November 21st, 2008

For The Birds

Higher pay = worse performance?

Interesting article from the NYTimes:
"We replicated these results in a study at the Massachusetts Institute of Technology, where undergraduate students were offered the chance to earn a high bonus ($600) or a lower one ($60) by performing one task that called for some cognitive skill (adding numbers) and another one that required only a mechanical skill (tapping a key as fast as possible). We found that as long as the task involved only mechanical skill, bonuses worked as would be expected: the higher the pay, the better the performance. But when we included a task that required even rudimentary cognitive skill, the outcome was the same as in the India study: the offer of a higher bonus led to poorer performance.

"If our tests mimic the real world, then higher bonuses may not only cost employers more but also discourage executives from working to the best of their ability."
Maybe discourage is not the right word. Distract might be a better fit.