Design Of Incentive Systems Research Articles

How to Make the Low-Powered Incentives Mode of the Public Sector Play a High-Powered Incentive Effect- Evidence from China's Government Performance Management Reform

Most challenging is motivating bureaucrats who perform duties during their jobs. Public organizations gain more from low-powered incentives than private sector incentives because of multitasking and lack of rivalry. Political and financial incentives dominate public sector motives, much below private sector incentives. Thus, scholars have concentrated on low-powered incentives to boost public sector incentives. This paper examines performance evaluation scheme-optimized incentive system design and operation. The case study of West Lake District, Hangzhou City, China, shows structure, process, and leadership-based organisational motivation development in performance management reform. The findings suggest that scientifically sound reward schemes necessitate effective interaction between many subjects under the current incentive structure. Transformational leadership defines incentive targets and requires high-quality incentive plans to turn reward plans into organisational incentive power. Performance review employing “classified assessment and classified incentive” can boost incentive power. How subordinate government civil servants view the performance evaluation scheme's fairness will affect their "performance recognition". and organisational incentive. This study improves China's performance-based incentive power system and low-powered incentives. The study indicated that fairness perception strengthens organisational incentives and transformative leadership. The study's district focus may restrict its value. Confirming the findings and studying transformative leadership in other public sectors requires research.

Pengaruh Sistem Insentif terhadap Perilaku Manajerial: Studi Empiris dalam Akuntansi Keperilakuan

This research analyzes the impact of incentive systems on managerial behavior in the realm of behavioral accounting. Using empirical methods, we collected data from a number of managers across various industrial sectors. Data analysis examined the significant relationship between incentive systems as independent variables and managerial behavior as dependent variables. The research results indicate that incentive systems have a significant influence on managerial behavior. These findings validate the hypothesis that the design of incentive systems can affect how managers act in the context of accounting. The practical implications of this research encourage a deeper understanding of incentive structures that can motivate desired managerial behavior. As a contribution to behavioral accounting theory, this research also provides valuable insights for practitioners in designing effective incentive systems that are contextually appropriate.

The Design of Incentive Systems in Digital Game-Based Learning: How Primary School Children Interact with It

Digital game-based learning builds on the general characteristics of games. The incentive system (points, scores, stars, levels, and performance feedback) integrates design elements to keep a learner engaged. In the work described here, we investigated which elements of the incentive system design—rewards, penalties, or feedback—have the potential to trigger students’ motivation to play the game. We used eye tracking of eight primary school children, aged 8–11 years, as they interacted with the incentive system of a mathematics game-based item and its specific design, followed by a semi-structured interview. Eye-tracking results show that students paid minimal visual attention to the incentive system during the game, regardless of their level of performance in the game or their age group. The feedback at the end of the game attracted more of their visual attention and provided a good opportunity to inform them about their performance. The semi-structured interviews revealed a high level of self-reported excitement about playing the game, mainly related to the design of the incentive system. Elements of the incentive system triggered students’ wish for student-to-student competition, which has been shown in the literature on traditional tangible rewards to stifle intrinsic motivation under certain conditions. The results of this study show that the design of the incentive system has the potential to promote extrinsic motivation with the game through rewards and penalties, and open the reflection on its possible spillover effect on intrinsic motivation in digital game-based learning.

How executive incentive design affects risk-taking: a literature review

This paper presents a review of research regarding the effects of monetary executive incentives on risk-taking. More precisely, we investigate executives’ risk-taking (i) in response to the curvature (steepness, convexity, concavity) of the compensation function and (ii) with regard to reference points. Thereby, we refine and update common textbook knowledge. In this vein, we identify essential moderators at the personal, firm, or environmental level that can be used to assess the effectiveness of the incentive scheme in a specific context. Implications for incentive system design in practice and paths for future research are discussed.

Innovation of Corporate Governance: A Discussion based on Blockchain Technology

Blockchain, as a newly-born application of computer technology, has unique advantages in data storage, point-to-point transmission, consensus mechanism and encryption algorithm, which could lead to innovation of corporate governance. The application of blockchain technology in corporate governance has attracted more and more attention as it provides new approaches to improve corporate innovation ability as well as operation efficiency. This paper will discuss three types of applications of blockchain technology in corporate governance, including operating based on DAO, creating employee performance appraisal and incentive mechanism and cooperating among Multi-departmental employees. There are three aspects that will be included in the discussion of each application, namely mechanism, preconditions and benefits, so as to show the potentials of blockchain technology comprehensively. Furthermore, this paper will provide detailed design of corporate governance model, including the structure of Blockchain-based platforms, design of operating system and design of appraisal and incentive system, which offers a guideline to corporations that intends to adopt blockchain technology in their corporate governance.

