Determinants of Performance Measure Choices in Worker Incentive Plans

Ittner, Christopher D.; Larcker, David F.

doi:10.1086/338674

Cited by 99 publications

(38 citation statements)

References 26 publications

Supporting

Mentioning

Contrasting

Order By: Relevance

“…Therefore, our understanding of the antecedents and consequences of such systems in real‐world organizations is likely to be enhanced if researchers start out from a more comprehensive model of man than the “homo economicus.” The effect of performance reports on peers and the openness of information policies are only two important aspects that require attention. Other potentially fruitful avenues for future research include the number and types of performance measures (Ittner and Larcker [], Budde []), the relation between performance and pay in incentive contracts (Fehr and Fischbacher []), and the level of subjectivity in evaluation decisions (Ittner, Larcker, and Meyer [], Rajan and Reichelstein []).…”

Section: Discussionmentioning

confidence: 99%

How Control System Design Influences Performance Misreporting

Maas

Rinsum

2013

J of Accounting Research

103

View full text Add to dashboard Cite

This paper investigates reporting honesty when managers have monetary incentives to overstate their performance. We argue that managers who report about their performance will take into account how their report affects their peers (i.e., other managers at the same hierarchical level). This effect depends on the design of the organization's control system, in particular, on the reward structure and the information policy regarding individual performance reports. The reward structure determines if peers’ monetary payoff is increased or decreased when managers claim a higher level of performance. The information policy determines if managers will be able to link individual peers to their reports and affects the nonmonetary costs of breaking social norms. We present the results of a laboratory experiment. As predicted, we find that participants are more likely to overstate their performance if this increases the monetary payoff of others than if their reported performance decreases others’ monetary gains. In addition, overstatements are lower under an open information policy, where each individual's reported performance is made public, compared to a closed information policy, where participants only learn the average performance of the other participants. Our findings have several important implications for management accounting research and practice.

show abstract

Section: Discussionmentioning

confidence: 99%

How Control System Design Influences Performance Misreporting

Maas

Rinsum

2013

J of Accounting Research

103

View full text Add to dashboard Cite

show abstract

“…Later agency works show analytically that the principal may take advantage of performance measures that the agent cannot fully control as long as they yield additional information about the agent's unobservable actions (Antle and Demski, 1988;Ittner and Larcker, 2002;Holmström, 1979;Milgrom and Roberts, 1992). Researchers have found this argument to be relevant in multi-agent settings as well (Baiman and Demski, 1980;Holmström, 1982).…”

Section: Review Of Prior Literature On the Controllability Principlementioning

confidence: 99%

“…Despite this rationale for the application of the principle, there are compelling arguments as to why organizations should not always fully conform to it. Companies can direct managers' attention to critical performance areas and gain additional information about their hidden actions by partially disregarding the principle (Ittner and Larcker, 2002;Manzoni, 2002;Simons, 2007). Given the convincing arguments both for and against applying the controllability principle, prior studies not surprisingly found that companies differ in the extent to which they follow the principle in formal performance evaluations (Drury and El-Shishini, 2005;Huffman and Cain, 2000;Vancil, 1979).…”

Section: Introductionmentioning

confidence: 99%

Application of the controllability principle and managerial performance: The role of role perceptions

Burkert

Fischer²,

Schäffer

2011

Management Accounting Research

View full text Add to dashboard Cite

“…Prior literature suggests that compensation contracts are designed to meet multiple objectives and that the choice of performance metrics in a given reward system is affected by organizational objectives for that system (Ittner and Larcker, 2002). Profit sharing plans are generally designed to meet economic or information sharing objectives (Lawler, 1989, p. 163).…”

Section: Overview Of Profit Sharing Plansmentioning

confidence: 99%