Is a 1% productivity gain worth it?The January 16 issue of The Economist has a brief report of an experimental study that found workers responded more to being told they would lose a supplement to their wages if they failed to meet a production target, than to being told they would earn the same amount by achieving the target.
The Economist report doesn't mention that the difference in productivity between the two situations was all of 1%. For that bit of information you have to go to the original paper (pdf) by Tanjim Hossain, an economist in the Department of Management at the University of Toronto Mississauga, and John List, an economist at the University of Chicago.
So the question arises whether a 1% gain in productivity is worth telling employees that, in effect, they will be punished for failing to meet a production goal, as opposed to telling them they will be rewarded for meeting the goal.
I'm inclined to think that, overall, the straightforward proposition to employees that "you'll share in gains from improvements you help the company achieve" will do more to nurture commitment to meeting company goals than a message of "we'll dock your pay if you fall short of this week's (or month's, or whatever) production target."
Labels: Rewards and recognition