Performance Standard Horizons, Uncertainty, and Effort Provision

68 Pages Posted: 11 Jan 2017

See all articles by Vic Anand

Vic Anand

University of Illinois at Urbana-Champaign - Department of Accountancy

Date Written: January 3, 2017

Abstract

A performance standard’s horizon is the time given to achieve the standard. Horizons vary considerably in practice, and the goal-setting literature provides mixed evidence on whether short or long horizons are more effective at eliciting effort from workers. I predict and find that uncertainty in workers’ effort-performance relationship moderates the effect of horizon on effort. Horizon and uncertainty affect expectancy (probability of standard attainment) which in turn determines effort. In an experiment in which the rate of effort needed to achieve the standard was held constant, participants facing low uncertainty decreased effort as horizon increased. However, those facing high uncertainty increased effort as horizon increased. These findings are consistent with the expectancy-based predictions, and suggest that managers should jointly determine the level and horizon of performance standards. These findings also provide potential explanations for the variation in horizons observed in practice and for the mixed findings in the goal-setting literature.

Keywords: Performance Standards, Goals, Uncertainty, Expectancy, Effort

JEL Classification: C91, D81, J33, M41, M52

Suggested Citation

Anand, Vikrant, Performance Standard Horizons, Uncertainty, and Effort Provision (January 3, 2017). Available at SSRN: https://ssrn.com/abstract=2896912 or http://dx.doi.org/10.2139/ssrn.2896912

Vikrant Anand (Contact Author)

University of Illinois at Urbana-Champaign - Department of Accountancy ( email )

1206 South Sixth Street
Champaign, IL 61820
United States

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