Can we get people to work harder and perform better if we make their pay performance-related - e.g. with performance bonuses or commissions? Does this work? Are individual or group incentives better? What does the evidence say? We know that people respond to incentives, but, as Gene Tunny and Tim Hughes discuss this episode, getting those incentives right can be tricky. 

Please get in touch with any questions, comments and suggestions by emailing us at [email protected] or sending a voice message via https://www.speakpipe.com/economicsexplored. 

What’s covered in EP177

• What is performance-related pay? [0:41]
• The types of jobs in which performance-based pay works and doesn’t - e.g. fast food vs real estate [8:09]
• The importance of getting incentives right and having transparency [23:16]
• Performance-related pay is a difficult thing to put into practice [28:24]
• Group-based incentive schemes - evidence from a recent European study of the Hydrema manufacturing business [52:54]

Links relevant to the conversation

IZA World of Labor - Performance-related pay and productivity

How group-based incentives increase worker performance | CEPR

Does Group-Based Incentive Pay Lead To Higher Productivity? Evidence from a Complex and Interdependent Industrial Production Process

The Use of Reward and Incentive Systems: A Case Study of McDonald's - ToughNickel

McDonald's Restaurants puts motivation and reward at heart of business strategy - Employee Benefits

Give and Take – Adam Grant

Performance-related pay | The Economist   

Real Estate Agent Commissions: How Does it Work and How Much Should You Be Paying

Learn the Truth About Real Estate Commissions | PropertyNow

Credits

Thanks to Obsidian Productions for mixing the episode and to the show’s sponsor, Gene’s consultancy business www.adepteconomics.com.au. 

Full transcripts are available a few days after the episode is first published at www.economicsexplored.com. Economics Explored is available via Apple Podcasts, Google Podcast, and other podcasting platforms.