Is it better to reward behavior or results? Two new papers describe the effect of pay for performance and suggest that rewarding behavior is more effective. In a study where half the students at poor performing schools were given the opportunity to earn a cash payment if they passed all tests, completion rates increased by about a third - but only for girls and mainly for those who only needed to improve a little. Students whose performance improved had clear ideas about what they needed to do to improve.
A different study paid some students for test scores and others for specific tasks like reading books. The results of the experiments where performance was rewarded were disappointing - plenty of money was paid out, but no evidence was found that paying students led them to do better. However, where students were simply given $2 for every book they read if they passed a computerized comprehension test, school grades improved substantially. This suggests that for students who do not know how to improve their own performance, the best strategy may be to reward them for simple tasks that ultimately translate into higher grades.
Applying these findings into a business context, incentive schemes designed to reinforce and reward specific behaviors on a frequent basis may be more effective for more people than schemes that award a year-end bonus based solely on performance.
