The Effect of Relative Performance Information on Performance and Effort Allocation in a Multi-Task Environment

Posted: 18 Aug 2010 Last revised: 3 Oct 2012

See all articles by R. Lynn Hannan

R. Lynn Hannan

Tulane University - A.B. Freeman School of Business

Gregory P. McPhee

Clemson University

Andrew H. Newman

University of South Carolina

Ivo Tafkov

Georgia State University

Date Written: July 26, 2012

Abstract

This study investigates how relative performance information (RPI) affects employee performance and allocation of effort across tasks in a multi-task environment. Based on behavioral theories, we predict that the social comparison process inherent in RPI induces both a motivation effect that results in increased effort as well as an effort distortion effect that results in the distortion of effort allocations across tasks away from the firm-preferred allocations. We also predict that both effects are magnified when the RPI is public compared to private. We argue that although the motivation effect will generally benefit performance, the effort distortion effect may be detrimental to performance. We design an experiment that isolates these two effects. Consistent with our predictions, we find that RPI induces both motivation and effort distortion effects and that both effects are magnified when the RPI is public rather than private. Although the motivation effect increases performance, we demonstrate that the effort distortion effect can decrease performance. By isolating the motivation and effort distortion effects, our study provides insights into the costs and benefits of RPI in a multi-task environment. As such, it informs accountants regarding the design of information systems and when tasks should be aggregated or disaggregated across employees.

JEL Classification: M40, M46

Suggested Citation

Hannan, Rebecca Lynn and McPhee, Gregory P. and Newman, Andrew H. and Tafkov, Ivo, The Effect of Relative Performance Information on Performance and Effort Allocation in a Multi-Task Environment (July 26, 2012). Accounting Review, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1660184 or http://dx.doi.org/10.2139/ssrn.1660184

Rebecca Lynn Hannan (Contact Author)

Tulane University - A.B. Freeman School of Business ( email )

6823 St Charles Ave
New Orleans, LA 70118
United States

Gregory P. McPhee

Clemson University ( email )

School of Accountancy
300 Sirrine Hall
Clemson, SC 29634
United States

Andrew H. Newman

University of South Carolina ( email )

Columbia, SC
United States

Ivo Tafkov

Georgia State University ( email )

35 Broad Street
Atlanta, GA 30303-3083
United States

Register to save articles to
your library

Register

Paper statistics

Abstract Views
1,811
PlumX Metrics