Monetary Incentives and Motivation explained by Bruno Frey

Monetary incentives are often viewed as the primary motivator for work, but many individuals prioritize recognition and acceptance from others over financial rewards. This observation challenges the common assumption that money drives motivation. Exploring non-monetary rewards reveals a significant societal value placed on symbolic awards, which can fulfill emotional needs such as acknowledgment and esteem without involving monetary compensation.

Motivation in the workplace can be categorized into extrinsic and intrinsic types. Extrinsic motivation is driven by external rewards like money, while intrinsic motivation stems from personal satisfaction and a desire to contribute positively to society. A study was conducted at a Fortune 500 call center to explore these motivations further, particularly focusing on voluntary behaviors among employees. Awards were given for acts of kindness or support within the team, allowing researchers to analyze how recognition influenced overall work performance.

People appreciate receiving awards as it signifies recognition and appreciation for their work, which is often lacking in many organizations. Many superiors fail to acknowledge good performance beyond monetary compensation. In a study involving call center employees engaged in voluntary work, those who received awards reported higher satisfaction levels. Additionally, there was a positive spillover effect; individuals who were recognized for their volunteer efforts also demonstrated improved performance in their primary job responsibilities.

Focusing on monetary incentives can undermine employee motivation. Symbolic awards, when accompanied by genuine recognition from superiors, foster intrinsic motivation and commitment to the company’s goals. These awards are cost-effective compared to bonuses and encourage employees to engage deeply with their work rather than just fulfilling minimum requirements. However, overusing awards can diminish their value; it's crucial for management to thoughtfully consider each award's significance.

Awards significantly influence performance, as evidenced by the Don Bates Clark medal for young economists. Recipients of this award show a 15% increase in activity and a 50% rise in citations post-award. Similarly, an award instituted to combat contributor dropout rates on Wikipedia has proven effective; recipients continue their contributions more consistently. Additionally, the concept of awards for poor performance raises intriguing questions about motivation—specifically regarding whether receiving something like the Ig Nobel Prize discourages further work or spurs individuals to prove themselves capable scientists.