The Effects of the Independent and Combined Use of Enabling Performance Measurement Systems and Financial Incentives on Employee Motivation

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Master’s Thesis

The Effects of the Independent and Combined Use of

Enabling Performance Measurement Systems and

Financial Incentives on Employee Motivation

By Gesine Gosch

Master of Science, Business Administration

Specialization: Organizational and Management Control

University of Groningen

Faculty of Economics and Business

June, 2016

Student number: 2980886

Supervisor: dr. W. Kaufmann

Co-assessor: dr. E. van der Mortel

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Abstract

This thesis investigates the effects of the independent and combined use of Performance Measurement Systems (PMS) and financial incentives on employee motivation. Using an online experiment (n=106), scenarios are distinguished between two dimensions: the type of PMS (enabling versus coercive); and whether financial incentives are provided or not. The results of this study indicate that enabling PMS have a more positive effect on the motivation of employees than coercive ones and that the provision of financial incentives lead to higher levels of employee motivation compared to the absence of financial incentives. While a positive interaction effect between enabling PMS and financial incentives in regard to employee motivation has only been partially supported, further research needs to focus on how to verify this interaction effect.

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1. Introduction

How can organizations influence the behavior of their employees in order to enhance their work motivation which will, in turn, lead to an improved performance as well as to the success of the organization in total? To answer this question, this thesis will investigate the effects of the independent and combined use of Performance Measurement Systems (PMS) and the use of incentives, as two parts of Management Control Systems (MCS), on employee motivation. MCS are defined by Flamholtz et al. (1985) as processes which influence people’s behavior in such a way that organizational goals will be achieved. Moreover, the primary function of MCS is to control the behavior of employees (Merchant and Van der Stede, 2012). This underlying behavioral control approach can also be found in the study of Malmi and Brown (2008), who state that managers are responsible for controlling the behavior of their employees in order to align it with organizational goals and strategies. According to Malmi and Brown (2008), MCS can be regarded as a package which is divided into five different types of controls, whereby planning, cybernetic and reward & compensation controls, which are mostly connected in organizations, represent the most important ones. In contrast, the other types of controls form the contextual framework of these central elements of MCS. While planning is relevant for organizational goal setting in both the short- and the long-term, cybernetic control measures the actual performance and compares it with the determined performance standards in order to discover variances. Reward & compensation control is aimed at motivating employees and thereby increasing their performance by aligning individual and organizational goals. In the following planning and cybernetic controls are taken together and are referred to as PMS, while reward & compensation control will be referred to as the use of incentives. Therefore the goal of this study is to understand which effects PMS and the use of incentives have, independently as well as in combination with each other, on employee motivation.

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4 perceive a connection between effort, performance and the amount of pay, it is supposed that employee motivation will be more positive when financial incentives are provided rather than in their absence (Bonner and Sprinkle, 2002; Vroom, 1982). For the purpose of identifying an interaction effect between the use of incentives in combination with the different types of PMS on employee motivation, the dichotomy of intrinsic and extrinsic motivation will be taken into account. While extrinsic motivation “refers to doing something because it leads to a separable outcome”, intrinsic motivation “refers to doing something because it is inherently interesting or enjoyable”, (Ryan and Deci, 2000, p. 55). From this perspective it can be derived that enabling PMS tend to motivate employees intrinsically, whereas the provision of financial incentives is caused by extrinsic motivation. Behavioral or psychology studies in relation to financial incentives argue whether the extrinsic motivation, in the case of monetary rewards, affects the intrinsic motivation, when both are used jointly. Additionally, it can be reasoned that financial incentives (extrinsic motivation) crowd-out intrinsic motivation (Osterloh and Frey, 2002; Ryan and Deci, 2000). This crowding-out effect would mean for the interaction between enabling PMS and financial incentives, that employees would be more interested in receiving monetary rewards than working in an enabling PMS environment. Therefore the interaction effect would not lead to higher employee motivation, compared to their independent use from each other, because financial incentives would undermine intrinsic motivation. In contrast, the combined use of enabling PMS and financial incentives could also result in an even higher level of employee motivation, in comparison to their independent use, because they could be regarded as complements (Lazear and Gibbs, 2008; Prendergast, 2000). This study expects therefore, in the case of an existing interaction effect between enabling PMS and financial incentives, that the interaction will be positive in regard to its impact on employee motivation.

