Economics Explored 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.
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What’s covered in EP177
- What 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 conversation
IZA World of Labor - Performance-related pay and productivity
How group-based incentives increase worker performance | CEPR
The Use of Reward and Incentive Systems: A Case Study of McDonald's - ToughNickel
McDonald's Restaurants puts motivation and reward at heart of business strategy - Employee Benefits
Performance-related pay | The Economist
Real Estate Agent Commissions: How Does it Work and How Much Should You Be Paying
Learn the Truth About Real Estate Commissions | PropertyNow
Credits
Thanks 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.