Group Incentives and Task Performance: An Information Asymmetries Perspective

Although financial incentives are widely used, their effectiveness has been debated in both the academic literature and in the popular press. More specifically, while there is general consensus that paying for performance (PFP) can serve to increase effort and productivity, there is much greater debate regarding the relationship between PFP and performance quality and/or creativity. Thus, the wisdom of using extrinsic motivators to enhance performance quality and creative decision-making -- especially important in complex, interdependent work teams found in many organizations today -- remains in doubt. Using an information asymmetries framework, we argue that group PFPs may encourage more effort in the form of greater time devoted to task-focused discussion. Based on existing research, we further suggest that greater discussion will yield higher performance quality due to more effective knowledge sharing and integration. We test these arguments in an experiment using a complex task in which relevant, crit...