XAT 2011 Question 29

Question 29

The motivation of human beings towards their work is a subject matter that is at once a simple as well as an extremely complicated matter. For a long time, economists, sociologists, as well as psychologists believed that a carrot and stick approach, with monetary incentives playing the role of the carrot, would be sufficient to goad employees towards achieving higher levels of performance. However, a number of recent studies and observations, especially dealing with the open source revolution are placing on the table strong evidence suggesting that monetary incentives are only one part of the entire story of motivation through incentives. In a study conducted by a group of researchers at MIT, it was found that monetary incentives work well only in respect of tasks requiring mechanical skills i.e. those tasks not requiring much use of higher level cognitive abilities (such as memorizing or problem solving). In fact their study showed that setting high monetary incentives for tasks requiring cognitive abilities were more likely than not to produce adverse outcomes. Since this result flew straight in the face of the widely accepted body of knowledge on employee motivation, they conducted multiple experiments in different settings and countries to ensure that it was not a one - off result. The findings were the same in all repetitions of the experiment. These studies appear to suggest that monetary incentives need to be provided only to such an extent as to take the minds of employees off the issue of money and focus on other issues that are necessary to get the job done right. For instance, some experiments have shown that greater autonomy to employees and lowered interference from management (and bosses) is successful in driving the performance of employees working in cognitive skill intensive jobs.

Identify the statement(s) that is (are) logically consistent with the con tent of the paragraph

i. The carrot - stick approach essentially requires the use of rewards to get more of a desired behaviour whereas penalties lead to increased undesirable behaviour.
ii. Expending time and effort on the design of monetary incentives is a wasteful exercise.
iii. The study by the group of MIT researchers was a flawed exercise from the start.
iv. There appears to be a need to reorient the existing paradigm prevalent in incentive design.
v. During the process of designing incentives, one should clearly delineate activities into those requiring mechanical skills and those requiring higher - level cognitive skills and design with separate sets of incentives and penalties for each.


The paragraph states that though monetary incentives are necessary for an employee, the importance of motivations such as greater autonomy cannot be overstated.
Hence, option E is the correct answer.

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