In order to investigate this explained interaction effect, the central research question is developed: “How does the use of financial incentives in an enabling PMS impact employee motivation?” This question is supported by two sub questions:

1) “How does the type of PMS influence employee motivation?” 2) “How does the use of incentives influence employee motivation?”

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5 Qualtrics. The experimental conditions were distinguished between two dimensions: the type of PMS (enabling versus coercive); and the use of incentives (provision of financial incentives versus absence of financial incentives). The respondents were randomly assigned to two of the four vignettes, while ensuring that each respondent received one vignette for each experimental condition dimension and that the program evenly presented the elements.

The thesis contribution to the literature will be threefold. First, this study contributes to the emergent stream of PMS literature that has focused on enabling and coercive formalization according to Adler and Borys (1996), as previous studies do not consider the relationship between enabling PMS and employee motivation. Moreover, enabling control approaches have never before been applied in an experimental research setting (Ahrens and Chapman, 2004; Jordan and Messner, 2012; Wouters and Wilderom, 2008). Second, this study adds evidence to the existing literature on financial incentives in relation to motivation by applying an online experiment, as a different research method, compared to previous studies (Bonner and Sprinkle, 2002). Third, this study uniquely contributes to the literature on complementarities in the workplace by investigating the interaction between enabling PMS, financial incentives and employee motivation (Lazear and Gibbs, 2008; Prendergast, 2000).

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2. Literature Review and Hypotheses Development

In the beginning of this chapter, MCS will be introduced in general (2.1), while the following sections will focus on two parts of MCS: PMS and incentives. To gain more insight into these two parts of MCS, the literature and hypotheses related to the effects of the independent use of enabling / coercive PMS and financial incentives on employee motivation will be provided in sections 2.2 and 2.3. Followed by an in depth discussion and hypothesis development about a possible interaction between the use of incentives in combination with the different types of PMS on employee motivation (2.4). Finally, at the end of section 2.4 a figure depicts all previously discussed variables and relationships in a conceptual model.

2.1 Management Control Systems (MCS)

Research into MCS is widely spread in the business literature, and many variations of definitions and typologies exist. These range from broader concepts of MCS (Chenhall, 2003; Malmi and Brown, 2008; Merchant and Van der Stede, 2012) to narrower aspects of MCS (Jansen et al., 2009; Langfield-Smith, 1997; Simons, 1990; Wouters and Wilderom, 2008). For example, Chenhall (2003) defines MCS as a wider concept that consists of management accounting systems and other types of controls like personal or clan control. In line with MCS as a broad model, Malmi and Brown (2008) published their research about MCS as a package, which consists of five different groups of control instruments: planning, cybernetic, reward & compensation, administrative and cultural control. In contrast, narrower views of MCS focus on single control elements of MCS as, for instance, strategy (Langfield-Smith, 1997; Simons, 1990), PMS (Wouters and Wilderom, 2008), or culture (Jansen et al., 2009). These studies provide a more in depth discussion of the individual types of controls.

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7 that if all employees would constantly do what best suits the organization, the use of MCS would not be necessary. Unfortunately, employees do not always act in accordance with the organization’s goals. Thus, MCS are required to assist managers in guarding against unsolicited demeanor, and in supporting desirable behaviors.

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2.2 Performance Measurement Systems (PMS) and Employee Motivation

As mentioned in the previous section, PMS is one important component of MCS and it can be further divided into the sub-units of goal setting, feedback, and reward or sanction, which are intended to influence the behavior of employees (Neely et al., 2005). This line of reasoning is in concordance with the definition of Speklé and Verbeeten (2014), who declare that PMS are one way for managers to achieve organizational goals by means of the creation of incentives in order to align individual goals. Moreover, PMS provide a provision of feedback on the progress towards these targets, and consequently ensure internal and external responsibility.

