Incentives
have been something which every manager and CEO always has tries to improve on.
Everyone feels it is the way to get a business moving and extremely important
in the way companies’ cultures are developed. Despite normal salaries
widespread use, most research finds that there normal incentives are terrible
at improving performance in the long-run on anything but mindless tasks,
because the fixation on prizes clouds our creative thinking. A new Harvard
study found that if you give a reward upfront and then threaten to take it away
which is called “loss-aversion” actually improved students’ performance. It all
has to do with how humans process loss and gains differently. This is known as
the “endowment effect” and has been proven in studies that people are
territorial about their own stiff and will pay more to keep it after they own
it. The Harvard school experimented offering teachers 4k upfront and then if
they did well throughout the year, they would receive 4k extra or be forced to
return it.
The research
holds exciting and endless possibilities for business but could have social repercussions
if used throughout all business. The only problem with this idea is the interest which
would be lost by not having that upfront money to invest. The real question is to try and calculate exactly how much this change someones work ethic.
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