Download this Paper Open PDF in Browser

The Performance Implication of Goal Achievability in Incentive Contracts and Feedback

26 Pages Posted: 15 Jan 2013 Last revised: 18 Jan 2013

Yasheng Chen

Simon Fraser University (SFU) - Beedie School of Business

Johnny Jermias

Simon Fraser University (SFU) - Beedie School of Business

George Lee

Simon Fraser University (SFU) - Beedie School of Business

Date Written: January 14, 2013

Abstract

This study investigates the performance feedback and goal achievability in incentive effects on employees’ effort and performance. We perform an experiment to examine whether the use of goal-specific feedback and incentive contracts have an interaction effect on task performance. Using the Mirametrix S2 eye tracking device to measure the level of effort, we find that the feedback effect on effort depend on goal achievability specified in the incentive contract. Specifically, we find that when employees are contracted based on achievable goals, feedback decreases their level of effort. By contrast, when employees are contracted based on more challenging but attainable goals, feedback increases their level of effort. Furthermore, we find that the level of effort has a significant positive impact on task performance. These findings have important implications for the design of control and compensation systems in organizations that aim for a higher employees’ performance.

Keywords: task performance, incentive contract, feedback, experiment, forward-looking measure, contemporaneous measure, eye tracking

Suggested Citation

Chen, Yasheng and Jermias, Johnny and Lee, George, The Performance Implication of Goal Achievability in Incentive Contracts and Feedback (January 14, 2013). CAAA Annual Conference 2013. Available at SSRN: https://ssrn.com/abstract=2200275 or http://dx.doi.org/10.2139/ssrn.2200275

Yasheng Chen

Simon Fraser University (SFU) - Beedie School of Business ( email )

8888 University Drive
Burnaby, British Colombia V5A 1S6
Canada
604-291-4485 (Phone)
604-291-4920 (Fax)

HOME PAGE: http://www.sfubusiness.ca

Johnny Jermias

Simon Fraser University (SFU) - Beedie School of Business ( email )

8888 University Drive
Burnaby, British Colombia V5A 1S6
Canada
604-291-4257 (Phone)
604-291-4920 (Fax)

George Lee (Contact Author)

Simon Fraser University (SFU) - Beedie School of Business ( email )

8888 University Drive
Burnaby, British Colombia V5A 1S6
Canada

Paper statistics

Downloads
112
Rank
208,919
Abstract Views
671