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9 In addition, to clarify the relationship between PMS and employee motivation, this study also references other authors who apply the formalization framework of Adler and Borys (1996) and who explain the features enabling and coercive in the context of PMS and employee motivation. For example, Wouters and Wilderom (2008, p.489) declare a PMS as enabling, when “it is perceived by employees as enabling of their work, rather than as primarily a control device for use by senior management.” Besides, the authors explain an enabling PMS as a support system for employees which increases their motivation and in turn also their work performance through the provision of feedback, problem-solving aids or improvement advice. In contrast, Wouters and Wilderom (2008) define a coercive PMS rather as a control device for employees’ behavior. This point of view is consistent with the study of Jordan and Messner (2012), who argue that a positive perception of formal systems will enable employees to feel motivated to fulfill their work tasks, while a negative perceived way of formalization leads employees to the feeling that the system coerces their compliance. In consequence, under the conditions in the latter case, the employee motivation will be lower compared to the enabling PMS.

From these studies it can be derived and expected that employee motivation is directly influenced by the type of PMS implemented. Therefore an enabling PMS is assumed to influence employee motivation more positively than a coercive PMS. This leads to the first hypothesis:

Hypothesis 1: Enabling PMS will have a more positive effect on the motivation of employees than coercive ones.

Due to the fact that this study aims to investigate if an interaction effect exists between the use of incentives in combination with the different types of PMS on employee motivation, the term incentives has also to be outlined and its independent effect on employee motivation needs to be explained. Therefore, the following section provides a discussion regarding the relationship between incentives and employee motivation.

2.3 Incentives and Employee Motivation

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10 mentioned earlier in this study, who differentiate rewards and compensation as a separate part of MCS, rather than as a part of PMS. This is due to their concept, that rewards are not only linked to PMS, but also meet other objectives in the organization, for example, retaining employees or stimulating cultural control through group rewards. However, this study focuses on the level of the individual in order to determine the relationship between the use of incentives and employee motivation and therefore the most widespread typology in the literature will be followed, namely the view of incentives as an element of PMS.

Although while Malmi and Browns (2008) classification of incentives differs from the common literature, they agree with the motivational purpose of incentives. According to Merchant and Van der Stede (2012, p.368) incentives “provide the impetus for the alignment of employees’ natural self-interests with the organization’s objectives”. In addition, these authors argue that the purpose of incentives lies in effort-inducing, which means that even diligent employees need incentives in order to be motivated to fulfill additional or often adverse and difficult tasks. Consistent with this, the use of rewards or incentives are aimed at employee motivation within organizations to ensure alignment of individual efforts with organizational goals (Bonner and Sprinkle, 2002). Due to these described motivational purposes of incentives, this study infers that a direct relationship should exist between the use of incentives and employee motivation.

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11 According to the above line of reasoning, a direct relationship between the use of incentives and employee motivation is expected. Moreover, this study predicts that the provision of financial incentives influences employee motivation more positively, as opposed to the lack of financial incentives. This leads to the second hypothesis:

Hypothesis 2: Employee motivation will be more positive when financial incentives are provided rather than in the absence of financial incentives.

After gaining more knowledge on the individually induced effects of the different types of PMS and the use of incentives in relation to employee motivation, the next section seeks to examine a possible interaction effect between these three variables.

2.4 Interaction between PMS, Incentives and Employee Motivation

The previous two sections outlined the direct effects of the independent use of PMS and incentives on employee motivation. From this, enabling PMS is assumed to influence employee motivation more positively than coercive ones. Besides, the provision of financial incentives influences employee motivation more positively as compared to their absence. When both PMS and the use of incentives individually have a direct impact on employee motivation it could be argued that there might also be an interaction effect between these two variables and employee motivation. Nevertheless, this does not necessarily have to be the case, because there might only be two independent main effects without an interaction effect. Moreover it will be interesting, in the case of an existing interaction effect, how the different interaction combinations between PMS types (enabling / coercive) and the use of incentives (provision of financial incentives / absence of financial incentives) impact employee motivation.

