It's (Not) All About the Jacksons: Testing Different Types of Short-Term Bonuses in the Field

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.

Policy implications

Incentives can play a key role in improving individual productivity, reducing absenteeism, and organisational performance. When designing incentives, the length of incentives and their impact on both job satisfaction and productivity need to be considered.

Additional information

Hypotheses/research question

Hypothesis 1: Productivity will increase when short-term bonuses are introduced. Hypothesis 2: The effectiveness of short-term bonuses should increase as bonuses become less fungible. Specifically, verbal rewards should have the strongest effect on productivity and cash should have the weakest effect. Hypothesis 3a: Once the bonuses are administered (and performance is no longer incentivised) productivity will decrease. Hypothesis 3b: Even after the bonuses are administered, productivity will remain high. Hypothesis 4: Monetary short-term bonuses will have a negative effect on productivity after the bonuses have been administered. This negative effect is expected to be mitigated for verbal rewards and when employees have control over the type of bonus that they receive. Hypothesis 5: Absenteeism will decrease during the initiation of the short-term bonuses programme. This positive effect of the bonuses on employees' withdrawal behaviour will persist after the incentive plan ends.

Study design

Natural field experiment

The experiment was executed within a semiconductor factory at a large global technological company. Participants were 156 technicians (118 male) at a global high-tech semiconductor company working at a fabrication plant in Israel. Age ranged from 24 to 57 years, and tenure varied from 1 months to 20.5 years. The technicians were selected for the study because their productivity depends solely on personal performance, without the complication of external uncontrolled factors. During the experiment, participants engaged in their regular jobs composed of standard 12-hour shifts, followed by 4 days off.

Cost benefit ratio

Not available.

Rounds of data collection

3: Baseline (3 weeks pre-intervention) + During (5 weeks during intervention) + Endline (2 weeks post-intervention)

Baseline data collection and method

Factory data was collected on employee productivity and absenteeism. Baseline data includes the 3 weeks worth of data prior to the intervention.

Data collection method and data collected

Factory data was collected on employee productivity, absenteeism, and the type of bonuses awarded throughout the 5 weeks of the intervention. Productivity and absenteeism data was also collected for the 2 weeks immediately after the termination of the intervention.

Unit of analysis

Individual

Stratification

Delivery partner

Intel Corporation

Reference

Bareket-Bojmel, L., Hochman, G., & Ariely, D., 2014. 'It’s (Not) All About the Jacksons Testing Different Types of Short-Term Bonuses in the Field'. Journal of Management, 0149206314535441.

It's (Not) All About the Jacksons: Testing Different Types of Short-Term Bonuses in the Field

Key information

Additional information

Key facts

Update trial