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The effects of nonfinancial and financial measures on employee motivation to participate in target setting

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  • Lau, Chong M.
  • Roopnarain, Ketvi

Abstract

Recent interest in nonfinancial performance measures has raised questions on how such measures influence employee reactions and behaviour. Surprisingly, the question of whether and how nonfinancial measures motivate employees to participate in target setting has remained largely unexplored. Employees can be motivated intrinsically or extrinsically to participate in target setting. Intrinsic motivation to participate in target setting initiates from within the employee and is perceived as an end in itself with the employee as the main beneficiary. In contrast, controlled extrinsic motivation to participate in target setting is controlled by the organization and is perceived as a means to an end with the organization as the main beneficiary. This study investigates the relative importance of nonfinancial measures vis-à-vis financial measures in engendering employee intrinsic and controlled extrinsic motivation to participate and how these two forms of motivation to participate in target setting translate into improved employee job performance. Based on a sample of 149 employees, the Partial Least Squares results indicate that both financial measures and nonfinancial measures are associated with employee intrinsic motivation to participate in target setting. However, only nonfinancial measures are associated with controlled extrinsic motivation to participate in target setting and because this form of motivation to participate is controlled by the organization as a means to achieve better performance, it is only this form of motivation which has a significant impact on employee job performance. These results provide important insights into the intricacies by which performance measures influence employee motivation to participate in target setting and job performance.

Suggested Citation

  • Lau, Chong M. & Roopnarain, Ketvi, 2014. "The effects of nonfinancial and financial measures on employee motivation to participate in target setting," The British Accounting Review, Elsevier, vol. 46(3), pages 228-247.
    • Handle: RePEc:eee:bracre:v:46:y:2014:i:3:p:228-247
    DOI: 10.1016/j.bar.2014.02.006
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    2. Hsiao-Fen Hsiao & Tingyong Zhong & Hasan Dincer, 2019. "Analysing Managers’ Financial Motivation for Sustainable Investment Strategies," Sustainability, MDPI, vol. 11(14), pages 1-22, July.
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    4. Joti kumari & Jai Kumar, 2023. "Influence of motivation on teachers’ job performance," Palgrave Communications, Palgrave Macmillan, vol. 10(1), pages 1-11, December.
    5. Lau, Chong M. & Scully, Glennda & Lee, Alina, 2018. "The effects of organizational politics on employee motivations to participate in target setting and employee budgetary participation," Journal of Business Research, Elsevier, vol. 90(C), pages 247-259.
    6. Nuraddeen Abubakar Nuhu & Kevin Baird & Sophia Su, 2022. "The association between the interactive and diagnostic use of financial and non-financial performance measures with individual creativity: The mediating role of perceived fairness," Journal of Management Control: Zeitschrift für Planung und Unternehmenssteuerung, Springer, vol. 33(3), pages 371-402, September.
    7. Fallahnejad Ali & Nazari Reza & Fard Mehdi Moradzadeh, 2023. "Analysis of the Relationship Between the Development of Performance Criteria and Job Performance of Employees with Respect to the Mediating Role of Employee Participation," Studia Universitatis „Vasile Goldis” Arad – Economics Series, Sciendo, vol. 33(2), pages 1-26, June.
    8. Lenka Tarábková, 2014. "Model of motivating linked-up with education," Entrepreneurship and Sustainability Issues, VsI Entrepreneurship and Sustainability Center, vol. 2(1), pages 12-18, September.
    9. Macinati, Manuela S. & Bozzi, Stefano & Rizzo, Marco Giovanni, 2016. "Budgetary participation and performance: The mediating effects of medical managers’ job engagement and self-efficacy," Health Policy, Elsevier, vol. 120(9), pages 1017-1028.
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