Motivating Unrewarded Task Performance: The Dual Effects of Incentives and an Organizational Value Statement in a Discretionary Task Setting

Abstract

Contemporary management accounting research increasingly recognizes the interactive nature of management controls when considered as a package such that informal controls may either sustain or circumvent formal controls. The complexity of these packages of controls is heightened in multiple task settings which are increasingly the norm. Firms develop formal controls, often in the form of incentive contracts, to motivate employees to exert effort on certain tasks that are objectively specifiable and measurable, and to align employees’ interests with those of the organization. Nonetheless, incentive contracts rarely govern all of the employees’ responsibilities as management often cannot foresee all important tasks and effort on some tasks may be difficult or very expensive to measure. Extant research suggests informal controls, implicit structures adopted by management to align employees’ actions with organizational goals, also play an important and complementary role in motivating employee effort. Informal controls that are congruent with formal controls can effectively integrate with financial incentives in a multitask setting to achieve performance objectives, however, informal controls that are not in alignment on a given task may impede the viability of formal controls (Kachelmeier et al., CAR, 2016; Akinyele et al., BRIA, 2020). Frequently, formal controls actually create disincentives for employees to complete discretionary tasks that contribute in aggregate to the efficient and effective functioning of an organization (Organ et al., Organizational Citizenship, 2005). The purpose of this study is to examine how the presence of a value statement (an informal control) alters the effect of differing financial incentives (a formal control) in an environment consisting of both rewarded and unrewarded tasks. Results show that under fixed pay, the presence of a value statement motivates performance on important but unrewarded discretionary tasks. Conversely, under piece-rate compensation, value statements negatively influence performance on unrewarded discretionary tasks. In contemporary work environments where such discretionary tasks are common and important to organizational effectiveness, these results suggest that informal controls can have an important role in performance outcomes.

Keywords: informal management control systems, incentive compensation schemes, organizational value statements, unrewarded task performance, social norm activation, organizational citizenship behavior, discretionary task.

JEL Classification: M14, M41, M52