The Effects of Reward Type, Payoff Timing, and Task Type on Performance

• In Event: Managerial Accounting Incentives

Abstract

This study investigates whether the effects of tangible rewards, paid over different time horizons, vary depending on the type of task being performed. Tangible rewards are non-cash incentives that have monetary value such as merchandise, travel and retail gift cards. Although accounting research has examined the effects of tangible rewards on the performance of effort-sensitive tasks, little is known about their effects for less effort-sensitive, creative tasks. Drawing on economic and behavioral theories, I compare tangible rewards to an economic benchmark of cash rewards using an experiment. I predict and find that cash rewards have a greater effect than tangible rewards for an effort-sensitive, analytic task and that this effect is magnified when cash is paid in the near future. I pose the research question of whether cash or tangible rewards, paid in the near or distant future, will have a greater effect for a less effort-sensitive, creative task. I find that cash paid in the near future and tangible rewards paid in the distant future are equally effective and outperform other combinations for a creative task. This study should benefit theory and practice by identifying that tangible rewards, which firms can purchase at wholesale prices, can be effectively used for creative tasks.

Author

• Gregory P McPhee, Florida International University