensation Motivates Employees in a Multidimensional Task

• In Event: Incentives and Multitask Environments

Abstract

Holmstrom and Milgrom (1991) suggest that in multidimensional task environments incentive compensation possesses both attention-getting and effort-inducing properties. We investigate the effect on performance of each property across dimensions in a multidimensional task. Our experimental results indicate that the attention-getting property has a positive performance effect on any dimension where the attention is directed and that the effort-inducing property has an incremental positive performance effect over and above the attention-getting property on some, but not all, incentivized dimensions. Supplemental analysis highlights that the attention-getting and effort-inducing properties of incentive compensation can also have separate performance spillover effects onto other non-incentivized task dimensions and we provides insights on how these spillover effects vary. By disentangling the performance effects of the attention-getting and effort-inducing properties of incentive compensation, our study provides a theoretical basis to help firms consider how to best motivate employees in multidimensional task environments.

Authors

• Ling Lin Harris, University of South Carolina

• Michael John Majerczyk, Georgia State University

• Andrew H Newman, University of South Carolina