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When 3+1 is more than 4

Economics, Finance, money, reward, work

In a famous scene from the film “Jerry Maguire,” NFL wide receiver Rod Tidwell repeatedly screams, “Show me the money!” as his agent listens on the other end of the telephone. Intuition might tell us that showing the money motivates, and that increasing an employee’s salary should correspondingly boost his or her motivation. It does — under certain conditions. The evolving field of behavioral economics is challenging the assumption that more money inevitably leads to increased effort.

In a recent field study that he conducted along with Harvard colleagues Duncan Gilchrist and Michael Luca, Harvard Business School Professor Deepak Malhotra set out to answer a basic question: “Do employees work harder when they are paid more?” As Malhotra, the Eli Goldston Professor of Business Administration, said in an interview, “Previous research has shown that paying people more than they expect may elicit reciprocity in the form of greater effort or productivity.” Malhotra and his research team, however, found that paying more only led to greater productivity when the additional pay was presented as a gift, with no strings attached.

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