Building trust through knowledge sharing: Implications for incentive system design

We examine whether knowledge sharing can enhance the efficacy of implicit, trust-based incentives. Using a stark laboratory experiment, we find support for theory suggesting that individuals believe that their knowledge is an important part of their identity, making it costly to share, but facilitating greater trust that recipients of this knowledge will reciprocate with future rewards. Utilizing participants with substantial work experience, results from additional scenario-based experiments demonstrate practical implications of this theory. Collectively, the results from our experiments show that individuals help others less when the help conveys personal knowledge relative to when it does not absent the prospect of rewards, but more when they can expect future rewards (i.e., with implicit incentives). Importantly, knowledge sharing increases the efficacy of implicit incentives more when they are determined by the help recipient relative to someone else (e.g., a supervisor). Collectively, we contribute to a better understanding of incentive systems designed to promote knowledge sharing in practice.

Do Narcissistic Managers Prefer Incentive Systems Based on Financial Instruments? An Analysis Based on Choice Experiments

The purpose of this work is to analyse the preferences of Chief Executive Officers (CEOs) in relation to the different components of incentive systems: financial vs. non-financial. The incentive systems could be an instrument for the sustainable development of Firms. Upper Echelons Theory establishes that the traits of executives affect the decision-making processes, and among these traits, narcissism is a potentially influential factor in these processes. Therefore, the extent to which the level of narcissism influences the choice of one instrument or another is also analysed. For this purpose, a choice experiment has been carried out to analyse the preferences of CEOs. The questionnaire developed incorporates both the choices about different systems and the NPI-16 test that allows individuals to be classified according to their narcissistic nature. The main results show that, in general, there is a stronger preference for non-financial instruments than for financial instruments in the design of incentive systems. However, narcissistic CEOs show a clear inclination towards financial incentives that bring them benefits rather than provide incentives.

Forgoing earned incentives to signal pure motives

Policy makers, employers, and insurers often provide financial incentives to encourage citizens, employees, and customers to take actions that are good for them or for society (e.g., energy conservation, healthy living, safe driving). Although financial incentives are often effective at inducing good behavior, they've been shown to have self-image costs: Those who receive incentives view their actions less positively due to the perceived incompatibility between financial incentives and intrinsic motives. We test an intervention that allows organizations and individuals to resolve this tension: We use financial rewards to kick-start good behavior and then offer individuals the opportunity to give up some or all of their earned financial rewards in order to boost their self-image. Two preregistered studies-an incentivized online experiment (n = 763) on prosocial behavior and a large field experiment (n = 17,968) on exercise-provide evidence that emphasizing the intrinsic rewards of a past action leads individuals to forgo or donate earned financial rewards. Our intervention allows individuals to retroactively signal that they acted for the right reason, which we call "motivation laundering." We discuss the implications of motivation laundering for the design of incentive systems and behavioral change.

How Incentive System Design Affects Risk-Taking: A Literature Review

Firms use monetary incentives to motivate employees to act in the firms’ interest, i.e., to increase effort and to align their risk-taking with the firm. Whereas Bonner and Sprinkle (2002) review and discuss research on how monetary incentives affect effort and performance, we examine the effects of risk-taking. Ultimately, when designing executives’ incentive systems, it is crucial to consider the potential effects on both, effort and risk-taking. Hence, the purpose of this literature review is to systematically present and review research findings regarding the effects of monetary executive incentives on risk-taking. We distinguish between different forms of incentive design and provide a framework for understanding their impact on risk-taking. Further, implications for incentive system design in practice as well as paths for future research are discussed. On the one hand, we provide suggestions on how to increase employee risk-taking and reduce loss-aversive behavior when risk-taking is too low. On the other hand, we discuss instruments that prevent employees from taking excessive risks.

Dose Managerial Optimism Affect Bank Risk-Taking? An Empirical Analysis Based on A-Share Listed Banks in China

In order to study the impact of management optimism on commercial banks’ risk-taking, this paper uses the unbalanced panel data of 28 A-share listed banks in China to analysis. The empirical results of the OLS estimation show that the excessive optimism of management has a significant positive impact on the risk-taking of commercial banks. The bank’s risk-taking level is also positively related to its deposit-loan ration and cost-income ratio, and has negative correlation with core capital adequacy and asserting scale. Therefore, when formulating policies, the supervisory authority should take into account the possible impact of managerial optimism on bank risk-taking. Commercial banks themselves should also pay attention to the excessive optimism of management in the design of compensation incentive system.

