JOURNAL OF MANAGEMENT ACCOUNTING RESEARCH

Volume Fifteen
2003
pp. 161176

Experimental Evidence on the Links

among Monetary Incentives, Task
Attractiveness, and Task Performance
Nicholas J. Fessler
Abilene Christian University
Abstract: This study reports the results of a laboratory experiment where subjects
performed a complex task under two types of compensation contracts, fixed-wage
and piece-rate. Additionally, all subjects evaluated the attractiveness of the task prior
to learning how they would be compensated during the experiment, and after they
performed the experimental task under their assigned compensation contract. The re-
sults show that when the task was originally perceived as being attractive, piece-rate
compensation led to a significant reduction in the perceived attractiveness of the task
and worsened task performance relative to fixed-wage compensation. When the task
was originally perceived as being unattractive, the form of compensation did not affect
perceptions of task attractiveness or task performance. However, these results did not
hold for a second group of subjects who performed a less complex task.
Keywords: monetary incentives; task attractiveness; performance; task complexity.
Data Availability: Data gathered in this study are available from the author upon
request.

INTRODUCTION

I
ncentive-based compensation is used frequently by organizations to align the interests
of employees with owners (Baker et al. 1988). Management accounting plays a critical
role in a firms incentive compensation system by providing information for evaluating
and rewarding employees. Theoretically, firms employ incentive-based compensation be-
cause individuals derive disutility rather than utility from work activities, per se. Thus,
rewards are necessary to ensure that employees work toward the owners objective of max-
imizing firm wealth (Baiman 1982, 1990).
Recent work, however, suggests that employees derive utility from work activities. For
example, Holmstrom and Milgrom (1991, 3334) posit that a worker on the job may take
pleasure in working up to some limit; incentives are only required to encourage work

This research is based on my dissertation at Indiana University. I am indebted to the members of my dissertation
committee, Joseph Fisher (chair), Laureen Maines, Dennis Organ, and Jamie Pratt, and also to Mark Bagnoli, Jacob
Birnberg, Walt Blacconiere, Alex Butler, George Dreher, Tim Fogarty, Frank Hodge, Pat Hopkins, Ivo Jansen,
Steve Kachelmeier, Jane Kennedy, Marlys Lipe, Joan Luft, Janet Near, David Perkins, Eric Rasmusen, Jerry
Salamon, Geoff Sprinkle, Jonathan Stewart, Nathan Stuart, Pamela Stuerke, Jim Wahlen, Susan Watts, four anon-
ymous reviewers, and workshop participants at Indiana University, the University of Memphis, Washington State
University, the 1999 ABO Conference, the 2000 Management Accounting Conference, and the 2000 AAA Annual
Meeting for helpful comments, encouragement, feedback, and suggestions during this research project. Indiana
Universitys Graduate School, the Kelley School of Business, and the Department of Accounting and Information
Systems provided funding for this project.

161
162 Fessler

beyond that limit. Csikszentmihalyi and LeFevre (1989, 820) report that the most positive
experiences in peoples lives seem to come more frequently from work than from leisure
settings. More recently, Colvin (1998) states, The infotech revolution is steadily taking
away the drudgery of work, the adding of numbers, the typing of data, the reconciliation
of accounts, even the tightening of bolts. Therefore, work activities can be attractive to
employees, and task attractiveness could affect the efficacy of monetary reward systems.
First, performance-contingent compensation may adversely affect an individuals per-
ceptions by turning play into work (e.g., Lepper et al. 1973). In turn, numerous studies
and meta-analyses report that there is a positive correlation between task attractiveness and
job performance (e.g., Judge et al. 2001). Taken together, these two points suggest that
incentive-based compensation can reduce both perceived task attractiveness and task per-
formance. The empirical evidence supporting this proposition, however, is limited (see, e.g.,
discussions by Rummel and Feinberg 1988; Organ 1991).
Prior research has not provided a strong test of the links among incentives, task attrac-
tiveness, and performance. First, prior research has exogenously manipulated rather than
endogenously measured individual perceptions of task attractiveness when examining the
effect of attractiveness on performance (e.g., Jenkins et al. 1998). This is problematic be-
cause task characteristics, such as a tasks attractiveness, are difficult to delineate objectively
(Griffin 1987; Hackman and Lawler 1971). Second, prior research generally has not ex-
amined changes in task attractiveness by utilizing before and after measures of perceived
attractiveness. This is problematic because attitudes toward a task can be changed by per-
formance-contingent compensation (e.g., Tang and Hall 1995). Third, prior research that
has measured task attractiveness has used attractiveness (or changes in attractiveness) as a
dependent variable, but has not followed through to examine the effect of attractiveness on
performance (e.g., Jordan 1986). Finally, prior research has focused on simple tasks that
have an easily identifiable and executable solution; this is problematic because many work
tasks do not have readily identifiable solutions (Kohn 1993).
I test the links among monetary incentives, task attractiveness and performance by
conducting a laboratory experiment that overcomes these limitations by: (1) asking subjects
to self-report their perceptions of task attractiveness, (2) measuring attractiveness before
and after subjects complete the task for compensation, (3) examining how the form of
compensation (fixed-wage, piece-rate) influences changes in task attractiveness and task
performance, and (4) using a task that does not have an easily identifiable solution.
The results indicate that when subjects initially perceived the complex task to be at-
tractive, incentive compensation led to a reduction in perceptions of task attractiveness.
Additionally, there was a positive correlation between perceptions of task attractiveness and
task performance. Finally, when subjects initially perceived the task to be attractive, incen-
tive-based compensation resulted in significantly lower individual task performance than
fixed compensation. Conversely, when subjects initially perceived the task to be unattrac-
tive, incentive-based compensation did not affect perceptions of task attractiveness, nor
influence performance. Thus, perceptions of task attractiveness interact with incentive-based
compensation to influence task performance. Collectively, these results suggest that when
workers perceive a task to be attractive, incentive compensation can reduce such percep-
tions, which, in turn, can worsen task performance.
The next section develops my hypotheses and the third section describes the experi-
mental design. The fourth section analyzes the data and presents the results. The final
section discusses the conclusions.

