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Home  > Resources  > Small Business Resources  > How Incentives Really Work



How Incentives Really Work Back To Business Resources >>

This study by professors from Carnegie Mellon, University of Chicago, and MIT funded by the Federal Reserve Bank shows the effectiveness of incentives for jobs requiring only mechanical skills vs. jobs requiring cognitive skills. For simple straight forward work where only mechanical skills are required, the higher the reward, the higher the performance, i.e. higher reward = higher performance (just as expected). Jobs requiring cognitive skills, where conceptual creative thinking is required, the larger the reward the lower the performance, i.e. higher reward = lower performance (not as expected). For jobs requiring cognitive skills, once employees are paid enough, they won’t be thinking about the money, they will be thinking about the work. They will become engaged in the job. If you allow them autonomy, mastery and purpose, they will excel in their jobs, no incentives required.



 

   
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