Justifiability and the Motivational Power of Tangible Noncash Incentives

Abstract

This article studies the motivational power of hedonic noncash incentives compared to the motivational power of an equivalent amount of cash. In a laboratory study, working adults who engaged in a challenging mental task performed better in pursuit of a noncash incentive than in pursuit of a cash incentive of equal cash value, even though they stated a preference to receive the cash award. Justification concerns regarding the consumption and purchase of luxurious hedonic goods are found to be a major cause of this behavioral inconsistency. These findings suggest that firms must be careful in asking employees what incentives they prefer, because the preferred incentive may not be the one that leads to the best performance.