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Links among Monetary Incentives, Task Attractiveness, and Task Performance 163

THEORY AND HYPOTHESES

Research in accounting and elsewhere has found that monetary incentives often do not
improve individual task performance. For example, recent reviews by Bonner et al. (2000),
Camerer and Hogarth (1999), and Jenkins et al. (1998) report mixed support for a perform-
ance-enhancing effect of incentives. This is also true for individual studies in accounting,
with some research finding positive effects of incentives on task performance (e.g., Libby
and Lipe 1992; Sprinkle 2000), no effect of incentives on task performance (e.g., Awasthi
and Pratt 1990), and negative effects of incentives on task performance (e.g., Ashton 1990).
The association between financial incentives and individual task performance is likely
to be affected by a multitude of factors (Jenkins et al. 1998). One variable proposed to be
an important moderator of the incentives-performance relation is task attractiveness (e.g.,
Bonner and Sprinkle 2002; Deci and Ryan 1985; McGraw 1978). An individuals perception
of task attractiveness represents a subjective attitude toward the task at a particular moment
(Csikszentmihalyi and LeFevre 1989), reflecting the interaction of objective task charac-
teristics with the perceptions of the individual (Hackman and Lawler 1971).
From a practical standpoint, task attractiveness is an important variable to examine
in managerial accounting research because the work environment is changing. Growing
evidence suggests that employees derive positive utility from certain work activities
(Csikszentmihalyi and LeFevre 1989). This extends to the accounting function where, for
instance, Siegel and Sorensen (1999, 9) report that [management accountants] are enthusi-
astic about their work, and there is an air of excitement in the way they describe their
involvement in running the business. Thus, task attractiveness may change the need for,
or effectiveness of, existing managerial accounting and control practices.
For example, if job tasks are perceived as attractive, then the need for effort-motivating
monetary reward systems may be reduced. Research shows that attractive tasks are accom-
panied by a high degree of intrinsic motivation on the part of workers, and that employees
perform attractive tasks in the absence of performance-contingent compensation (e.g., Fabes
et al. 1986; Rummel and Feinberg 1988). Thus, when work activities are perceived as
attractive, fewer organizational resources are needed to control or monitor employees
behavior.
Significantly, research shows that task attractiveness and incentive compensation are
not additive sources of motivation (e.g., Frey and Goette 1999). Furthermore, theory sug-
gests that performance-contingent compensation can undermine task attractiveness as a form
of motivationi.e., intrinsic motivationsuch that extrinsic motivation (in the form of
performance-contingent compensation) crowds out intrinsic motivation (Frey and Jegen
2000, 8). Thus, when individuals perceive an external intervention via performance-
contingent compensation, extrinsic control replaces intrinsic motivation, thereby reducing
task attractiveness.
A recent meta-analysis examining the results of 128 studies (Deci et al. 1999) provides
evidence that contingent rewards reduce task attractiveness when the task originally is
perceived as attractive, although individual studies (e.g., Wiersma 1992) find competing
results. Consistent with Deci et al.s (1999) overall finding, this study expects performance-
contingent compensation to reduce perceived task attractiveness when the task originally is
perceived as attractive. In other words, I predict that individuals who are paid to perform
a task they originally view to be attractive will reduce their perceptions of the tasks
attractiveness and view it more as work than as play (Lepper et al. 1973).
Additionally, activation theory predicts a similar effect of incentive compensation on
perceived task attractiveness (e.g., Gardner and Cummings 1988). Activation theory asserts
that perceived attractiveness is a function of an individuals arousal level (i.e., stress level)

Journal of Management Accounting Research, 2003

164 Fessler

during task performance. Moderate arousal leads to maximum perceived attractiveness,

while either too much or too little arousal leads to reduced attractiveness. Incentive-based
compensation has arousal-increasing properties (Scott 1966). Thus, if an individual finds a
task to be attractive and therefore moderately arousing in the absence of compensation,
paying that individual incentive-based compensation can increase his/her arousal and de-
crease task attractiveness.