The effect of incentives on intrinsic motivation and employee attitudes: A multilevel study across nations and cultural clusters

In a study of employees across 29 nations and 9 of the 10 Global Leadership and Organizational Effectiveness (GLOBE) cultural clusters, the association between economic and psychological incentives and intrinsic motivation, job satisfaction, and organizational commitment were examined. Self‐Determination Theory (SDT) is utilized to develop a theoretical model and then compare structural relationships across nations and cultural clusters. Results confirm the positive relationship between basic psychological needs and intrinsic motivation across all nations and cultures. However there is an effect of cultural cluster on the relationships between incentives and motivation, wherein external incentives are intrinsically motivating in Southern and Confucian Asian clusters. The implications for the design of incentive systems are discussed.

Why Do Goal-Based Incentives Cause Cheating? Unpacking the Confounding Effects of Goals, Social Comparisons and Pay

Research has shown that goal-based incentive systems lead to cheating. However, goal-based systems contain many distinct components, including the assignment of the target, justification of the target through information such as social comparisons, and monetary rewards for meeting the target. Existing research has not decomposed which of these elements induce cheating. We run two experiments to test which elements, either on their own or when used together, lead to cheating. Using a task from previous experiments, Study 1 detects increased cheating (and especially blatant forms of cheating) in response to social comparison framing. Merely assigning a target had no detectable effect unless social comparisons were simultaneously implemented. In Study 2, we pay participants based on performance and equate marginal financial returns to cheating between goal and non-goal conditions. We find that paying for performance increases cheating, but assigning a target again had no detectable effect unless implemented alongside pay for performance. Together, both studies suggest that, while goal-based systems may cause cheating, elements other than goal targets appear to drive this cheating. These results emphasize that incentive systems such as those using goals are inherently complex, and research and incentive system design must carefully consider the underlying components of the system.

Peer review and competition in the Art Exhibition Game

To investigate the effect of competitive incentives under peer review, we designed a novel experimental setup called the Art Exhibition Game. We present experimental evidence of how competition introduces both positive and negative effects when creative artifacts are evaluated and selected by peer review. Competition proved to be a double-edged sword: on the one hand, it fosters innovation and product diversity, but on the other hand, it also leads to more unfair reviews and to a lower level of agreement between reviewers. Moreover, an external validation of the quality of peer reviews during the laboratory experiment, based on 23,627 online evaluations on Amazon Mechanical Turk, shows that competition does not significantly increase the level of creativity. Furthermore, the higher rejection rate under competitive conditions does not improve the average quality of published contributions, because more high-quality work is also rejected. Overall, our results could explain why many ground-breaking studies in science end up in lower-tier journals. Differences and similarities between the Art Exhibition Game and scholarly peer review are discussed and the implications for the design of new incentive systems for scientists are explained.

Designing incentive pay practices to motivate not alienate: why firms adopt different payment practice configurations in different countries

Purpose Examines the reward structures used by private-sector firms in different locations. Design/methodology/approach Analyzes the prevailing incentive pay practice configurations in 14 countries over four continents. Investigates the extent to which local factors constrain firms’ use of personal and team bonuses or profit-sharing. Findings “When in Rome, do as the Romans do” – an old saying but still relevant for the growing number of firms operating in several countries. A well-thought-out incentive scheme encourages employees to think and act in ways that support company objectives. But people in different places can have different ideas about what is fair and appropriate. Human resource professionals have to decide whether to follow the local norms or to introduce the firm’s established practices – and an informed decision can make the difference between having a motivated workforce or making an expensive mistake. Practical implications Observes that organizations in some countries show a strong preference for a particular bundle of incentive options. Warns that introducing a different approach may prove counter-productive unless combined with a careful process of change management. Social implications Highlights the importance of institutional context and social norms in determining the incentive pay configurations adopted in different countries. Originality/value Provides an international guide to prevailing patterns of incentive payment adoption. Shows that external constraints specific to individual countries can have a significant impact on the flexibility of incentive system design.

