Incentives, Performance Measurement Systems and Managerial Effort Allocation
This work tests, through a laboratory experiment, for the association between managerial effort allocation and the interaction between Performance Measurement System and incentive scheme. Factors observed are number of measures of the information system, congruence of incentive with firm’s objectives, comprehensibility of defined incentive, interaction between measure numerousness and incentive congruence.
No association is found between effort allocation and number of measures used, in absence of an incentive (either explicit or implicit), while an association is found between congruence of the incentive and effort allocation and between incentive comprehensibility and effort allocation. Furthermore, interesting effects are found on managerial effort allocation coming from the interaction between numerousness of the measures of the information system and congruence of the incentive scheme.
These results help in designing effective incentive schemes and contribute to systematize the fragmentary and, sometime, conflicting findings of the literature.
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