H1(a): When subjects perform a task they find attractive, incentive-based compensation
will reduce perceptions of task attractiveness.

Conversely, activation theory asserts that if an individual finds a task to be unarousing

and therefore unattractive (i.e., boring), then incentive-based compensation should increase
subject arousal and perceived task attractiveness.

H1(b): When subjects perform a task they find unattractive, incentive-based compen-
sation will increase perceptions of task attractiveness.

Finally, because fixed compensation has few arousal-increasing properties (Scott 1966),
it is not expected to cause changes in attractiveness.

H1(c): When subjects perform a task they find attractive or unattractive, fixed compen-
sation will have no effect on perceptions of task attractiveness.

Evidence supports an effect of perceived attractiveness on performance. Numerous stud-

ies and meta-analyses report that job satisfaction or job attractiveness is positively
correlated with job performance. Although small (Vroom 1964; Iaffaldano and Muchinsky
1991), the relation is typically positive and significant (Judge et al. 2001).

H2: Subjects perceptions of task attractiveness will be positively associated with their
task performance.

The links hypothesized above suggest that the introduction of incentive-based compen-
sation can lead to changes in perceptions of task attractiveness, and that perceptions of task
attractiveness are likely to be associated with task performance. Thus, the introduction of
incentive-based compensation should lead to changes in task performance (e.g., Yerkes and
Dodson 1908). Because incentive-based compensation is expected to have a negative effect
on task attractiveness when the task is initially viewed as attractive, but a positive
effect on task attractiveness when the task is initially viewed as unattractive, incentive-
based compensation is expected to have similar effects on task performance. That is,
incentive-based compensation is expected to influence performance positively when the task
is initially perceived as unattractive, but negatively when the task is initially perceived as
attractive.

H3(a): When performing a task they find attractive, subjects paid fixed compensation
will outperform subjects paid incentive-based compensation.
H3(b): When performing a task they find unattractive, subjects paid incentive-based
compensation will outperform subjects paid fixed compensation.

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Links among Monetary Incentives, Task Attractiveness, and Task Performance 165

EXPERIMENTAL DESIGN
Ninety-eight undergraduate students at a large state university participated in the ex-
periment. Subjects received course credit and monetary compensation for participation in
the study.
The experimental task involved a paper-and-pencil exercise. Subjects were randomly
assigned to one of two compensation conditions (fixed-wage and piece-rate), with 49 sub-
jects in each condition. All subjects evaluated the attractiveness of the task prior to learning
how they would be compensated for their participation, and once again after they performed
the experimental task. As explained in more detail below, I used the initial task attractive-
ness evaluation to categorize subjects as finding the task either attractive or unattractive.
Using this categorization, I employed the second evaluation of task attractiveness to deter-
mine changes in perceived task attractiveness and I analyzed task performance for subjects
in the attractive and unattractive categories.

Experimental Task
Subjects completed a series of water-jar problems, adapted from Luchins (1942) and
Stedry (1960).1 In a sample water-jar problem (McGraw and McCullers 1979, 287), a
mother sends her son to the well to get exactly 3 liters of water. She gives him a 5-liter
can and an 8-liter can. How can the boy get exactly 3 liters of water using only these
containers? The answer is to fill the 8-liter can, then fill the 5-liter can from the contents
of the 8-liter can, and 3 liters of water will remain in the 8-liter can. Panels A, B, and C
of the Appendix present an example of the experimental instructions, experimental stimuli,
and a list of the 15 water-jar problems employed in this study.

