The Determinants of Incentive Intensity in Group-Based Rewards

Highly incentive intensive rewards have been linked both theoretically and empirically to higher effort. Nonetheless, historically the incentive intensity of individual rewards has been quite modest in most hierarchies. In an effort to escalate the incentive intensity of rewards, managers have increasingly implemented pay systems which reward individuals for group performance. While the determinants of incentive intensity for individual rewards have been widely examined, the determinants of incentive intensity for group- based rewards remain unexplored. In this paper, we draw upon literature in economics and social psychology to develop a theory of the determinants of incentive intensity in group rewards. Our derived hypotheses are tested using data from a large sample of 663 group pay plans in the US private sector.

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