The Effects of Performance Measurement and Compensation on Motivation: An Empirical Study
De Economist, Vol. 153, No. 3, 2005
Tinbergen Institute Discussion Paper No. 03-048/3
36 Pages Posted: 19 Aug 2003 Last revised: 31 Oct 2014
Date Written: June 1, 2003
Abstract
The design and implementation of a performance measurement and compensation system can strongly effect the motivation of employees. Building on economic and psychological theory this study develops a conceptual model that is used to empirically test this effect. We find that the employee's perception of the compensation system influences the motivation of agents. Our survey results demonstrate a significant positive relationship between the perceived characteristics of the compensation system and extrinsic motivation. Intrinsic motivation is not affected by the design of the monetary compensation system, but is affected by promotion opportunities. The compensation system also significantly affects other indicators of motivation, namely work satisfaction and turnover intent. Further research could extend these results by investigating the relationship between extrinsic and intrinsic motivation on the one hand and individual and company performance on the other.
Keywords: Performance measurement, Compensation, Promotions, Intrinsic Motivation, Extrinsic Motivation
JEL Classification: J41, J33
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Enriching a Theory of Wage and Promotion Dynamics Inside Firms
By Robert S. Gibbons and Michael Waldman
-
Enriching a Theory of Wage and Promotion Dynamics Inside Firms
By Robert S. Gibbons and Michael Waldman
-
Monitoring Costs and Occupational Segregation by Sex: an Historical Analysis
-
Home Production, Market Production and the Gender Wage Gap: Incentives and Expectations
By Stefania Albanesi, Claudia Olivetti, ...
-
A Theory of Trade Secrets in Firms
By Jan Zabojnik
-
Corporate Tournaments, Human Capital Acquisition, and the Firm Size-Wage Relation
By Jan Zabojnik and Dan Bernhardt
-
Envy, Comparison Costs, and the Economic Theory of the Firm
By Jackson A. Nickerson and Todd Zenger