Monetary Incentives, Feedback, and Recognition—Complements or Substitutes? Evidence from a Field Experiment in a Retail Services Company

Abstract

ABSTRACT This study investigates the performance effects of the combined use of three reinforcers, or incentive motivators, commonly used by companies: monetary incentives, feedback, and recognition. Using a field experiment in a retail services company, I test whether these incentives, which appeal to diverse motivation mechanisms—tangible payoffs, self-regulation, and social esteem—and, hence, have different utilities, are complements or substitutes. The results of the hard performance data collected, in the form of a ratio of sales relative to goals, show that monetary incentives and recognition are substitutes, while feedback is independent of the other incentives. The negative interaction between monetary incentives and recognition is evidence of crowding out between tangible payoffs and social esteem motivations. Individually, these two incentives have a positive impact on performance of about 13 percentage points, which corresponds to a 32.5 percent performance increase. Feedback interactions and main effects are not statistically significant, which suggests that, in this setting, providing feedback in the form of knowledge of results has no impact.