Abstract
Prior theory suggests that incentive plans, such as piece-rate or commission plans, motivate good performance because employees anticipate that current performance will generate matching future incentive payments. In this article, we move beyond reward expectancy to argue that performance can also derive from employees’ reactive responses to received incentive payments. We propose a salience-based theory casting incentive payments as recurring temporal markers that periodically increase the salience of the incentive plan, to which employees respond by temporarily increasing incentivized and unincentivized performance. We introduce multivariate time-series methods to test our hypotheses in longitudinal data spanning 169 weeks (1,183 days), drawn from an online firm using an incentive plan for its customer-support employees. While we find no evidence that incentive payments affect the dynamics of incentivized performance, they do temporarily boost several unincentivized behaviors and outcomes. Combined with fieldwork, these findings support our proposed mechanism of “salience-induced reciprocity”—that is, the temporary reciprocity in response to a periodic increase in the salience of the incentive plan. This article contributes to a more complete understanding of performance and effort dynamics in incentive plans, offers new inroads into studying temporality in the functioning of human resources practices, and provides other future research avenues.
Highlights
The duration of the temporary increase in performance following an incentive payment may vary across outcomes, for example, depending on the extent to which they are under employees’ immediate control
vector autoregression (VAR) is based on linear regression and requires that the variables chosen as endogenous in Step 1 are stationary, meaning they must fluctuate around a fixed mean
If a unit-root test reveals that a variable fluctuates around a trending mean, we must detrend that variable before estimation
Summary
The duration of the temporary increase in performance following an incentive payment may vary across outcomes, for example, depending on the extent to which they are under employees’ immediate control. Employee responses to an incentive payment likely follow the payment fairly readily on behaviors over which they have more control (e.g., picking fruit or answering a phone call). Such responses would wear off before the payment arrives, provided that the payment interval is large relative to the time it takes to complete a “unit” of task performance. On outcomes outside of employees’ immediate control (e.g., sales performance), the incentive-payment effect on performance dynamics might (but need not) be delayed and last longer. Such possible heterogeneity in response duration constitutes an open empirical question, and we revisit this issue after presenting our empirical results
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