Attention-Getting and/or Effort-Inducing? An Examination of How Incentive Compensation Motivates Quality and Quantity Performance in a Multidimensional Environment

Abstract

We investigate the effectiveness of two proposed motivating properties of incentive compensation – the attention-getting property and the effort-inducing property – in a multidimensional task environment. Specifically, in a task environment with quantity and quality dimensions we empirically test the effects of the two properties on performance in an effort to gain a more thorough understanding of the workings of incentive compensation. Our experimental results indicate that the attention-getting property always has a positive performance effect on the task dimension to which attention is directed. We also find that the effort-inducing property has an incremental positive performance effect over and above the attention-getting property on the quality dimension, but not on the quantity dimension. Our analysis also highlights that the attention-getting and effort-inducing properties of incentive compensation have separate performance spillover effects onto non-incentivized task dimensions and we provide insight on how these spillover effects vary. Our study has direct implications for theoretical research on, and use in practice of, inventive compensation in multidimensional task environments.