Abstract

http://ssrn.com/abstract=1658642
 
 

References (26)



 


 



Using Relative Performance Information in Complex Tasks


Timothy Charles Miller


Xavier University - Department of Accountancy

W. Timothy Mitchell


University of Waterloo

Sean A. Peffer


University of Kentucky - Gatton College of Business and Economics

February 15, 2013


Abstract:     
Companies commonly use income as the basis for short-term incentives designed to motivate performance. Managing income is a complex task, particularly in multi-period settings. Strategy development is necessary to maximize income in a complex task, and requires trade-offs between current and future periods. In addition, Relative Performance Information (RPI) is often provided, or available as feedback, to motivate performance. While firms have the option of taking the additional step and contracting on RPI, many do not. We separately investigate how providing RPI and contracting on RPI affect strategy development in a multi-period experimental setting where income is the basis for short-term incentives. The results show that only providing RPI reduces strategy development and performance. However, contracting on RPI mitigates these effects. Our results suggest a potential cost to this ‘middle ground’ between eliminating RPI and contracting on RPI. We conclude that employers incenting their managers to maximize income in a multi-period setting should avoid the dissemination of RPI as ex post information only.

Number of Pages in PDF File: 33

Keywords: Strategy development, learning, comparative feedback, goals, rank-order tournaments

JEL Classification: M40, M46


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Date posted: August 14, 2010 ; Last revised: January 17, 2016

Suggested Citation

Miller, Timothy Charles and Mitchell, W. Timothy and Peffer, Sean A., Using Relative Performance Information in Complex Tasks (February 15, 2013). Available at SSRN: http://ssrn.com/abstract=1658642 or http://dx.doi.org/10.2139/ssrn.1658642

Contact Information

Timothy Charles Miller
Xavier University - Department of Accountancy ( email )
United States
William Timothy Mitchell (Contact Author)
University of Waterloo ( email )
Waterloo, Ontario N2L 3G1
Canada
5198884567 x38084 (Phone)
Sean Peffer
University of Kentucky - Gatton College of Business and Economics ( email )
Lexington, KY 40506
United States
606-257-3149 (Phone)
606-257-3654 (Fax)
Feedback to SSRN


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