Designing Wage Contracts in Multi-Goal Organizations

Economic theory has long suggested the use of monetary incentives to motivate workers. In practice, however, public bureaucracies and nonprofit organizations are driven by a broader mission that often involves multiple operational goals, not all of which may translate equally well into measurable indicators. The authors worked with the largest partner of a prominent development organization in Pakistan called the Pakistan Poverty Alleviation Fund (PPAF) and its largest partner National Rural Support Program (NRSP) who share the same mission of reducing poverty. The study was conducted in all thirty five branch offices located in fifteen districts across Sindh, Punjab, and Khyber Pakhtunkhwa provinces, where NRSP was active. These results indicate that both production and cost complementarities are empirically relevant. Finally, the results suggest that financial incentives that crowd out intrinsic motivation can also affect performance by undermining the willingness of motivated employees to work in teams