Independent Variables
The manipulated independent variable is the compensation scheme: fixed-wage or
piece-rate. Subjects receiving fixed-wage compensation received $7.00 for participating in
the experiment. Subjects receiving piece-rate compensation received $2.00 for each water-
jar problem they answered correctly. Based on pilot tests, these amounts generated approx-
imately equal pay across compensation schemes.2
The measured independent variable is subjects self-reported perceptions of initial task
attractiveness. This measure is the average of the responses to the scale items shown in
Figure 1 and is similar to the one employed by Scott and Erskine (1980). Responses ranged
in increments of 0.5 from a minimum of 1 (extremely unattractive) to a maximum of 7
(extremely attractive).3
The cutoff points for attractive and unattractive categories should balance predictive
value with adequate sample size. Extremely high attractiveness values should be most pre-
dictive, but with prohibitively small cell sizes. I chose an attractive cutoff value of 4.8,

1
McGraw and McCullers (1979) describe water-jar problems as a problem-solving task, and Bonner et al. (2000,
2526) describe problem-solving tasks as being complex. I use a complex task in this study because the
performance of such tasks is more likely to be degraded by incentive-based compensation than is the performance
of simple tasks (Ashton 1990).
2
Ex post, subjects paid piece-rate compensation earned more than subjects paid fixed compensation ($10.41 versus
$7.00, t 6.028, p .001). However, research by Camerer and Hogarth (1999) supports the assertion that the
magnitude of piece-rate compensation may not significantly influence the observed results.
3
Cronbachs alpha yielded a high measure of internal reliability (alpha .9014).

Journal of Management Accounting Research, 2003

166 Fessler

FIGURE 1
Measure of Task Attractiveness

How would you describe THE TASK?

Neither
one nor
Extremely Quite Slightly the other Slightly Quite Extremely
|----------|----------|----------|----------|----------|----------|

TASK ATTRACTIVENESS
Attractive Repulsive
|----------|----------|----------|----------|----------|----------|

Exciting Dull
|----------|----------|----------|----------|----------|----------|

Good Bad
|----------|----------|----------|----------|----------|----------|

Interesting Boring
|----------|----------|----------|----------|----------|----------|

Superior Inferior
|----------|----------|----------|----------|----------|----------|

Wholesome Unwholesome
|----------|----------|----------|----------|----------|----------|

Fun Tedious
|----------|----------|----------|----------|----------|----------|

Responses are coded from 1 (i.e., Repulsive) to 7 (i.e., Attractive). The resulting measure of task attractiveness
is the simple average across the seven dimensions.

which was higher than the scale midpoint (4.0) and higher than the data mean (4.52) and
median (4.57). This resulted in 38 subjects being categorized as viewing the task to be
attractive, including 20 in the fixed-wage compensation condition and 18 in the piece-rate
compensation condition. The remaining 60 subjects were classified as viewing the task as
unattractive, including 29 and 31 subjects in the fixed-wage and piece-rate compensation
conditions, respectively.

Dependent Variables
The first dependent variable is the change in the perceived attractiveness of the task. I
measured perceived task attractiveness after subjects completed the practice task, but prior
to learning their compensation contract, and again after subjects completed the experimental
task for compensation.
The second dependent variable is task performance, measured as the number of water-
jar problems answered correctly during the 30-minute timed portion of the experimental
session. Subjects could solve as many as 15 problems during that time, although no par-
ticipant correctly completed all of the problems.

Experimental Procedures
Subjects participated in groups of 4 to 22 students, and the experiment lasted approx-
imately two hours. The first part of the experiment involved four steps. First, subjects

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Links among Monetary Incentives, Task Attractiveness, and Task Performance 167

completed a preexperimental questionnaire eliciting background information.4 Second, sub-

jects practiced solving three sample problems with instructions regarding how answers
should be formatted (see Appendix). When subjects had completed all three sample prob-
lems, the administrator checked their work to ensure they knew how to answer the problems
correctly before continuing the experiment. Third, subjects rated the attractiveness of the
task using the scale in Figure 1. Fourth, subjects were informed of their compensation
contract for the experiment. Fixed-wage subjects were paid $7.00 to compensate them for
their time in the experiment; piece-rate subjects were paid $2.00 per water-jar problem
correctly solved.
Subjects completed the preceding steps at their own pace. Once all subjects finished
part 1, the administrator answered any remaining questions and then started part 2 of the
experiment.
In part 2, subjects had 30 minutes to answer as many as 15 water-jar problems.5 The
problems involved three, four, five, or six jars, with easier problems presented first. Due to
the paper-and-pencil nature of the task, subjects could solve the problems in any order they
wished. At the end of 30 minutes, the experimenter instructed subjects to stop working on
the problems. Subjects then completed an additional questionnaire that again elicited the
tasks perceived attractiveness, so that changes in perceived attractiveness could be calcu-
lated. After completing this questionnaire, participants received their cash compensation.

