New research shows that people respond to incentives
!...even in government in the UK;
Under both [incentive pay] schemes some teams hit their targets and were awarded bonuses. So relatively small bonuses did lead team members to increase their output. And the costs of achieving the output gains were smaller than a general pay rise to achieve the same gains.
But the news was not all good. In an evaluation of the scheme for the collection of indirect tax (VAT), we use high frequency management data from the agency to look at how employees hit their targets (Burgess et al. 2010). We find that teams that hit their targets and got their bonuses did so primarily by reallocating the more productive workers to incentivised tasks and away from the tasks that gave no rewards, rather than by greater effort of the members of the team.
They moved their best hitters up in the line-up. Good show.
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