Effects of Performance-Based Pay, Social Recognition, and Training on Performance in Creative Problem Solving: An Experimental Investigation

Abstract

I investigate the effect of different incentive schemes on employees’ effort and performance in a creative problem-solving task because current literature is divided on the effect of performance-based incentives on creative performance. I conduct an experimental study comparing two types of performance-based incentives (piece-rate pay and fixed pay plus social recognition) with fixed pay alone and examine whether the use of creativity training can moderate the relationship between incentives and creative performance. By integrating theoretical predictions from both Bonner and Sprinkle’s (2002) incentive-effort-performance model and Amabile’s (1996) componential model of creative problem solving, I predict that the effect of performance-based incentives on creative performance will be more positive in the presence of creativity training than in its absence. In the experiment, 120 participants attempted to solve 6 problems requiring creative insight under time constraints. Creative performance is measured as the number of insight problems solved. Significant interactions with training are found for both piece-rate pay and social recognition. I find that, without training, piece-rate pay produces lower creative performance than fixed pay. With training, however, performance is higher under piece-rate pay than under fixed pay. Relative to fixed pay alone, fixed pay plus social recognition has no effect on creative performance without training, but it motivates higher creative performance with training. Findings from this study have implications for organizations that need creative output from their employees and are looking to use incentives, either monetary or non-monetary, to motivate superior performance.