In order to investigate if there exists an interaction effect between the use of incentives in combination with the different types of PMS on employee motivation and how the different interaction combinations impact employee motivation, several points of view have to be taken into account:

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13 Prendergast, 2000). Since this study also investigates the relationship between two MCS elements, this kind of literature matches perfectly the underlying research. Two parts of a MCS are determined to interact as complements, when the increase in one part enhances also the returns of the other part, whereas they are defined to interact as substitutes, when the marginal benefit of each part declines in the level of the other part (Friis et al., 2015; Widener et al., 2008). Based on the discussed literature, this paper hypothesizes, in line with Lourenço (2015), that in the case of an existing interaction effect between PMS and incentives, this interaction effect will be positive in regard to its impact on employee motivation, whenever the type of PMS is enabling and financial incentives are provided. This line of reasoning leads to the third hypothesis:

Hypothesis 3: In the case of an existing interaction effect between enabling PMS and financial incentives, this interaction will be positive in regard to its impact on employee motivation.

Fig. 1. Conceptual model

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3. Methods and Data

This chapter discusses the methods and data of this study. In the first section the research method, in the form of experimental research, is explained in general. Followed by the second section which presents the research design of this paper. Finally, the third section contains the data collection and analysis.

3.1 Research Method

The underlying research method of this paper represents an experiment which is mostly applied in the literature of psychology (Christensen et al., 2011; Davis, 2003; Greer and Mulhern, 2002; McBurney and White, 2004; Ritter, 2013). More precisely, experimental research refers to the quantitative research approach in order to test hypotheses, which is considered as the most popular research approach in psychology. However, experiments can also be found in the accounting research literature (Bloomfield and Wilks, 2000; Kachelmeier and Shehata, 1992; Libby et al., 2002; Maines and McDaniel, 2000). Experimental research aims for the identification of cause-and-effect relationships through manipulations of the independent variables. This means that the independent variable, which will be manipulated, can be regarded as the cause and the dependent variable as the measure of the behavior of the participant that reflects the outcome or effect of what will happen (Christensen et al., 2011; McBurney and White, 2004).

This leads directly to the advantages of experimental research: First of all, it is the best methodological approach to determine causal relationships. Secondly, a key and, at the same time, a unique characteristic of experimental research is the manipulation of one or more independent variables. Thirdly, experimental research can control for external influencing variables by ensuring a constant experiment environment, for example, by conducting the experiment in a laboratory in order to shield the participants from noise and other external distractions. The random assignment of participants to the experimental treatments is also a common control technique to decrease bias (Christensen et al., 2011; Dean et al., 1998).

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15 that the experiment is brought to the participant and not the other way around or that experiments can have a high statistical power, when applying a large sample. In contrast, disadvantages can be multiple submissions of the experiment or the lack of control. However, these bias can be undermined by deleting responses with the same IP address of the participants and the randomization technique as previously explained. In addition, an emerging way to conduct research experiments online is to use the website Amazon.com’s Mechanical Turk (MTurk). This online research method provides lots of benefits, for instance, MTurk tends to be more successful in recruiting demographically diverse respondents than other Internet samples and MTurk respondents are proven to be more representative than convenience samples. Moreover, the reliability of the data gathered via MTurk can at least be compared to those gathered via conventional research methods (Berinsky et al., 2012; Buhrmester et al., 2011).

Based on the above reasoning, an experiment fits the underlying research of this study best to examine how the two independent variables, enabling PMS and the use of financial incentives, impact, both independently from each other and in interaction, the dependent variable, employee motivation.

3.2 Research Design

The experiment of this study employed a 2 x 2 between-subjects design, which was conducted online with the survey program Qualtrics. The experimental conditions were distinguished between two dimensions: the type of PMS (enabling versus coercive); and the use of incentives (provision of financial incentives versus absence of financial incentives). The respondents were randomly assigned to two of the four vignettes, while ensuring that each respondent received one vignette for each experimental condition dimension and that the program evenly presented the elements. The interaction between PMS and incentives was expected to be positive, in regard to their impact on employee motivation, whenever the type of PMS was enabling and financial incentives were received. The entire text of the vignettes is provided in the Appendix.