ANALYSIS AND RESULTS

Preliminary Analysis
Subjects paid fixed-wage compensation did not differ from subjects paid piece-rate
compensation in their initial and final perceptions of task attractiveness, changes in per-
ceived task attractiveness, or levels of performance (smallest p .25). Additionally, subjects
paid fixed-wage and piece-rate compensation did not differ on ability (e.g., GPA), general
familiarity and experience with puzzles, personal importance of money, or perceived self-
esteem (smallest p .21). Finally, subjects finding the task to be attractive and those finding
the task to be unattractive did not statistically differ on GPA, general familiarity and ex-
perience with puzzles, personal importance of money, or perceived self-esteem (smallest
p .16). Descriptive statistics for the fixed-wage and piece-rate compensation cells are
presented in Table 1.

Effect of Compensation on Changes in Perceived Task Attractiveness

Hypotheses 1(a), 1(b), and 1(c) predict that 1(a) subjects paid piece-rate compensation
will reduce their perceptions of attractiveness of tasks originally perceived as attractive,
1(b) subjects paid piece-rate compensation will increase their perceptions of attractiveness
of tasks originally perceived as unattractive, and 1(c) subjects paid fixed-wage compensa-
tion will not alter their perceptions of task attractiveness. A significant task attractiveness-
by-compensation condition interaction effect would provide support for H1(a), H1(b), and
H1(c), collectively.

4
The questionnaire collected measures of Familiarity with puzzles, Frequency using puzzles, Personal importance
of money, Perceived self-esteem, Age, Gender, Year in school, Major, Overall college GPA, and Math college
GPA.
5
Calculators were available to all subjects, and 99 percent of subjects reported using them during the experiment.

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168 Fessler

TABLE 1
Descriptive Statistics

Fixed- Piece- Difference t-test for Difference

Variable Wage Rate (FW PR) (two-tailed)
Initial Task Attractiveness 4.44 4.57 0.13 t .834, p .406
Final Task Attractiveness 4.48 4.60 0.12 t .666, p .507
Change in Task Attractiveness 0.41 0.02 0.39 t .164, p .870
Performance 5.63 5.20 0.43 t 1.145, p .255
Familiarity with Puzzles 4.66 4.76 0.10 t .339, p .735
Frequency with Puzzles 3.83 4.09 0.26 t 1.249, p .215
Importance of Money 4.28 4.46 0.18 t .598, p .551
Perceived Self-Esteem 5.08 5.46 0.38 t 1.257, p .212
Age 21.34 21.38 0.04 t .122, p .901
Gender 1.63 1.63 0.00 t .000, p 1.000
Year in School 3.35 3.37 0.02 t .110, p .912
GPA 3.22 3.14 0.08 t .988, p .326
Math GPA 3.21 3.11 0.10 t .745, p .458
Initial Task Attractiveness the mean of the perceived task attractiveness scale completed prior to learning
of pay scheme; values can range from 1 to 7;
Final Task Attractiveness the mean of the perceived task attractiveness scale completed after performing
the experimental task for compensation; scores can range from 0 to 15;
Change in Task Attractiveness the difference between initial and final task attractiveness;
Performance the total number of water-jar problems correctly answered during the 30-
minute experimental session; scores can range from 0 to 15;
Frequency with Puzzles self-reported on a scale of 1 to 7;
Frequency with Puzzles self-reported on a scale of 1 to 7;
Importance of Money self-reported on a scale of 1 to 7;
Perceived Self-Esteem self-reported on a scale of 1 to 7;
Age age in years;
Gender coded as 1 when male, 2 when female;
Year in School coded as follows: 1 Freshman, 2 Sophomore, 3 Junior, 4 Senior, and
5 Graduate student;
GPA self-reported cumulative GPA; and
Math GPA calculated from self-reported math courses taken and grades received.

The pattern of change-in-attractiveness means is partially consistent with the hypotheses

(see Panel A of Table 2). The hypotheses were tested using a two-factor ANOVA with
Compensation condition (fixed-wage and piece-rate) and initial Attractiveness (attractive
and unattractive) as independent variables and change in perceived task attractiveness as
the dependent variable. Panel B of Table 2 shows that the main effect of Attractiveness
(F 3.061; p .083) is marginally significant. However, the interaction of Compensation
and Attractiveness is not significant (F .329; p .568), and the main effect of Compen-
sation (F .131; p .719) is not significant.
Notwithstanding the insignificant interaction, I tested the simple effect of compensation
condition at each level of task attractiveness to address H1(a), H1(b), and H1(c) specifically.
When subjects originally viewed the task as attractive, they marginally reduced their
perceptions of task attractiveness when paid incentive compensation (mean 0.139,

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Links among Monetary Incentives, Task Attractiveness, and Task Performance 169

TABLE 2
The Effect of Compensation and Task Attractiveness
on Changes in Task Attractiveness

