Examining the Effects of Performance-Based Pay and Performance Monitoring on Task Performance

Abstract

Past research suggests that individual, task, and environmental factors interact to affect task performance in the workplace. This study reports the results of a laboratory experiment where 88 participants completed both an algorithmic clerical task and a creative problem-solving task, in a factorial experiment that manipulated the presence and absence of performance-based pay (PBP) and performance monitoring (PM). Additionally, we collected participants’ perceptions of the attractiveness and difficulty of the two tasks, as well as other affective reactions to the control environments. Contrary to hypotheses, PBP improved performance of the creative problem-solving task, but degraded performance of the algorithmic clerical task, while PM had less effect on task performance. Although the effects of PBP were surprising, consideration of the mediating effects of perceived task attractiveness and perceived task difficulty, along with affective reactions to PBP, offer an explanation. These results shed light on how individual, task, and control factors may interact to affect task performance, and highlight the difficulty of predicting the effects of internal controls in a complex work environment.