Do financial incentives improve motivation and performance under time constraints?

Abstract

This study investigates the extent to which financial incentives, or the lack thereof, can influence the motivation and consequently the performance of professionals in an organization. In our paper, variable pay that is contingent on performance and fixed pay which are independent of performance are jointly referred to as financial incentives. With intense competition among private companies, professionals are often faced with high time pressure on deliverables. However, they have at their disposals several commonplace resources that can be used to manage time pressure. One such resource is time constraint awareness, which enables the monitoring of time-lapsed and allows the gauging of time remaining before deadlines are due. Another common resource is job autonomy, which allows professionals to control the prioritizing of jobs to complete within a set of deliverables demanding work. Prior researches have established that time pressure is generally related to a decrease in motivation and performance while financial incentives are generally related to an increase in motivation and performance. In our study, we posit that these linear relationships can also interact with common resources, such as controllability over task completion and time awareness that are available in the workplace to mitigate the effect of time pressure on motivation and hence performance. Through a 3 x 2 x 2 x 2 experimental research design involving 455 undergraduates, we show that all four independent variables; payment, awareness, control and time pressure contribute to affect motivation and performance via an interactive manner. Our findings reveal that while under the absence of time pressure, the positive effects of performance-based pay and control are substitutive, their positive effect becomes additive under time pressure. In addition, further analyses reveal that while awareness is associated with a decrease in motivation of participants who are paid independent of performance, this detrimental effect is negated when participants are given performance-based pay.