The Effects of Reward Type on Employee Goal Setting, Goal Commitment and Performance

47 Pages Posted: 10 Aug 2010 Last revised: 8 Mar 2013

See all articles by Adam Presslee

Adam Presslee

University of Waterloo - School of Accounting and Finance

Thomas W. Vance

Colorado State University, Fort Collins - Department of Accounting

Alan Webb

University of Waterloo - School of Accounting and Finance

Date Written: October 31, 2012

Abstract

The use of tangible rewards in the form of non-cash incentives with a monetary value has become increasingly common at organizations (Peltier, Schultz and Block 2005). Despite their use, the behavioral and performance effects of tangible rewards have received minimal research attention. Relative to cash rewards, we predict tangible rewards will have positive effects on goal commitment and performance but will lead employees to set easier goals, which will negatively affect performance. The overall performance impact of tangible rewards will depend on the relative strength of these competing effects. We conduct a quasi-experiment at five call centers of a financial services company. Employees at two locations earned cash rewards for goal attainment while employees at three locations earned points, with equivalent retail value to cash rewards, redeemable for merchandise. Results show that cash rewards lead to better performance through their effects on the difficulty of the goals employees selected. Implications for theory and practice are discussed.

Keywords: goals, tangible rewards, performance

JEL Classification: M12, M41, M52

Suggested Citation

Presslee, Adam and Vance, Thomas W. and Webb, Alan, The Effects of Reward Type on Employee Goal Setting, Goal Commitment and Performance (October 31, 2012). Accounting Review, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1656517 or http://dx.doi.org/10.2139/ssrn.1656517

Adam Presslee

University of Waterloo - School of Accounting and Finance ( email )

Waterloo, ON
Canada

Thomas W. Vance

Colorado State University, Fort Collins - Department of Accounting ( email )

256 Rockwell Hall
Fort Collins, CO 80523
United States

Alan Webb (Contact Author)

University of Waterloo - School of Accounting and Finance ( email )

200 University Avenue West
Waterloo, Ontario N2L 3G1 N2L 3G1
Canada

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