Lots of companies give out bonuses at the end of January. Researchers at Tilburg University wanted to know if these bonuses really make a difference in today’s workplaces, where teams have to solve tricky problems together. Turns out, bonuses do work well and boost performance in this kind of setting by helping good leaders emerge.

Working together as a team, especially when it involves thinking analytically, has become a big deal in recent decades. In the old days, before the 1970s, most people did repetitive tasks on their own. Now, we often work in teams, like a group of tech specialists or consultants, tackling problems and thinking creatively within tight deadlines. Bonuses play a crucial role in making sure teams work smoothly and perform at their best in today’s work world.

The right incentive

“Previous research has suggested that financial incentives are not effective in tasks that require creative thinking, but these claims were based on thin evidence from very artificial laboratory settings,” the researchers explain. “We now wanted to systematically find out what the causal effects of incentives are and if, in fact, they do work.”

The researchers discovered that bonuses really work well—they make teams complete tasks much faster. Importantly, it’s not just about setting ambitious goals; the money incentive itself plays a big role.

The study also highlighted an interesting finding about leadership. Teams tend to seek more leadership when there’s a chance to earn a bonus. In a follow-up study, they found that encouraging teams to choose a leader has a similar positive effect. So, it seems like bonuses not only make teams more organized but also help a leader emerge naturally.

A good strategy

“Our research shows, contrary to previous research, that incentives do work in tasks that require creative thinking,” the researchers explain. “And they underscore the importance of leadership, which we did not expect to play such a crucial role.”

They argue that companies can use their findings to better design the incentive packages they offer to employees. The findings suggest that team bonuses can indeed boost performance.

“Since we don’t observe detrimental effects (such as reduced excitement for the task), bonuses can be a powerful tool to enhance output,” they conclude.