Is There a Value Proposition for Higher Rates of Incentive?

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High incentive does lead to a better engagement of higher levels of productivity and performance in the long run. Even with low incentives, even with any incentives, what people, or what policy makers and what managers should consider is the net effect of incentives. And there we find incentives, in my experiments, even low incentives, have a positive net effect which essentially means that incentives are useful for improving people's behavior, engagement performance.

Incentives can improve motivation. But what actually happens when the incentive is removed? An influential body of research previously suggested that extrinsic rewards have a negative impact on intrinsic motivation. However, more recent studies show this not to be the case over the long term. Our guest, Dr Indranil Goswami PhD, talks us through the longer term effects of temporary incentives and the implications for motivating behavior change.

Indranil is an Assistant Professor of Marketing at the University at Buffalo. The research that we focus on in this episode is the paper he co-wrote with Dr Oleg Urminsky PhD, called “The Dynamic Effect of Incentives on Post-Reward Task Engagement”.

While there may be a dose of confirmation bias with this conversation, Kurt and Tim are excited to hear more about Indranil’s research which backs up what they have been telling companies for years:

“Incentives are useful for improving people's behavior, engagement and performance.”

Managers, academics and even parents have bought into the widely held belief that extrinsic motivators are not a useful tool for initiating behavior change. But Indranil’s work may help you reevaluate the tools you use to motivate those around you. Listen in and let us know if it encourages you to rethink your incentive program.

Regular listeners to Behavioral Grooves may enjoy being part of our exclusive group of Patreon members by supporting our work. You can also write a review of our podcast on whatever platform you listen on, and we often read these out on the show. Thank you!

Topics

(2:49) Welcome and speed round questions.

(4:00) Do extrinsic incentives always suppress intrinsic motivation?

(9:41) Does post incentive disengagement actually happen?

(16:59) The surprising effect of big incentives.

(22:42) Real world experiences of incentives.

(25:03) Can we design incentives that improve post reward performance?

(31:40) What is more motivating - flat fee payment schemes or rate based payment scheme?

(38:57) Does Indranil use music as motivation?

(43:18) Grooving Session with Kurt and Tim on rewards and motivation.

Links

Goswami I, Urminsky O (2017) The dynamic effect of incentives on postreward task engagement: https://pubmed.ncbi.nlm.nih.gov/28054810/

Daniel Kahneman: https://en.wikipedia.org/wiki/Daniel_Kahneman

Dan Ariely: https://danariely.com/

Eisenberger, R., & Cameron, J. (1996) Detrimental effects of reward: Reality or myth? https://doi.org/10.1037/0003-066X.51.11.1153

Dan Ariely, Uri Gneezy, George Loewenstein, Nina Mazar (2009) Large Stakes and Big Mistakes: https://doi.org/10.1111/j.1467-937X.2009.00534.x

Episode 106, Jana Gallus: The Role of Precision in Incentives: https://behavioralgrooves.com/episode/jana-gallus-the-role-of-precision-in-incentives/

Goswami, Indranil and Urminsky, Oleg (2018). Don't Fear the Meter: How Longer Time Limits Yield Biased Preferences for Flat Fee Contracts: http://dx.doi.org/10.2139/ssrn.3448174

Episode 71, Alex Imas: Clawback Incentives and Tom Waits: https://behavioralgrooves.com/episode/alex-imas-clawback-incentives-and-tom-waits/

Behavioral Grooves Patreon: https://www.patreon.com/behavioralgrooves

Musical Links

Ravi Shankar “The Spirit of India”: https://www.youtube.com/watch?v=gMk2eTqPLWk