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16 general, how motivated are you to work for this organization?” given a 5-point Likert scale in line with Russell and Bobko (1992). Afterwards, respondents had to indicate their level of motivation on a 5-point Likert scale in regard to four different items (amount of payment, receipt of financial incentives, amount of supervisor’s support & guidance and reaching sales targets). These questions were developed referring to Wiley (1997). Ensuing, the respondents were asked to indicate their level of agreement with eight different attributes of motivation on a 7-point Likert scale according to the adjusted questions from Hackman and Oldham (1974); and Mak and Sockel (2001). In addition, the final questions also referred to internal transparency, one of the key characteristics of an enabling PMS (Adler and Borys, 1996). The entire survey experiment is given in the Appendix.

3.3 Data Collection and Analysis

The web link for this online experiment was provided in the social media network of the researcher of this study which consisted mostly of business and economics students from the Netherlands and Germany. Additionally, students who were enrolled in a Master program of Business Administration at the University of Groningen were asked via e-mail to fill out the survey. Each participant was tested individually and it took approximately five minutes to complete the survey. The data sample was transferred from the online software platform Qualtrics to the IBM program SPSS Statistics V. 23 in order to perform statistical data analysis on the research data. Out of the 155 completed experimental questionnaires, 49 responses were excluded due to deficient attention checks. The remaining sample of 106 respondents consisted of 45 males and 61 females with a mean age of 27.1, SD = 8.01, ranging from 18 to 58; a mean of 6.79 years work experience, SD = 7.22; and a mean monthly net income between €1,500 and €1,999.

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17 the three dependent variables, referred to as dependent variable 1 and 2, were further used in the data analysis to measure the construct employee motivation.

Moreover, a regression analysis was undertaken with an included dummy variable for the two manipulation check questions (1 = one or both questions were incorrectly answered). The entire text of the manipulation check is provided in the Appendix. The result of the regression analysis showed that the dummy variable was not statistically significant, therefore responses with incorrectly answered manipulation check questions could remain in the sample.

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4. Results

This chapter presents the results of the survey experiment. In section 4.1 the descriptive results are shown, whereas in section 4.2 the multiple regression analysis will be outlined.

4.1 Descriptive Results

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19 TABLE 1: Descriptive statistics for study variables

Measures N Mean Min Max SD

Experimental work motivation in general 106 3.22 1 5 1.32 Type of PMS 106 Enabling PMS 48 3.90 1 5 1.12 Coercive PMS 58 2.66 1 5 1.21 Type of incentives 106 Financial incentives 52 3.81 1 5 1.17 No financial incentives 54 2.65 1 5 1.20 Gender 106 1.58 1 2 0.50 Age 106 27.21 18 58 8.01

Work experience (full and part time) 106 6.79 0 37 7.22

Monthly net income 106 2.30 1 6 1.66

TABLE 2: ANOVA analysis of both employee motivation measures

Dependent variable 1 general work motivation (scale from 1 -5) Dependent variable 2 sum variable of 8 items (scale from 1-7)

Scenario N M (SD) M (SD)

Enabling PMS * financial incentives 29 4.41 (0.57) 5.32 (0.83)

Enabling PMS * no financial incentives 19 3.11 (1.29) 4.27 (1.18)

Coercive PMS * financial incentives 23 3.04 (1.30) 3.23 (0.96)

Coercive PMS * no financial incentives 35 2.40 (1.09) 2.96 (0.97)

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20 TABLE 3a: ANOVA analysis of employee motivation based on general work motivation

Source of variation Sum of

squares df Mean square F p PMS 27.07 1 27.07 23.76 0.000 Incentives 23.94 1 23.94 21.02 0.000 PMS * incentives interaction 2.78 1 2.78 2.44 0.121 Total 1279 106

TABLE 3b: ANOVA analysis of employee motivation based on the sum variable of eight specific items

Source of variation Sum of

squares df Mean square F p PMS 72.77 1 72.77 76.73 0.000 Incentives 10.95 1 10.95 11.55 0.001 PMS * incentives interaction 3.80 1 3.80 4.01 0.048 Total 1809.33 106

4.2 Multiple Regression Analysis

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21 TABLE 4a: Multiple regression analysis based on general work motivation – Unstandardized coefficients

