Are Bonuses the Best Way to Motivate Employees?

Feeling unappreciated at work? Would a little extra cash help? Dan Ariely thinks he’s found a better answer. In his book Payoff: The Hidden Logic That Shapes Our Motivations, Ariely says that bosses should consider other ways to let employees know that they’re doing a good job and that they are valued. Ariely conducted an experiment at an Intel factory in Israel in which workers on a semiconductor assembly line were offered one of three different rewards for increased daily productivity. One group was promised a bonus of 100 shekels (around $30 USD), another was offered a voucher for a free pizza, and a third group was told that they would receive praise from the boss. Pizza proved to be the top motivator, as productivity jumped by 6.7 percent after the first day, when compared to a control group’s output. The group that was promised compliments finished a very close second, with a 6.6 percent productivity increase, while the group receiving cash had a productivity increase of only 4.9 precent.

A slice of life on the assembly line:

• When the weeklong experiment was over, the overall productivity increases in the pizza and compliments groups had declined somewhat from the first day's energetic output, but were still slightly higher than the work of the control group, which was not offered any incentive.
• After a whole week, the least effective motivation for the assembly line workers was still money. In fact, the offer of a small cash bonus resulted in a 6.5 percent decrease in productivity for the entire week.
• Compared to the power of intrinsic motivation, the allure of money quickly fades, perhaps because people generally feel they deserve higher pay. On the other hand, a sense of appreciation has a longer-lasting effect in the workplace.