Needs Versus Wants: The Mental Accounting and Effort Effects of Tangible Rewards

The use of tangible rewards to motivate employees is common in North American organizations. However, there is considerable variation regarding the nature of tangible rewards used with some firms offering hedonic items (e.g., wants) and others offering utilitarian items (e.g., needs). We use two stu...

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Bibliographic Details
Published in:Journal of management accounting research 2022-03, Vol.34 (1), p.187-207
Main Authors: Mitchell, Timothy, Presslee, Adam, Schulz, Axel K-D., Webb, R. Alan
Format: Article
Language:English
Subjects:
Accounting
Human resource management
Incentives
Motivation
Rewards
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Summary:The use of tangible rewards to motivate employees is common in North American organizations. However, there is considerable variation regarding the nature of tangible rewards used with some firms offering hedonic items (e.g., wants) and others offering utilitarian items (e.g., needs). We use two studies to examine the effects of tangible reward nature on employee mental accounting and effort. In Study 1, consistent with predictions, we find that hedonic tangible rewards are mentally accounted for separately from utilitarian tangible rewards, and that hedonic tangible rewards are more likely categorized separately from regular earnings than are utilitarian tangible rewards. In Study 2, as predicted, we find hedonic tangible rewards lead to greater effort than utilitarian tangible rewards. Collectively, results from our two studies demonstrate the motivational benefits of offering performance-based hedonic tangible rewards rather than utilitarian tangible rewards and offer new insights regarding the mental accounting mechanisms underlying these effects. Data Availability: Data are available on request. JEL Classifications: C91; M41; M52.
ISSN:1049-2127
1558-8033
DOI:10.2308/JMAR-2019-505