Model 1 Model 2 Model 3

Step and variables B SE B SE B SE

Intercept 3.27** (0.60) 6.78** (0.68) 8.47** (1.24) Control Gender 0.07 0.26 -0.18 (0.22) -0.12 (0.22) Age -0.01 0.02 -0.01 (0.01) -0.01 (0.01) Main effects PMS -1.06** (0.22) -2.14** (0.70) Incentives -0.97** (0.22) -2.08** (0.72) Interaction effect PMS * Incentives 0.73 (0.45) R Square 0.00 0.35 0.37 ** p < .05

TABLE 4b: Multiple regression analysis based on the sum variable of eight specific items –

Unstandardized coefficients

Model 1 Model 2 Model 3

Step and variables B SE B SE B SE

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5. Discussion and Conclusion

In section 5.1 the findings are discussed, summarized and compared with existing literature. Moreover, each relation of the conceptual model will be debated by answering the hypotheses. Additionally, theoretical and managerial implications are presented based on the findings (5.2). Finally, research limitations and future research are discussed in section 5.3.

5.1 Findings

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23 Jordan and Messner (2012) argue that a positive perception of formal systems will enable employees to feel motivated to fulfill their work tasks, while a negative perceived way of formalization lead employees to the feeling that the system coerces their compliance. This line of reasoning was verified in the results of the data analysis which indicated that the average experimental value for employee motivation was higher for an enabling PMS, compared to a coercive PMS. For that reason, hypothesis 1 is supported because enabling PMS have a more positive effect on the motivation of employees than coercive ones. Therefore, it can also be concluded that employees prefer the setting of an enabling PMS which includes the provision of personal feedback and support from the supervisor.

The second hypothesis is also supported through the results of the data analysis which indicates a direct relation between financial incentive provision and employee motivation. This is backed by the fact that the average experimental values for employee motivation were, in all cases, higher when financial incentives were provided than compared to their absence. Therefore, the importance of monetary incentives, in order to enhance the motivation of employees, can be inferred. In addition, highly motivated employees perform their work tasks as effectively as possible which, in turn, leads to organizational goal attainment. This is consistent with the literature, for instance, of Bonner and Sprinkle (2002) who explain that the usage of rewards or incentives aimed at employee motivation within organizations to ensure the alignment of individual efforts with organizational goals. Moreover, these authors state that employee effort will increase when financial incentives are provided, in contrast to the lack of incentives, since employees perceive a connection between effort, performance and an adequate payment. Other authors, for example, Rynes et al. (2004) also argue in their findings that monetary incentives have influential effects on the effort and commitment towards reaching individual targets of the employees as well as organizational goals.

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24 interaction effect was found in the combination of enabling PMS and financial incentives, it can be assumed that enabling PMS and financial incentives interact as complements (Lazear and Gibbs, 2008; Prendergast, 2000). Moreover, the combination of coercive PMS and no financial incentives depicted the lowest mean value for both dependent variables, which might indicate a negative impact on employee motivation. Despite these insights, the mean values for the other combination do not indicate explicitly if and to which extent an enabling PMS can compensate for the lack of financial incentives and to which extent the provision of financial incentives can compensate for a coercive PMS.

5.2 Theoretical and Managerial Implications

Despite the fact that researchers already examined the relationship between monetary incentives and employee motivation (Bonner and Sprinkle, 2002), there is little empirical research that explicitly considers the relationship between enabling PMS and employee motivation. Therefore, this study adds not only evidence to the existing literature on financial incentives by applying an experiment, as a different research method, but it also contributes to an emergent stream of PMS literature that has focused on enabling and coercive formalization according to Adler and Borys (1996). Furthermore, previous studies of enabling control approaches have never been realized before in an experimental research setting (Ahrens and Chapman, 2004; Jordan and Messner, 2012; Wouters and Wilderom, 2008). As a consequence, the findings of this study provide additional support and highlight the importance that employee motivation is positively influenced independently by both enabling PMS and monetary incentives. Moreover, this study uniquely contributes to the literature on complementarities in the workplace by investigating the interaction between enabling PMS, financial incentives and employee motivation. Nevertheless, the theoretical implication concerning this interaction provides only a starting point for further research which could explain and verify this partially supported interaction effect in more depth.

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25 resulted, due to the complementarities effect of these factors, in higher levels of employee motivation compared to their independent use. For this reason, it can be derived for practitioners that a combined use might be recommended in order to enhance employee motivation.

