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

Lan Guo; Bernard Wong-On-Wing; Gladie Lui

doi:10.1108/S1474-7871(2012)0000020015

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Advances in Management Accounting

ISSN: 1474-7871
Series editor(s): Professor Marc Epstein and Professor John Y. Lee

Subject Area: Accounting and Finance

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

Document Information:
Title:	Motivational Effects of Linking Incentives to Different Measures in Strategic Performance Measurement Systems: Implications for Proactive Strategic Behavior
Author(s):	Lan Guo, Bernard Wong-On-Wing, Gladie Lui
Volume:	20 Editor(s): Marc J. Epstein, John Y. Lee ISBN: 978-1-78052-754-3 eISBN: 978-1-78052-755-0
Citation:	Lan Guo, Bernard Wong-On-Wing, Gladie Lui (2012), Motivational Effects of Linking Incentives to Different Measures in Strategic Performance Measurement Systems: Implications for Proactive Strategic Behavior, in Marc J. Epstein, John Y. Lee (ed.) Advances in Management Accounting (Advances in Management Accounting, Volume 20), Emerald Group Publishing Limited, pp.209-240
DOI:	10.1108/S1474-7871(2012)0000020015 (Permanent URL)
Publisher:	Emerald Group Publishing Limited
Article type:	Chapter Item
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.