This Is Your Brain On Incentives

 

Takeaway

  • UT research study lends new insight into performance-based incentives, employee attitudes and the decision-making process
  • Employees who are offered incentives are more likely to use the analytical part of their brains

You may have to work with a jerk, but if you’re paid differently it might be a little more bearable.

Take this scenario, for example: Peter Gibbons is a computer programmer at Initech. Earlier this week, senior management suggested Gibbons collaborate with his coworker, Drew, on a large project. Even though it’s a high-profile project that looks like it will be more interesting than TPS reports, Gibbons has a big problem: He cannot stand Drew. 

Lately, Gibbons has taken the attitude of “It’s not that I’m lazy; it’s that I don’t care.” Maybe Gibbons just has a case of the Mondays, or maybe Initech management needs to reevaluate how to motivate their employees.

In a forthcoming paper, Brian White, assistant professor of accounting at the McCombs School of Business, questions whether or not performance-based incentives can change employee attitudes and their decision-making processes. Coauthored with Anne Farrell of Miami University and Joshua Goh of National Taiwan University, the study raises the question of whether the brain reacts differently in environments that promise rewards for good results.

Emotionally Charged

It’s not unusual to dislike your coworkers. Like Peter Gibbons in the above example, many of us have to deal with people we don’t like in the workplace. According to The Chicago Tribune, irritating coworkers are the second highest complaint among employees, after low wages.

“Our brains are wired to make decisions based on our emotional reactions to a situation, rather than the economic merits,” White says. 

Emotions arise in various forms — happiness, sadness, regret, anger — and purposely or not, they can affect our attitude and behavior toward others. Someone who is irritated may lose patience listening to a coworker’s long story or may be more likely to send out a contentious email. On a good day, however, you can overlook poor customer service or a coworker’s loud personal phone call.   

Mind Over Matter
Office work generally involves collaborating with coworkers and peers, often with different personalities and backgrounds. However, our own emotional biases can block the creative process. This can harm the company overall. So what can you do?

When faced with working with someone you dislike, it’s easy to tell yourself to “just get over it,” but there may be a way to change your mind — literally. In his research, White and his team used MRI imaging to capture brain patterns in both a fixed-wage and performance-based work contract. In the lab, they tested full-time graduate business students with professional work experience and gave them hypothetical investment situations. 

The study found that the participants who were offered incentives were more likely to use the analytical part of their brain. An emotional influence was still present under an incentive-based contract; however, participants were more likely to carefully weigh the pros and cons while limiting the amount of emotional influence. “This study suggests that well-designed incentive contracts are a useful tool for firms for not only better aligning managers’ goals with those of the firm owners, but also for inducing managers to think more analytically about the impact of various decisions,” White says.

“Under a fixed wage, we see a strong influence of emotion on people’s decisions. That influence is reduced when we pay them with a performance-based contract.”

The Payoff 

White’s research suggests that by introducing incentives, employees think less emotionally and more analytically, which makes working with someone you dislike a little easier. Instead of focusing on annoying idiosyncrasies, you’re more likely to consider the economic merits for yourself and your company. Instead of attempting to force Peter and Drew to get along by putting them through a battery of team-building exercises, their boss might be better off creating a bonus system that rewards them for the results of the project.

“Emotion still matters. It’s hard-wired: You can’t shut it off, but you can override it,” White says.
 

Faculty in this Article

Brian White

Assistant Professor of Accounting McCombs School of Business

Brian White is an assistant professor in the Accounting Department. He earned his Ph.D. in Accountancy from the University of Illinois at Urbana-...

About The Author

Kim Brown

Senior Graphic Designer,

I design, write, and sometimes take pictures.

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