Behavioral Economics for Leaders

CHAPTER 36Team Bonuses Motivate Employees to Work Harder—and to Help Each Other More

When it’s impossible or demands too much effort to measure individual work performance, companies like to make bonus payments for the entire team. They’re intended to give all team members an incentive to work more and work better. Does it work? This example of a bakery chain provides an answer to the question.

On his way to the office in the morning, Peter, a Frankfurt‐based banker, wants to quickly buy a sandwich for his lunch break. He’s glad to see the line of customers at the bakery shop is short and he’ll be served quickly. He arrives at the office before his boss, who places great value that people in her department start working before she does. Peter noticed for some weeks now that the lines at the bakery shop have become far shorter than in the past. Still, he sees the same faces every morning. So the reason for the shorter lines cannot really be a loss of customers. Nor are there more people working at the shop. And the staff has not been replaced by new people who might be more qualified because Peter has known most of the shop employees ever since he began working for the renowned bank more than a year ago. Without spending more thought on the shorter waiting times, he takes his sandwich, pays for it, and hurries to his bank, where he will certainly arrive before his boss.

My Cologne‐based colleague Matthias Heinz, whose research focuses on human resource questions, published with ...