Do Financial Incentives Always Improve Performance?

manager showing financial graph
Topic(s): Job Design, motivation, performance
Publication: Journal of Applied Psychology (2021)
Article: Do Financial Incentives Help or Harm Performance in Interesting Tasks?
Authors: J.H. Kim, B. Gerhart, M. Fang
Reviewed by: Josie Anker

Do financial incentives lead to increased performance on interesting tasks? Early research concluded that financial incentives are helpful for performance, regardless of whether the task at hand is interesting or not. However, later research demonstrated that while financial incentives helped performance on non-interesting tasks, they hurt performance on interesting tasks by undermining motivation. These conflicting findings highlight the need for an updated study to settle this important question.


To provide more insight into this debate, researchers (Kim et al., 2021) conducted a meta-analysis (or statistical combination) of many previous studies that measured the link between financial incentives and performance on interesting and non-interesting tasks. The researchers found that financial incentives are related to better performance on both interesting and non-interesting tasks. Further, this result held regardless of the intensity of the incentive, how motivation-driven performance is, or amount of autonomy.

Additionally, the results show that the relationship between financial incentives and performance is weaker when performance is measured by quality (as opposed to quantity), especially on interesting tasks.


The results of this study suggest that financial incentives are typically helpful for performance, regardless of whether the task at hand is interesting or not. Organizations may benefit from offering their employees financial incentives for all tasks, without having to worry about financial incentives undermining motivation and performance. 

That being said, organizations should also realize that financial incentives may be more beneficial for performance that is measured by quantity as opposed to quality, and this is especially true of interesting tasks. Organizations should keep these findings in mind when designing or updating compensation systems.


Kim, J. H., Gerhart, B., & Fang, M. (2021). Do financial incentives help or harm performance in interesting tasks? Journal of Applied Psychology. Advance online publication.