Incentives and Productivity
Karen N. Chavis
BUS 642
Instructor: Ruizhen Hardin
October 15, 2012

Incentives and Productivity
Background and Introduction Over the past several years, I have been employed by two companies that specialize in healthcare revenue cycle management. My particular job function focuses on eligibility for benefits. On a small-scale level, I work with patients who are uninsured to determine what type of benefits they may be eligible for to pay their hospital bills. On a larger scale, my job helps generate revenue for the hospital at which I am stationed. It also helps reduce the hospital’s allowance for bad debt, which in turn makes the hospital look more profitable to the corporation who owns us as well as potential investors. Although I have performed the same job function for both companies, the methods of management and motivation employed by these companies have been drastically different. One difference that I found particularly interesting was the utilization of incentives as a motivational tool. Generally the term “incentive” refers to “outcomes of value that are provided to employees based on their levels of performance,” (Pritchard, 2004). The first eligibility organization that I was employed by did not offer incentives, but the company that I currently work for does. Every month that we generate revenue above our goal, a certain percentage of that revenue is returned to us in a bonus. This policy has led me to wonder if incentives actually do increase the productivity of workers. It seems logical to believe that it does, since the workers understand that not only does the company benefit from their hard work and success, but they receive personal gains from it as well. My personal experiences have inspired me to conduct research into the topic, as I hope to advance to a management role in the future and it will be beneficial to be well-versed in motivational techniques. By analyzing existing research on the topic, I hope to find that utilizing incentives in the workplace does in fact increase the productivity of employees.

Research In order to determine if the use of incentives in the workplace increases worker productivity, I plan on analyzing existing research on the topic. Specifically, I will analyze the data collected in the study “Effects of group feedback, goal setting, and incentives on organizational productivity” by Drs. Robert D. Pritchard, Steven D. Jones, Philip L. Roth, Karla K. Stuebing, and Steven E. Ekeburg. This study was experimental in nature and sought to compare the effectiveness of several motivational techniques, including incentives, on the productivity level of the sample group. From this I can gather the effectiveness of incentives on workplace productivity and potentially reject the null hypothesis.

Sample The research group chose to sample “five organizational units at an Air Force base in the southwest United States,” (Pritchard et al, 1988). The five units consisted of: Communications and Navigation with personnel ranging from 29-35 during the course of the study, Receiving (15 average employees), Storage and Issue (15 average employees), Pickup and Delivery (13 average employees), and Inspection (7 average employees). All of these departments worked together in the supply chain to keep processes moving smoothly.

Measure of Productivity In order to determine if productivity has improved as a result of the treatments, the research group was forced to determine a method of evaluating productivity. Productivity is defined by most as “both efficiency and effectiveness… are necessary for a complete definition of productivity. One such definition is that productivity refers to how well an organization uses its resources to achieve its objectives,” (“Productivity”, 2004). The research group decided on ProMES, which is described as “approach to measuring productivity that include[s] methods of going from what we call products to obtaining objective indicators of how well these products were being done,” (Pritchard et al, 1988). Essentially, this method of evaluation involves several steps. First, the products must be defined. ‘Product’ is defined in this instance as a set of responsibilities or actions that are expected of an individual or organization. Next, indicators must be defined. These indicators are specific to the products being analyzed, and are specific units of measure that indicate how well the product is being generated. Next, contingencies must be defined. “A contingency is the relation between the amount of the indicator and the effectiveness of that amount of the indicator,” then “the effectiveness level of the maximum and minimum indicator levels would be established.” (Pritchard et al, 1988). Essentially, “These effectiveness scores have a distinct meaning. A score of zero would mean that organizational personnel were just meeting expectations; their productivity was neither particularly good nor bad. As the score became positive, they were exceeding expectations. The more positive the score, the more they were exceeding expectations. As the score became negative, they were below expectations,” (Pritchard et al, 1988).

Treatment For a 9-month period, baseline data was collected from Communications and Navigation, and for an 8-month period from all other departments. “Next, feedback was given to each unit for 5 months. Goal setting was then added to feedback for each unit and continued for another 5 months. Finally, incentives were added to feedback and goal setting in each unit for 5 months, “Pritchard et al, 1988). During the 5-month incentive period, time off from work was chosen as the incentive rather than a monetary incentive or other type of incentive.

Results Using the measures of productivity discussed above, the research group concluded that the “average increase over baseline was 50% for feedback, 75% for goal setting, and 76% for incentives. For Comm/Nav alone, the increases were 30% for feedback, 65% for goal setting, and 68% for incentives. For the four sections of MS & D, percentages of increase were 54%, 77%, and 79%. As will be discussed later, results for each of the four sections in MS & D were similar to these overall figures. These results indicate a major increase in productivity. The effects were extremely large,” (Pritchard et al, 1988).

Impressions and Conclusion Based on the results of this study, the hypothesis seems to be upheld. However, the research also indicated the incentives may not be the most effective method of motivation. Productivity was also significantly increased by utilizing feedback and goal-setting. This seems to suggest that, from a managerial perspective, a combination of motivational factors is the key to increasing productivity, not just implementing incentives. Logically, this makes sense, as an array of motivational techniques can appeal to a variety of employees and increase productivity by appealing to their various personalities. In conclusion, the results of the study that was analyzed indicate that implementing incentives does indeed increase productivity.

References
Hunter, J. E., & Schmidt, F. L. (1983). Quantifying the effects of psychological interventions on employee job performance and work-force productivity. American Psychologist, 38(4), 473-478. doi:10.1037/0003-066X.38.4.473
Pritchard, R. D., Jones, S. D., Roth, P. L., Stuebing, K. K., & Ekeberg, S. E. (1988). Effects of group feedback, goal setting, and incentives on organizational productivity. Journal Of Applied Psychology, 73(2), 337-358. doi:10.1037/0021-9010.73.2.337
Productivity. (2004). In Encyclopedia of Applied Psychology. Retrieved from
http://www.credoreference.com/entry/estappliedpsyc/productivity