George Akerlof, Rachel Kranton

People respond almost too well to monetary incentives. That is, ‘firms get what they pay for’, but since these schemes cannot be targeted well, what firms get is often not what they want.

If an organization is going to function well, it should not rely solely on monetary compensation schemes. The ability of organizations to place workers into jobs with which they identify and the creation of such identities are central to what makes organizations work. Research shows that production is enhanced when organizations hire workers who share the organization’s mission, and that an employee who identifies himself as ‘an insider’ in an organization needs little monetary inducement to perform his job well.

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