5.3 Limitations & Future Research

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Moreover, further research could also repeat this experiment especially with participants who have more years work experience. Besides, different job positions and hierarchy levels of the participants can lead to variations of the results and should therefore be taken into account for

future research. This study concludes that employee motivation is strongly influenced by the type

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Appendix

Text of the conducted survey experiment

Introduction

Welcome to the "performance measurement system" study It will take you about five minutes to fill out this survey. This study consists of two parts:

First, you will be asked to carefully read a short text about a performance measurement system used within an organization and answer a number of questions about this system.

Next, you will be asked to fill out some general information about yourself.

Please read the following text carefully

Imagine you are working in the sales department of a computer software firm called Morph. Morph designs, develops and sells computer software and services to small and medium sized enterprises. As a business specialist, you are in charge of selling the services provided by Morph to a variety of clients. Every month you receive a sales volume target from Morph. Your performance is measured based on how your actual sales volume per month compares to the sales volume target.

Vignette enabling

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33 Vignette coercive

Every month you receive an automatically generated email with your monthly performance results. If your performance is below the given target, you receive a warning. If you receive three of these warnings in one year, you will be fired.

Vignettes financial incentives

Your monthly income after taxes is €3,500.You receive a bonus of €2,000 on top of your monthly income after taxes if you reach the given sales volume target for the month.

Vignettes no financial incentives

Your monthly income after taxes is €3,500. You do not receive a bonus if you reach the given sales volume target for the month.

Instruction

Please answer the following questions based on the story you have just read. 1) In general, how motivated are you to work for this organization?

 Very unmotivated (1)  Moderately unmotivated (2)  Indifferent (3)

 Moderately motivated (4)  Very motivated (5)

2) How motivating are the following aspects of the job you just read about? 2.1 The amount of payment you receive

2.2 Financial incentives you receive

2.3 The amount of support and guidance you receive from your supervisor 2.4 Reaching the sales targets

 Very unmotivating (1)

 Moderately unmotivating (2)

 Neither motivating nor unmotivating (3)  Moderately motivating (4)

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34 3) Please indicate your level of agreement with the following statements:

3.1 All in all, I am satisfied with this job 3.2 In general, I like working here

3.3 I will probably not be looking for a job outside of this organization 3.4 I never think about quitting

3.5 This organization makes a real effort to develop the employee's skills 3.6 I perceive a clear relationship between job performance and rewards 3.7 I experience an adequate support in difficult situations

3.8 I feel treated fairly at work  Strongly disagree (1)  Disagree (2)

 Somewhat disagree (3)

 Neither agree nor disagree (4)  Somewhat agree (5)

 Agree (6)

 Strongly agree (7)

Manipulation Check

a) How would you describe the performance measurement system used by this organization?  It helps employees to feel motivated. (1)

 It forces employees to do as they are told. (2)

b) What type of financial incentives were used by the organization?

 I receive a bonus of €2,000 if I fulfill the monthly sales volume target. (1)  The company doesn’t pay any bonuses. (2)

Control Variables Demographics

Finally, please answer some general questions about yourself a) What is your gender?

 Male (1)  Female (2)

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35 c) How many years have you worked (either full or part time)?

d) What is your monthly net income?  < €1,000 (1)  €1,000 - €1,499 (2)  €1,500 - €1,999 (3)  €2,000 - €2,499 (4)  €2.500 - €3,000 (5)  > €3,000 (6) Attention Check

Organizational culture is a fuzzy concept that is hard to define. To help us understand how people interact in organizations we are interested in how people react to culture. Specifically, we are interested in how much you read instructions; if not, your answers may not tell us much about people in real organizations. To show that you have read these instructions please ignore the question below about organizational culture and check only "None of the above" as your answer. Please select all that describe the organizational culture that fits your personality best:

 Fun (1)  Exciting (2)  Dreadful (3)  Innovative (4)  Collaborative (5)  Open (6)  Free (7)  Tolerant (8)  Obedient (9)  Oppressive (10)

The Effects of the Independent and Combined Use of Enabling Performance Measurement Systems and Financial Incentives on Employee Motivation

Master’s Thesis