Money and Motivation - A study about monetary incentives and their effect on motivation and performance

Sammanfattning: This essay examines how eight identified negative effects influence the perceived motivation and performance of employees as a result of the current efficacious monetary incentive system. Through a multiple case study based on a qualitative research method, eight semi-structured were conducted. Afterwards the interviews were compiled in a database and analyzed. Both an inductive and deductive approach have been used in different parts of the thesis. We have reviewed a variety of theoretical perspectives with background in economics, such as the agency theory, as well as several theories within the psychosocial context regarding motivation and performance to generate a deeper understanding in connection to monetary incentive systems. The given theories and the previous research executed within the area will be used as a basis for further analysis and to explain the identified results and relation identified in our study. As our objective was to examine monetary incentive, one of the key factors was that such systems were currently implemented within the chosen companies. In addition, another important requirement was that the human capital would be one of the more important assets to the firm. Therefore we concluded that the two chosen companies appeared as relevant candidates. Selected were four people from each company. The essay concludes that five of the identified negative effects affected the perceived motivation and performance, whereof one effect needed further complementing to indicate its real effect. Two of the negative effects did not result in empirical evidence but could not be dismissed without further studies and one effect was completely dismissed. The given effect proved to be greatest on the perceived motivation as the performance was not as strongly connected to the monetary incentives and can be kept high altough a decrease in motivation.