Psychological Theories on Financial Incentives and Motivation

Individuals will minimize effort unless it contributes to their own economic well-being.

Financial incentives increase the acceptance of achievement goals and lead to higher performance.

Agency theory predicts that financial incentives based on teams enhance cooperation and performance.

<p>Self-regulation theory emphasizes how financial incentives affect individuals' self-concepts and behaviors.</p> Signup and view all the answers

<p>Organizational justice theories explain why team-based rewards are not comparable to individual incentives.</p> Signup and view all the answers

<p>Financial incentives increase goal levels and commitment to personal, team, and organizational goals.</p> Signup and view all the answers

<p>Expectancy theory suggests that motivation level depends on the product of expectancy and value constructs which an individual ascribes to different action goals. Incentives enhance the perceived valence, making performance goals more attractive and motivating individuals to choose goals related to performance. The connection between effort, performance, and outcome also plays a significant role.</p> Signup and view all the answers

<p>Money has symbolic value due to its perceived relationship to prestige and status.</p> Signup and view all the answers

<p>Agency theory, derived from economic-focused literature on executive compensation, explains the effectiveness of financial incentives by aligning the interests of agents (employees) with those of principals (employers). Incentives help to reduce agency costs, which are the costs of ensuring that the agent acts in the principal's best interests.</p> Signup and view all the answers

<p>The expectancy construct in expectancy theory refers to the perceived probability that a certain level of effort will lead to a particular level of performance. It influences individual motivation by making the performance goal more attractive and increasing the perceived likelihood of success.</p> Signup and view all the answers

<p>According to expectancy theory, individuals are motivated when there is an obvious connection between effort, performance, and outcome. This connection increases the perceived valence and desirability of the outcome, making the individual more likely to choose goals related to performance.</p> Signup and view all the answers

<p>Expectancy theory focuses on the perceived valence and attractiveness of performance goals, while agency theory centers on aligning the interests of agents (employees) with those of principals (employers) to reduce agency costs. Both theories explain the effectiveness of financial incentives but from different perspectives.</p> Signup and view all the answers