The use of short-term bonuses to motivate employees has become an organizational regularity, but a thorough understanding of the relationship between these incentives and actual performance is lacking. We aim to advance this understanding by examining how three types of bonuses (cash, family meal voucher, and verbal reward) affect employees’ productivity in a field experiment conducted in a high-tech manufacturing factory. While all types of bonuses increased performance by over 5%, nonmonetary short-term bonuses had a slight advantage over monetary bonuses. In addition, the removal of the bonuses led to decreased productivity for monetary bonuses but not for the verbal reward. However, this negative effect of monetary short-term bonuses diminishes when a cash bonus is chosen by employees rather than granted by default. Theoretical implications about the effect of short-term bonuses on intrinsic motivation and reciprocity, as well as practical applications of short-term bonus plans that stem from our findings, are discussed.
Bonus administration, productivity, absenteeism.
Both monetary and nonmonetary short-term bonuses increase performance, even when they are of a small magnitude. Surprisingly, there was no difference between the types of bonuses. When the bonuses were no longer active, overall productivity decreased, and for monetary rewards, this reduction reached far below the level of base productivity.