Paying with Self-Chosen Goals

Incentives and Gender Differences

P.S. Dalton, V.H. Gonzalez Jimenez, C.N. Noussair

Research output: Working paperDiscussion paperOther research output

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Abstract

Abstract: To boost employees’ performance, firms often offer monetary bonuses when production goals are reached. However, the evidence suggests that the particular level of a goal is critical to the effectiveness of this practice. Goals must be challenging yet achievable. Computing optimal goals when employees have private information about their own abilities is often not feasible for the firm. To solve this problem, we propose a compensation scheme in which workers set their own production goals. We provide a simple model of self-chosen goals and test its predictions in the laboratory. The evidence we
find in the laboratory confirms our model’s predictions for men, but not for women. Men exert greater effort under the self-chosen goal contract system than under a piece rate contract. In contrast, women perform worse under the self-chosen goal contract. Further analysis suggests that this is because women fail to set goals that are challenging enough, because they are less likely to update their goals to take into account their improving performance as they repeat the task.
Original languageEnglish
Place of PublicationTilburg
PublisherEconomics
Number of pages29
Volume2015-021
Publication statusPublished - 23 Mar 2015

Publication series

NameCentER Discussion Paper
Volume2015-021

Fingerprint

Gender differences
Incentives
Employee performance
Piece rate
Prediction
Bonuses
Employees
Workers
Private information
Prediction model

Keywords

  • contracts
  • bonus
  • endogenous goals
  • productivity
  • intrinsic motivation
  • challenge seeking
  • gender differences

Cite this

Dalton, P. S., Gonzalez Jimenez, V. H., & Noussair, C. N. (2015). Paying with Self-Chosen Goals: Incentives and Gender Differences. (CentER Discussion Paper; Vol. 2015-021). Tilburg: Economics.
Dalton, P.S. ; Gonzalez Jimenez, V.H. ; Noussair, C.N. / Paying with Self-Chosen Goals : Incentives and Gender Differences. Tilburg : Economics, 2015. (CentER Discussion Paper).
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Dalton, PS, Gonzalez Jimenez, VH & Noussair, CN 2015 'Paying with Self-Chosen Goals: Incentives and Gender Differences' CentER Discussion Paper, vol. 2015-021, Economics, Tilburg.

Paying with Self-Chosen Goals : Incentives and Gender Differences. / Dalton, P.S.; Gonzalez Jimenez, V.H.; Noussair, C.N.

Tilburg : Economics, 2015. (CentER Discussion Paper; Vol. 2015-021).

Research output: Working paperDiscussion paperOther research output

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T1 - Paying with Self-Chosen Goals

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AU - Noussair, C.N.

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N2 - Abstract: To boost employees’ performance, firms often offer monetary bonuses when production goals are reached. However, the evidence suggests that the particular level of a goal is critical to the effectiveness of this practice. Goals must be challenging yet achievable. Computing optimal goals when employees have private information about their own abilities is often not feasible for the firm. To solve this problem, we propose a compensation scheme in which workers set their own production goals. We provide a simple model of self-chosen goals and test its predictions in the laboratory. The evidence wefind in the laboratory confirms our model’s predictions for men, but not for women. Men exert greater effort under the self-chosen goal contract system than under a piece rate contract. In contrast, women perform worse under the self-chosen goal contract. Further analysis suggests that this is because women fail to set goals that are challenging enough, because they are less likely to update their goals to take into account their improving performance as they repeat the task.

AB - Abstract: To boost employees’ performance, firms often offer monetary bonuses when production goals are reached. However, the evidence suggests that the particular level of a goal is critical to the effectiveness of this practice. Goals must be challenging yet achievable. Computing optimal goals when employees have private information about their own abilities is often not feasible for the firm. To solve this problem, we propose a compensation scheme in which workers set their own production goals. We provide a simple model of self-chosen goals and test its predictions in the laboratory. The evidence wefind in the laboratory confirms our model’s predictions for men, but not for women. Men exert greater effort under the self-chosen goal contract system than under a piece rate contract. In contrast, women perform worse under the self-chosen goal contract. Further analysis suggests that this is because women fail to set goals that are challenging enough, because they are less likely to update their goals to take into account their improving performance as they repeat the task.

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M3 - Discussion paper

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Dalton PS, Gonzalez Jimenez VH, Noussair CN. Paying with Self-Chosen Goals: Incentives and Gender Differences. Tilburg: Economics. 2015 Mar 23. (CentER Discussion Paper).