Scrimping on incentives and other false economies

Reading Michael Sandel‘s What Money Can’t Buy – subtitled The Moral Limits of Markets –  has made me reflect on researchers‘ attitudes to the ‘incentives‘, as we call them in the UK, that we pay to research participants. At the risk of now being bombarded by offers of participation in my projects from the entire sentient population, I’m one who believes in paying more rather than less to participants. Sandel’s book shows the folly of looking too much to the monetary incentive as a motivator – as it can backfire. But it also suggests that when you are in the world where monetary reward is expected, paying well gets better outputs. You pay peanuts, you get monkeys, as the old saying goes.

Sandel is interested in how monetising certain activities can actually change our attitudes towards them. One fascinating example he cites is of the Israeli day care centre that wanted to stop parents turning up late to collect their kids. It introduced a system of fines for late pick-ups, expecting parents would get their acts together in the face of losing money over it, not to mention the embarrassment of being fined. But guess what, it had the opposite effect: late pick-ups actually increased. Parents started to see the fine as a price they could pay to collect their kids late and so it became just another transaction. The fine suggested to errant parents that the day care centre was covering its costs in this matter and that the staff expected to have to stay open late for tardy parents – and so those parents felt less guilty and carried on or even increased their lateness. (On another behavioural economics point, the day care centre was also indicating to late parents that turning up late, while undesirable, must be fairly common – thus unwittingly giving parents a ‘social norming‘ reason to persist in this behaviour.)

But it was another of Sandel’s examples of the change wrought by introducing a monetary element into a relationship that made me think of qualitative research incentives. A 2000 study by Uri Gneezy and Aldo Rustichini showed that poor incentives lead to less commitment to a task than good incentives, as you might expect (but also that, where the task is one people could be persuaded to do out of the goodness of their hearts, giving no monetary incentive works best of all.) Gneezy and Rustichini took three groups of Israeli secondary school pupils who were to collect charity donations door to door and put them in competition to see which group collected the most. Group 1 was given a motivational speech but no monetary incentive; group 2 was told it would receive a 1% bonus of whatever it raised (from a different pot); and Group 3 was offered 10%. Group 1 did best by some margin, then Group 3, then Group 2.

In the commercial and even public sector research worlds, we rarely have tasks we can ask people to do for free and expect them to be motivated to do it, with the exception of a limited amount of research among supporters of political causes or voluntary groups. But the example also showed that if you’re paying people, paying them a bit more does indeed get more out of them than paying badly. Those paid a little were much less motivated than people paid nothing at all.

As Richard Gush of Sundance said in the latest In Brief (the AQR’s regular publication), where he had the experience of being a discussion group participant during a training course, we do ask a lot of our participants these days: humouring our sometimes bizarrely angled questioning and giving up a good four hours of their day. Don’t get me wrong, most agencies pay appropriate incentives most of the time, but I do sometimes come across projects where incentives have been stripped down to the minimum necessary to get people into the room. It puts the whole project – involving a much bigger investment – at unnecessary risk. It also creates hidden costs – the extra effort recruiters have to put in but can’t charge for, the extra time and thought the researcher has to put into managing the recruitment as a result, but also can’t charge for (because inevitably, the budget on these projects is tight).

Of course it would be silly and irresponsible to pay out more than is necessary. But when calculating what is necessary, the question to ask is not, “What’s the minimum that will get eight people to show up on time?”, but “What’s the minimum to get them to show up on time and feel relaxed and positive about their involvement?” (and therefore generate richer qual data). Of course the money we pay is only part of creating that mood – the recruiter’s and moderator’s ability to make people feel part of something interesting and valuable is crucial – but scrimping on the incentives jeopardises the quality of the inputs and therefore outputs of a qualitative research project.

D. Cam’s Big Society idea is built, in a way, upon the same insight Sandel has made. It is about people doing activities more productively (and of course more cheaply) when they do them on a voluntary basis than when they are paid to do them. There is a lot of sense in trying to encourage and grow those useful activities which people do for each other voluntarily. The problem is though in relying on these to get services delivered which should really be done by properly paid and trained professionals. This is why there has been so much cynicism about the Big Society: it risks leaving some public services to the vicissitudes and inevitable patchiness of spontaneous public spirited activity. Volunteers are often very motivated, but relying on volunteers – as one major charity client I have worked with has attested – places big limits on what you can do organisationally. Because their labour is voluntary, it inhibits managers from asking them to do new or difficult things. It’s great to make use of the grass roots energy; but directing it towards efficient ends becomes a big challenge.

Sandel’s main thrust is against marketising areas of public life where social and ethical concerns should prevail – like organ donation, migration policy, controlling carbon emissions – because ‘market norms’ then crowd out social and ethical ones and encourage people in behaviours that are ultimately highly damaging. His point about incentives is really that introducing money into a relationship where it is not needed can be counter-productive. But where you are in an area where payment is needed to make the activity happen as you want it, then pay properly. The living wage campaign is gathering momentum just now in the UK – “Observer 20th Jan, 2013: Living Wage Zones”. There is some interesting counter-austerity thinking going on now that suggests tackling low pay in this way could have big benefits for both reviving the economy and reducing the benefits bill (because government effectively ends up paying out in benefits to working people because their employers have slipped into paying lower and lower salaries in real terms). Labour and the Lib Dems are both very interested and it will be interesting to see if the Conservatives adopt it too. A lot of bigger businesses are already signed up including, tellingly, most of the big accountancy firms like KPMG and Deloitte (one assumes they’ve done the numbers) and the ‘Magic Circle’ law firms, including my former employer Slaughter and May: Living Wage: List of Accredited Employers. And if the living wage argument convinces them, there really is hope for it (no bitter irony intended …)

Related articles

• Incentives & creativity (stumblingandmumbling.typepad.com)
• Report: Cameron’s big society is being thwarted by outsourced public services (guardian.co.uk)
• Flourishing of ‘big society’ in Barnet raises major legal questions for councils (guardian.co.uk)
• the incentive driven opinion (spreadinformation.wordpress.com)