Abstract

Two contrasting theories concerning the effects of performance-contingent rewards have developed within the literature. Eisenberger and his colleagues argue in favour of the use of pay-for-performance strategies, whereas Self-Determination Theory argues against them. SDT claims that performance-contingent rewards are controlling and undermine perceived autonomy, intrinsic motivation, and creative performance. Eisenberger argues that these rewards, when given with appropriate instructions, increase autonomy, motivation and performance by giving people the choice to work harder for rewards if they so choose. This study simultaneously tested these two opposing theories to determine which one is best supported by empirical evidence. The present study was designed as a computer simulation. Participants were randomly assigned to one of six Pay (Piece-Rate vs. Base-Pay vs. No Reward) by Instruction Type (Creative vs. Quantity) conditions and asked to provide slogans for the John Molson MBA International Case Competition. They then completed a set of questionnaires. Participants were given the option to complete a second task, which was included as an indicator of their intrinsic motivation. Main findings showed mixed results but with a general trend in support of Self-Determination Theory and the use of base-pay strategies. Most significantly were the findings that base-pay was consistently related to higher levels of intrinsic motivation than piece-rate pay. There was limited evidence in support of Eisenberger's hypothesis that instructions are key to improving performance, and no evidence that piece-rate pay improves perceived autonomy, intrinsic motivation or performance. Implications for the use of different pay systems in organizations are discussed