Panel A: Change in Mean Task Attractiveness

Fixed- Piece-
Wage Rate
Attractive 0.036 0.139
Unattractive 0.093 0.118

Panel B: ANOVA Summary for the Effect of Compensation and Task Attractiveness on
Changes in Task Attractiveness
Source of Sum of Mean
Variation Squares df Square F-Statistic p-value
Compensation (C) .037 1 .037 .131 .719
Attractiveness (A) .866 1 .866 3.061 .083
CA .093 1 .093 .329 .568
Error 26.588 94 .283
Change in Attractiveness the mean change in the perceived task attractiveness scale, completed prior to
learning the pay scheme, and again after completing the task for compensation;
values can range from 0 to 6;
Compensation 1 under piece-rate compensation; 0 under fixed-wage compensation; and
Attractiveness the mean of the perceived task attractiveness scale completed prior to learning the
pay scheme, values can range from 1 to 7. Scores above 4.8 are classified as
attractive; scores below are classified as unattractive.

t 1.490; p .077 one-tailed).6 This result provides partial support for H1(a). When
subjects originally viewed the task as unattractive, they did not significantly increase their
perceptions of task attractiveness (mean 0.118; t 1.052; p .151 one-tailed). This
result provides no support for H1(b). When subjects were paid fixed-wage compensation,
they did not significantly alter their perceptions of task attractiveness when the task was
initially viewed as attractive (mean 0.036, t 0.463; p .649 two-tailed), or as
unattractive (mean 0.093, t .828; p .414 two-tailed). This result is consistent with
H1(c). In summary, the results provide support for H1(c), partial support for H1(a), and no
support for H1(b).

Task Attractiveness and Performance

Hypothesis 2 predicts that subjects perceptions of task attractiveness will be positively
associated with their task performance. Although perceptions of initial task attractiveness
were not significantly correlated with performance levels (Pearson r .112, p .270;

6
The Sign Test (see Conover 1999) is a nonparametric test of whether the number of increases and decreases (in
perceived task attractiveness) significantly differ from a ratio of 50:50. Results obtained using the Sign Test
provided results that are qualitatively similar to those of the t-tests. Changes in perceptions of attractiveness
occurred only when subjects originally perceiving the task to be attractive were paid incentive compensation,
in which case subjects reduced their perceptions of attractiveness (p .018, one-tailed). No other changes in
perceptions of attractiveness occurred (smallest p .424). These results provide additional support for H1(a)
and H1(c) but not H1(b).

Journal of Management Accounting Research, 2003

170 Fessler

Spearman rho .121, p .121), final perceptions of the tasks attractiveness were sig-
nificantly correlated with levels of performance (Pearson r .291, p .004; Spearman
rho .280, p .005). This result provides support for H2.
Effect of Compensation on Performance
Hypotheses 3(a) and 3(b) predict that subjects paid fixed-wage compensation will out-
perform subjects paid piece-rate compensation when the task is originally perceived as
attractive, but that subjects paid piece-rate compensation will outperform subjects paid
fixed-wage compensation when the task is originally perceived as unattractive. Collectively,
H3(a) and H3(b) predict a significant task attractiveness-by-compensation condition inter-
action effect.
The pattern of performance means is consistent with H3(a) and H3(b) (see Panel A of
Table 3). The hypotheses were tested using a two-factor ANOVA with Compensation con-
dition (fixed-wage and piece-rate) and initial Attractiveness (attractive and unattractive) as
independent variables and task performance as the dependent variable. Panel B of Table 3
presents results demonstrating that the interaction of Compensation and Attractiveness is
significant (F 7.756; p .006). Additionally, the main effects of both Compensation (F
2.947; p .089) and Attractiveness (F 3.628; p .060) are marginally significant.
As explained below, this significance appears to be driven by the high performance of
fixed-wage compensation subjects who perceived the task as attractive (see Panel A of
Table 3).
Given the significant interaction obtained from the ANOVA, I tested the simple effect
of compensation condition at each level of task attractiveness. When subjects perceived the
task as attractive, those paid fixed-wage compensation outperformed those paid piece-rate

TABLE 3
The Effect of Compensation and Task Attractiveness on Performance

Panel A: Observed Performance Means (Number of Problems Correctly Answered)

Fixed- Piece-
Wage Rate
Attractive 6.65 5.00
Unattractive 4.93 5.32

Panel B: ANOVA Summary for the Effect of Compensation and Task Attractiveness on
Performance
Source of Sum of Mean
Variation Squares df Square F-Statistic p-value
Compensation (C) 9.192 1 9.192 2.947 .089
Attractiveness (A) 11.317 1 11.317 3.628 .060
CA 24.190 1 24.190 7.756 .006
Error 293.186 94 3.119
Performance the total number of water-jar problems correctly answered during the thirty minute
experimental session; scores can range from 0 to 15;
Compensation 1 under piece-rate compensation; 0 under fixed-wage compensation; and
Attractiveness the mean of the perceived task attractiveness scale completed prior to learning the pay scheme;
values can range from 1 to 7. Scores above 4.8 are classified as attractive; scores below are
classified as unattractive.

