Cash, non-cash, or mix? Gender matters! The impact of monetary, non-monetary, and mixed incentives on performance
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Cash, non-cash, or mix? Gender matters! The impact of monetary, non-monetary, and mixed incentives on performance Hanna M. Sittenthaler1
· Alwine Mohnen1
© The Author(s) 2020
Abstract Standard economic theory asserts that cash incentives are always better than non-cash ones, or at least not worse. This study employs a real effort experiment to analyze the impact of monetary, non-monetary, and a combination of monetary and non-monetary incentives on performance, where non-monetary incentives are defined as tangible incentives with market value. Our overall results suggest that there exists no significant difference in performance in response to monetary, non-monetary, and mixed incentives. However, gender-based differentiation reveals a different picture: the performances of men and women depend upon the type of incentive used. Whereas men’s performance is significantly higher in response to monetary incentives compared to non-monetary ones, women’s performance is significantly higher in response to nonmonetary incentives. The gender differences in the effectiveness of monetary and non-monetary incentives do not seem to be triggered by the perceived attractiveness of the non-monetary incentives but rather by the differences between men and women in the feelings of appreciation and perceived performance pressure in a tournament setting. Therefore, our results indicate that gender differences must be considered when implementing incentives. Keywords Monetary incentives · Non-monetary incentives · Mixed incentives · Gender differences · Work performance · Experiment JEL Classification C91 · D01 · J16 · J33 · M52
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Hanna M. Sittenthaler [email protected] Technical University of Munich, TUM School of Management, Arcisstraße 21, 80333 Munich, Germany
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H. M. Sittenthaler, A. Mohnen
1 Introduction Cash is king? According to standard economic theory, a monetary incentive is always better—or at least not worse—than a non-monetary incentive of equal market value due to the option value of cash (Jeffrey 2009; Waldfogel 1993). It is often difficult for companies to determine the preferences of individual employees and choose the most suitable non-monetary incentives. It is thus reasonable to assume that companies may occasionally choose inappropriate material incentives that do not match employees’ preferences. As a result, employees would be better off receiving cash incentives, which enable them to purchase benefits that maximize their individual utilities (Jeffrey 2009). However, although the use of non-monetary benefits is not reasonable from a neoclassical viewpoint, it is a widespread phenomenon within companies (Kauflin 2017; Zepelin 2017). Besides monetary incentives such as profit-sharing or bonus payments, non-monetary benefits such as restaurant coupons for meals (Condly et al. 2003), incentive travel, merchandise (i.e., electronics, luggage, or watches), and gift cards are often used by companies to reward top performing employees (Incentive Research Foundation 2016, 2017). A famous example is t
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