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Performance targets are an important element of incentive systems. On the one hand, targets aim to motivate employees, on the other hand, firms use them as a basis for further performance incentives such as bonus payments. A common instrument for target setting is target ratcheting, i.e. the orientation on performance in prior periods. This method can cause a so-called ratchet effect, if employees do not use their full performance potential to avoid an increase of their targets.
Based on an innovative experiment, this book investigates, how the feedback frequency and the framing of compensation contracts can contribute to the reduction of the ratchet effect. The results show that frequent feedback can enhance the initial performance, when employees receive a new task. However, in later periods, when employees have gained experience, rare feedback can lead to a higher performance and exceeding of targets. With regard to the framing of compensation contracts, the experiment shows that penalty contracts can enhance a higher performance compared to bonus contracts but do not directly influence the ratchet effect.
The results of this investigation provide a practice-relevant starting point for the optimization of incentive systems by identifying the relation between performance targets, feedback frequency and the framing of compensation contracts with regard to performance effects. Furthermore, the results show that an adaption of the influence factors over time, especially in the case of feedback frequency, can be beneficial. With respect to the research in behavioral management accounting, the study adds to prior investigations of influence factors on the ratchet effect. In addition, the designed experiment provides a starting point for further studies.
keywordsAnreizsysteme Controlling Experiment Feedbackhäufigkeit Framing Ratchet Effect Target Ratcheting Vergütungsverträge Verhaltensorientiertes Controlling Zielvorgaben
Ihr Werk im Verlag Dr. Kovač
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