Needs Versus Wants: Which Motivates More Effort?

Abstract

A significant and increasing number of North American organizations use tangible rewards to motivate their employees. Despite the widespread use of tangible rewards, there is limited understanding as to what makes them effective. Our study has two related purposes. First, we use a lab experiment to examine the extent to which the utilitarian versus hedonic nature of performance-contingent tangible rewards affects participants’ effort. Consistent with mental accounting theory, we find participants eligible for hedonic tangible rewards outperform participants eligible for utilitarian tangible rewards. Second, we use a separate follow-up lab experiment to examine whether differentially framing the potential use of cash rewards on hedonic versus utilitarian items can achieve the same effect on effort as we observed in our first experiment. Using the same task and procedures as the first experiment, we find no difference in participants’ performance between our two framed cash conditions. Implications for theory and practice are discussed.