More money? More feedback? How to motivate employees in the 21st-century workplace

According to research, there are efficient and inefficient ways to inspire your staff in today’s multidimensional business environment. Learn the combination for achieving better performance from your workforce.

How do you motivate employees?

Incentive compensation is certainly one common way. But it’s usually awarded for one or two specific achievements, and research has shown that employees who receive it tend to ignore other aspects of their performance. What’s a company to do?

With that question in mind, Scott Emett, assistant professor of accounting, along with colleagues Margaret Christ of the University of Georgia, and Bill Tayler and David Wood of Brigham Young University, designed a research project to shed more light on the subject. Most previous research has considered incentive pay and performance feedback separately, so it can be hard to differentiate their effects when they work together, as they do in the real world. Emett and his colleagues designed an experiment to both isolate and combine their results.

They uncovered some interesting relationships, detailed in their article, “Compensation or feedback: Motivating performance in multidimensional tasks,” recently published by the journal Accounting, Organizations and Society.

What the typing test revealed

The researchers conducted experiments with several groups of students, offering them real compensation of $5 to $15 to complete a data entry typing test following a particular set of instructions. All teams were told at the outset to type as quickly and as accurately as possible. They were given a brief typing test as a performance benchmark.

Then they were given a second test, again with instructions to type as quickly and as accurately as possible. But this time, one group was told they would be paid based on how quickly they typed. Another group was told they’d be compensated based on how fast they typed, but they would also be given feedback on their typing accuracy during the test. A third group was told they would be compensated for both speed and precision.

The results demonstrated several important concepts.

First, they showed that offering compensation for just one task leads to deteriorating performance of the other task. The first group — the speed demons paid only for their fast typing — not surprisingly zoomed through the test, but made tons of errors. “We found evidence consistent with prior literature — employees compensated on one dimension of performance neglect the others,” Emett says.

The results also showed that feedback could complement compensation to avoid this problem. Group Two — compensated for speed alone but given feedback on accuracy — improved both their speed and their accuracy.

That result may be surprising to some. “Traditional economic theory would say that Group Two shouldn’t care about accuracy at all, but we didn’t find that,” Emett says. “We provide evidence that feedback has an impact, even when it’s not tied to compensation.”

The implication for employers is clear. “Companies should look to provide more feedback on dimensions they think are important, but aren’t tied to compensation,” Emett says.

Tripped up by goal conflict

Another interesting finding was that Group Three, compensated for both speed and accuracy, did worse than Group Two. It’s hard to concentrate on typing fast and accurately at the same time. Group Three experienced what psychologists call goal conflict, a fundamental concept in Emett and his colleagues’ research.

“People struggle to balance multiple goals, and because of that, their performance suffers,” Emett says. Psychologists have found that people aren’t good at dividing their attention among goals. They deliberate over which one to focus on, when, and how much. If offered compensation for multiple goals, they feel they need to measure their progress to prove results. They have to spend the time to figure out a system to do that, then continually monitor themselves on progress — on everything.

All that thinking about goals takes time and energy away from performing the tasks employees are paid to do. The sad conclusion: The more achievements for which you offer employees incentive pay, the less likely they are to do a good job.

And that’s not the only problem. Employees invested in measuring their success invariably become discouraged when they find they’re not doing as well as they expected. They brood over unfulfilled goals, taking yet more time away from performing the job at hand. Though it’s outside the scope of Emett’s research, it seems likely that discouraged employees who feel bad about themselves may not try as hard, and as their enthusiasm wanes, their creativity may suffer.

Goal conflict is a subject more relevant than ever in today’s workplace, which is full of jobs that Emett would call “multidimensional.” During the recession, employers eliminated not only workers, but positions, and many didn’t replace them after the recession ended. The result is that employees now have more on their plates. Jobs once centered on a narrow range of tasks have broadened their scope. A glance at employment ads reveals how much employers value workers with a myriad of skills, some of them crossing departmental boundaries. At the same time, software has replaced repetitive tasks, giving employees more responsibilities that require their full attention.

Employers aren’t quite sure how they should deal with performance goals under these conditions. “It’s always tricky to motivate people in multidimensional work environments,” Emett says.

Emett’s research doesn’t say that multifaceted jobs are harmful — they’re simply a fact of modern life. But his research suggests that there are efficient and ineffective ways of motivating employees in such an environment. Offering incentive pay for one goal makes workers neglect others, and offering incentive pay for multiple objectives, as companies sometimes do for executives, causes goal conflict.

But offering incentive pay for one goal while at the same time providing feedback for others leads not only to heightened performance for the compensated goal — it produces better performance all-around. That’s the key takeaway from Emett’s research.

Speeding up the feedback loop

How should employers give feedback?

It’s not so much what you do as when you do it. Emett’s prior research on the subject found that feedback works best when it’s immediate, or as close to the performance action as possible. In practice, that means giving feedback often. It can be as formal as a performance review or as informal as a manager’s stopping by someone’s desk to say a few words about a recently submitted report. Any written feedback, such as customer satisfaction surveys, should be shared as soon as they come in. The form of the feedback isn’t important — what matters is that employers follow up early and often.

Next steps

Emett’s research gives businesses a much-needed blueprint for combining compensation and feedback to achieve better employee performance. But more work is needed to sketch in the details.

At the moment, Emett is on a different tack, studying financial reporting to learn how managers and investors make decisions. One unique study he’s doing examines the effect of auditors’ physical appearance at the companies where they work. He uses software to manipulate facial expressions, determining which features make people look trustworthy or shifty.

But someday he may return to compensation and feedback. Some important questions remain unanswered: Are some tasks better suited for feedback, and others for compensation? Do some task combinations produce more goal conflict than others?

The more employers understand the psychology behind employees’ task management decisions; the more productive the workplace will become — even in an environment where workers are already doing more with less.