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Links among Monetary Incentives, Task Attractiveness, and Task Performance 171

compensation by an average of 1.65 correctly answered questions, or 33.0 percent (t

2.875; p .003, one-tailed). This result supports H3(a). When subjects initially viewed
the task as unattractive, those paid piece-rate compensation outperformed those paid fixed-
wage compensation by .39 problems, but this difference is not statistically significant (t
0.860; p .197, one-tailed). This finding does not support H3(b).

Additional Experiment
Prior research suggests that performance-contingent compensation is less likely to de-
grade performance on simple tasks than complex tasks (e.g., Bonner et al. 2000; Ashton
1990; McGraw 1978). To assess the robustness of my results to task complexity, I ran a
second (supplemental) experiment in which 94 (new) subjects received the algebraic form
of the solution to each water-jar problem. Having the algebraic solution should transform
the task from one of greater task complexity to one of less task complexity.
Results from this experiment differed from the earlier experiment in the following
ways.7 First, performance on the supplementary task far exceeded that on the original task
(14.7 versus 5.4 problems solved, p .001), and subjects perceived the supplemental task
as less difficult than the original task (3.1 versus 4.5 on a 7-point scale), less complex (3.1
versus 4.2), and less varied (3.7 versus 4.1) (largest p .025). Second, the less complex
task results indicate that piece-rate compensation did not lead to changes in task attrac-
tiveness when the task was initially viewed as attractive (t 0.254; p .802). Third,
performance did not differ significantly between compensation conditions when the task
was viewed as attractive (t 0.331; p .742), or when the task was viewed as unattractive
(t 0.158; p .876). In short, the primary conclusions reported earlier (i.e., the detrimental
effect of incentive-based compensation for attractive tasks) appear to hold only when the
task is relatively complex. Arguably, production in many settings has shifted from mech-
anistic tasks (e.g., production work) to more complex tasks (e.g., design work) such that
the results from the original experiment better reflect these modern production
environments.

CONCLUSIONS
Firms frequently compensate managers based on financial (and nonfinancial) results,
with management accounting information playing an important role in evaluating and re-
warding employees. At a time when firms use of incentive-based compensation continues
to increase (Wall Street Journal 1999), research in accounting, management, and other
disciplines has found that incentive compensation does not always improve task perform-
ance (e.g., Bonner et al. 2000). These findings underscore the importance of identifying
when incentives improve performance (e.g., Sprinkle 2000), when incentives do not improve
performance (e.g., Awasthi and Pratt 1990; Libby and Lipe 1992), and when incentives can
actually degrade performance (e.g., Ashton 1990).
One variable that can potentially influence the effectiveness of incentive-based com-
pensation is task attractiveness (e.g., Bonner and Sprinkle 2002; Kohn 1993; McGraw

7
Results from the second experiment were similar to results from the earlier experiment in the following ways.
First, the less complex (supplemental) task results indicate that piece-rate compensation did not lead to changes
in task attractiveness when the task was initially viewed as unattractive (t 1.247; p .226). Second, fixed-
wage compensation did not cause a change in the perceived attractiveness of the less complex task when it was
initially viewed as attractive (t 1.697, p .107), or when the task was initially viewed as unattractive (t
1.556, p .132). Third, task performance for the less complex task was correlated with final perceived task
attractiveness (Pearson r .269, p .009; Spearman rho .205, p .049).

