Effects of Incentive Scheme and Outcome Feedback on Work Attitude and Performance: An Experimental Study

This thesis examines whether performance-based incentive scheme (piece rate vs. fixed incentive scheme) is detrimental to work attitude as suggested by the over-justification literature. It also investigates the effects of work attitude and incentive scheme on performance. In addition, it explores the role of outcome feedback in the relationship between work attitude and incentive scheme.

A computerized experiment with a 2 (high initial work attitude vs. low initial work attitude) x 2 (piece rate vs. fixed incentive) x 3 (no outcome feedback vs. positive outcome feedback vs. negative outcome feedback) between-subject design is conducted to test the following hypotheses:

H1: There is an interactive effect between initial work attitude and incentive scheme on subsequent changes in work attitude.
H2: There is an interactive effect between initial work attitude and incentive scheme on performance.
H3: Outcome feedback independently and interactively (with initial work attitude and incentive scheme) affects subsequent work attitude.
H4: Initial work attitude affects performance, and performance in turn affects subsequent work attitude.

One hundred and thirty five undergraduate students participate in the experiment and are rewarded the amount they earn in performing the water jar task. The experimental results suggest that H1 is supported, but H2 is not. Outcome feedback independently affects subsequent work attitude, especially for positive vs. negative outcome feedback groups of subjects. The interactive effect between outcome feedback, initial work attitude and incentive scheme on subsequent work attitude is not significant, indicating that outcome feedback does not moderate the relationship among initial work attitude, incentive scheme, and subsequent work attitude. Finally, H4 is supported, which suggest that initial work attitude can affect performance, and performance can affect subsequent work attitude. Implications for future studies are discussed.