Motivational Effects of Linking Incentives to Different Measures in Strategic Performance Measurement Systems: Implications for Proactive Strategic Behavior

Advances in Management Accounting

ISBN: 978-1-78052-754-3, eISBN: 978-1-78052-755-0

ISSN: 1474-7871

Publication date: 3 May 2012

Abstract

The present research examines the effect of incentivizing both outcome and driver measures of SPMS on middle managers' proactivity in influencing the strategy formulation process. A case-based experiment was conducted among 74 full-time employees. The results suggest that when incentives are linked to both outcome and driver measures of SPMS, compared with when they are outcome-based and not linked to the SPMS, managers are more proactive in communicating strategy-related issues to top management. In addition, this effect of SPMS-based incentives on middle managers' proactivity is mediated by their autonomous extrinsic motivation to achieve strategic goals. The results are in general consistent with postulates of the self-determination theory of motivation. This chapter also has practical implication. Specifically, recent evidence suggests that most SPMS adopters fail to validate causal business models underlying their formulated strategies (Ittner, 2008; Ittner & Larcker, 2003, 2005). Middle managers' proactive strategic behavior may be one means to prompt top management to inspect formulated strategies and their underlying business models.

Keywords

Citation

Guo, L., Wong-On-Wing, B. and Lui, G. (2012), "Motivational Effects of Linking Incentives to Different Measures in Strategic Performance Measurement Systems: Implications for Proactive Strategic Behavior", Epstein, M.J. and Lee, J.Y. (Ed.) Advances in Management Accounting (Advances in Management Accounting, Vol. 20), Emerald Group Publishing Limited, Bingley, pp. 209-240. https://doi.org/10.1108/S1474-7871(2012)0000020015

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Emerald Group Publishing Limited

Copyright © 2012, Emerald Group Publishing Limited

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