Journal of Management Accounting Research, 2003

172 Fessler

1978). In this study, I examine the links between incentive compensation and perceived
task attractiveness, between perceived task attractiveness and task performance, and be-
tween incentive compensation and task performance. The results reveal that when an in-
dividual perceives a complex task as attractive, incentive-based compensation leads to a
marginally significant reduction in the perceived attractiveness of the task. Second, I find
evidence of a positive correlation between task attractiveness and task performance. Most
importantly, when the task is perceived as attractive, incentive compensation reduces task
performance relative to fixed-wage compensation. This same pattern of results, however,
does not hold for a less complex task.
This study demonstrates that incentive-based compensation can, under some conditions,
interact with and adversely affect perceptions of task attractiveness and task performance.
Given that production tasks in firms today are often evolving away from assembly line
activities toward mentally challenging and intrinsically interesting tasks, the possibility that
incentive compensation could influence task attractiveness and concomitant task perform-
ance is becoming increasingly important.8 Moreover, firms should use care when using
performance-based rewards for tasks that employees find attractive in the absence of in-
centive compensation, particularly when such tasks are complex in nature, because per-
formance-based compensation can undermine the intrinsic rewards employees derive from
performing attractive and challenging tasks, thereby degrading employee performance.
This study helps to shed insight on why incentive-based compensation can sometimes
be ineffective. In this regard, Bonner et al. (2000) show that the effectiveness of incentive
compensation varies inversely with task complexity; that is, the more complex the task, the
less effective incentive compensation will be at motivating improved task performance. My
findings suggest that task attractiveness is an important variable in the task complexity-
incentive effectiveness relation found in Bonner et al. (2000). Specifically, the inverse re-
lation they observed reflects more than the cognitive difficulty of the task per se (Bonner
and Sprinkle 2002), particularly if complex tasks are more likely to be perceived as attrac-
tive than simple tasks (Deci and Ryan 1985).
This study is subject to several limitations. First, I examine the effect of only two forms
of compensation. These results may not generalize to other forms of compensation such as
budget-based quota schemes and tournament schemes. Second, this study uses only two
tasks, while accountants are interested in the determinants of performance in a variety of
tasks. Thus, the results of this study may not generalize to vigilance and detection tasks,
memory tasks, production and simple clerical tasks, or judgment tasks (Bonner et al. 2000).
Finally, this studys single-period nature contrasts with the repeated nature of most work
tasks, and my results may not generalize to multiperiod settings (e.g., Sprinkle 2000). These
limitations provide possibilities for future research.

8
As an example of evolving tasks, one survey respondent described how a clerical task had changed: Eight
years ago this form would have been torn out and mailed. Five years ago it would have been torn out and faxed.
Today it was scanned in and faxed by computer (Inc. 1995). Similarly, John Challenger, CEO of Challenger,
Gray and Christmas, an outplacement firm in Chicago, states that Were [in the new economy] moving more
toward skills jobs and personal service. Theres big growth in trainers and teachers, people who can teach us
how to cook Japanese food, play tennis, or do physical therapy (as quoted in Joyner 2000). The job performer
is likely to perceive such skills jobs as intrinsically attractive.

Journal of Management Accounting Research, 2003

Links among Monetary Incentives, Task Attractiveness, and Task Performance 173

APPENDIX
Panel A: Experimental Instructions to Subjects Describing the Proper Format for
Answers
Experimental Instructions
Consider a problem like the following: A mother sends her son to the well to get 3
liters of water. She gives him a 5-liter jar and an 8-liter jar. How can the boy get exactly
3 liters of water using only these containers and not guessing the amount?
How? The boy can fill the 8-liter jar with water until it is completely full. Then the
boy can pour water out of the 8-liter jar into the 5-liter jar until the 5-liter jar is completely
full. The boy can now bring his mother exactly 3 liters because that is what is left in the
8-liter jar.
If the 8-liter jar is denoted as A, and the 5-liter jar is denoted as B, then the solution
to this problem can be denoted: A B A, where the volume in jar B is subtracted from
the volume in jar A, and the desired volume of water is left in jar A ( A).
Please put all your answers in this standard form:

ABA

where:

A jar A;
B jar B; and
A the jar containing the desired amount of water.

Remember:
(1) Any single jar can be used many times, but all the water must fit into the jars you
have.
(2) Thus, the volume of water you are using at any point in time can never be larger than
your largest jar, and can never be smaller than zero.
(3) No jar will ever be used more than 9 times.
(4) Solutions may not always require all the jars.
(5) No parentheses ( ) can be used to determine or denote the solutions.

Panel B: An Example of a Water-Jar Problem

Water-Jar Problem #3

Use jars with these measures: To obtain the following amount of water:
A B C GET:
16 23 61 59
Your solution:

Journal of Management Accounting Research, 2003

174 Fessler

Panel C: Summary of the Experimental Water-Jar Problems

To obtain the Jar containing the

Use jars with these following amount desired amount
measures: of water: of water
A B C D E GET: Solution:
PRACTICE: i 8 5 3 AB A
ii 29 3 16 20 A3B A
iii 13 5 27 23 2BA C
iv 31 17 13 8 19 ABDC A

TASK: #1 36 19 12 31 BC A
#2 25 53 13 15 BAC B
#3 16 23 61 59 C3A2B C
#4 9 14 41 79 78 A2BC D
#5 60 47 7 96 66 2B4C D
#6 23 151 53 37 116 B3DAC B
#7 103 53 71 19 56 CB2D C, A
#8 17 31 64 13 32 2BAD C
#9 83 194 281 47 136 AB3D C
#10 113 167 83 31 145 B2CAD B
#11 62 113 157 199 31 DCB2A D
#12 268 127 83 35 167 A4D2CB A
#13 47 239 61 156 208 5A3CD B
#14 157 349 433 234 61 269 CDAB2EC
#15 389 212 96 37 163 176 2E3CB2D A

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