Goal Setting and Monetary Incentives: When Large Stakes Are Not Enough

55 Pages Posted: 9 Nov 2012 Last revised: 15 Jan 2014

See all articles by Joaquín Gómez-Miñambres

Joaquín Gómez-Miñambres

Bucknell University - Department of Economics; Economic Science Institute at Chapman University

Brice Corgnet

Chapman University - Economic Science Institute; Chapman University - The George L. Argyros School of Business & Economics

Roberto Hernan Gonzalez

Université de Bourgogne - Burgundy School of Business; University of Granada

Date Written: December 19, 2013

Abstract

The aim of this paper is to test the effectiveness of wage-irrelevant goal setting policies in a laboratory environment. In our design, managers can assign a goal to their workers by setting a certain level of performance on the work task. We establish our theoretical conjectures by developing a model in which assigned goals act as reference points to workers’ intrinsic motivation. Consistent with our model, we find that managers set goals which are challenging but attainable for an average-ability worker. Workers respond to these goals by increasing effort, performance and by decreasing on-the-job leisure activities with respect to the no-goal setting baseline. Finally, we study the interaction between goal setting and monetary rewards and find, in line with our theoretical model, that goal setting is most effective when monetary incentives are strong. These results suggest that goal setting may produce intrinsic motivation and increase workers’ performance beyond what is achieved using solely monetary incentives.

Keywords: Intrinsic motivation, incentives, goal-setting, reference dependent preferences, virtual organizations

JEL Classification: C92, D23, M54

Suggested Citation

Gómez-Miñambres, Joaquín and Corgnet, Brice and Hernan Gonzalez, Roberto, Goal Setting and Monetary Incentives: When Large Stakes Are Not Enough (December 19, 2013). Available at SSRN: https://ssrn.com/abstract=2172852 or http://dx.doi.org/10.2139/ssrn.2172852

Joaquín Gómez-Miñambres (Contact Author)

Bucknell University - Department of Economics ( email )

Lewisburg, PA 17837
United States

Economic Science Institute at Chapman University ( email )

One University Dr.
Orange, CA 92866
United States

HOME PAGE: http://www.chapman.edu/research-and-institutions/economic-science-institute/index.aspx

Brice Corgnet

Chapman University - Economic Science Institute ( email )

One University Dr.
Orange, CA 92866
United States

Chapman University - The George L. Argyros School of Business & Economics ( email )

One University Dr.
Orange, CA 92866
United States

Roberto Hernan Gonzalez

Université de Bourgogne - Burgundy School of Business ( email )

29 rue Sambin
Dijon, 21006
France

University of Granada ( email )

C/Rector López Argueta S/N
Granada, Granada 18071
Spain

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