Incentives, Peer Pressure, and Behavior Persistence

Abstract

Organizations often introduce temporary incentive programs with a view of establishing long lasting behaviors. Monetary payoffs are awarded upon achievement of team goals, which measure the success of the initiative. In this study I explore whether and how organizational behavior modifications introduced via temporary incentive programs persist beyond the incentive period. In many cases, achieving team goals requires the cooperation of members of the organization external to the team and not eligible to receive the monetary award. In this study I compare the persistence of behavior modifications between subjects rewarded with a monetary award with subjects that are exposed uniquely to peer pressure. Using hand hygiene performance data from a California hospital, I find that monetary incentive are associated with higher likelihood and greater magnitude of performance improvements during the incentive period, but are relatively short lived, while implicit incentives facilitate a longer persistence of the organizational behavior modification.

Keywords: Organizational Behavior Modification, Peer Monitoring, Persistence of Performance Improvements, Crowding Out, Implicit Incentives, Compensation, Healthcare

JEL Classification: I12, M4, M12, M14, M52