Influence of incentive system design on individual farm performance: A survey in the German strawberry and asparagus sectors

Influence of incentive system design on individual farm performance: A survey in the German strawberry and asparagus sectors

Functioning and Impact of Incentives for Amalgamations in a Federal State: The Swiss Case

In Switzerland, where most amalgamations are voluntary, supportive measures for municipal mergers vary considerably between cantons. This study focuses upon the interests of higher-ranking state levels in amalgamation, the design of incentive systems set by the Swiss cantons, and their influence on the municipalities’ amalgamation activities. Empirical results show that with a higher number of municipalities, the canton sets more incentives for mergers. Also, financial incentives positively influence the municipalities’ merger activities. The data sources include comprehensive surveys of the Swiss municipal secretaries (2009/2010) and of the cantonal administrations (2010).

Incentive System Design in Creativity-Dependent Firms

ABSTRACT I empirically investigate the impact of an organization's creativity dependency on the design of its incentive system. In firms for which the primary source of value creation is the creativity of core employees, the designs of incentive systems are particularly challenging. The nature of creative work constrains the feasibility of extrinsic incentives, but at the same time creates a need for them. Accordingly, there is concern that the use of incentives renders people not creative enough, but a lack of incentives makes employees “too creative.” I argue that a solution to this dilemma is the acknowledgment that the decision to use performance-based pay is not made in isolation, but as part of a set of complementary choices. I theoretically argue and empirically show that subjective evaluations of non-task-related performance and performance-based pay are complements in a creativity-dependent setting. I further argue that the intense use of both control mechanisms is the incentive system that best accommodates the control requirements of creativity-dependent firms, and show that the likelihood of choosing this system increases with the creativity dependency.

Incentive System Design in Creativity-Dependent Firms

I empirically investigate the impact of an organization’s creativity dependency on the design of its incentive system. In firms for which the primary source of value creation is the creativity of core employees, the designs of incentive systems are particularly challenging. The nature of creative work constrains the feasibility of extrinsic incentives but at the same time creates a need for them. Accordingly, there is concern that the use of incentives renders people not creative enough, but a lack of incentives makes employees “too creative.” I argue that a solution to this dilemma is the acknowledgment that the decision to use performance-based pay is not made in isolation, but as part of a set of complementary choices. I theoretically argue and empirically show that subjective evaluations of non-task-related performance and performance-based pay are complements in a creativity-dependent setting. I further argue that the intense use of both control mechanisms is the incentive system that best accommodates the control requirements of creativity-dependent firms and show that the likelihood of choosing this system increases with the creativity dependency.

Managers' Choices of Performance Measures in Promotion Decisions: An Analysis of Alternative Job Assignments

ABSTRACTIn this study, we investigate the choice of performance measures in promotion decisions. In particular, we examine the extent to which managers incorporate different performance measures for different types of job assignment. Based on a simple theoretical framework, we predict that, in making promotion decisions, the weight on current job performance decreases with increases in the change in tasks upon promotion, while the weight on subjective assessments of ability increases. This result basically follows from the premise that, with increased changes in tasks between hierarchical levels, the ability to master the current job says little about the ability needed in the next job, which makes current job performance less informative and increases the emphasis on subjective assessments. Using panel data of a retail bank, we find that individual managers behave according to our predictions. By examining the choice of performance measures in promotion decisions, we are able to provide unique insights into the incentive versus sorting roles of promotions, which has important implications for performance measurement and incentive system design.

Impact of test sensitivity and specificity on pig producer incentives to control Mycobacterium avium infections in finishing pigs

In this paper we analyze the impact of the sensitivity and specificity of a Mycobacterium avium (Ma) test on pig producer incentives to control Ma in finishing pigs. A possible Ma control system which includes a serodiagnostic test and a penalty on finishing pigs in herds detected with Ma infection was modelled. Using a dynamic optimization model and a grid search of deliveries of herds from pig producers to slaughterhouse, optimal control measures for pig producers and optimal penalty values for deliveries with increased Ma risk were identified for different sensitivity and specificity values. Results showed that higher sensitivity and lower specificity induced use of more intense control measures and resulted in higher pig producer costs and lower Ma seroprevalence. The minimal penalty value needed to comply with a threshold for Ma seroprevalence in finishing pigs at slaughter was lower at higher sensitivity and lower specificity. With imperfect specificity a larger sample size decreased pig producer incentives to control Ma seroprevalence, because the higher number of false positives resulted in an increased probability of rejecting a batch of finishing pigs irrespective of whether the pig producer applied control measures. We conclude that test sensitivity and specificity must be considered in incentive system design to induce pig producers to control Ma in finishing pigs with minimum negative effects.