Determining performance targets

Research output: Contribution to JournalArticleAcademicpeer-review

Abstract

Performance targets direct organizational participants toward firm strategy, provide guidance for allocating effort, and induce effort toward performance goals. Key aspects of the setting of performance targets are how specific they should be and at which levels they should be set. We develop a structural model that aims to explain the specificity of targets set for subordinate managers and the information sources used to set target levels for defined performance dimensions, which sources include past performance, future planning, and benchmarking information. An analysis of 364 survey responses provides support for our expectations that both target specificity and the use of information sources to determine target levels vary with firms' environmental dynamism and task uncertainty, and with the intensity of financial incentives provided to subordinate managers. In addition, the results show that in response to these contextual variables, firms typically combine information sources to determine adequate target levels, instead of treating them as substitutes.
Original languageEnglish
Pages (from-to)21-46
JournalBehavioral Research in Accounting
Volume24
Issue number2
DOIs
Publication statusPublished - 2012

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Information sources
Managers
Specificity
Environmental dynamism
Planning
Financial incentives
Substitute
Task uncertainty
Guidance
Sources of information
Benchmarking
Structural model
Firm strategy

Cite this

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title = "Determining performance targets",
abstract = "Performance targets direct organizational participants toward firm strategy, provide guidance for allocating effort, and induce effort toward performance goals. Key aspects of the setting of performance targets are how specific they should be and at which levels they should be set. We develop a structural model that aims to explain the specificity of targets set for subordinate managers and the information sources used to set target levels for defined performance dimensions, which sources include past performance, future planning, and benchmarking information. An analysis of 364 survey responses provides support for our expectations that both target specificity and the use of information sources to determine target levels vary with firms' environmental dynamism and task uncertainty, and with the intensity of financial incentives provided to subordinate managers. In addition, the results show that in response to these contextual variables, firms typically combine information sources to determine adequate target levels, instead of treating them as substitutes.",
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Determining performance targets. / Dekker, H.C.; Groot, T.L.C.M.; Schoute, M.

In: Behavioral Research in Accounting, Vol. 24, No. 2, 2012, p. 21-46.

Research output: Contribution to JournalArticleAcademicpeer-review

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