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Rankings, Performance, and Sabotage: The Moderating Effects of Target Setting

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  • Frank Hartmann
  • Philipp Schreck

Abstract

Competitive performance rankings are widely used in organizations. Such incentive systems enable agents to improve their performance ranking not only by increasing their own performance, but also by undermining their competitors’ performance. While previous accounting studies have stressed the positive effect of ranking systems on managerial effort, the present paper investigates when such ranking systems may induce sabotage, and how this unintended effect can be mitigated. Our study is based on a laboratory experiment designed to investigate (a) whether competitive performance feedback increases an agent’s inclination to disrupt the efforts of competitors, in a case where ranking has no effect on compensation and (b) whether the presence of a self-set absolute performance target moderates these effects. Our results show that ranking increases both performance and sabotage. Adding an absolute performance standard appeared to reduce sabotage. However, when there is an absolute target, performance is higher in the absence of ranking. Overall, our results thus suggest that performance benefits from the use of either a relative or an absolute performance target, but not from their simultaneous use.

Suggested Citation

  • Frank Hartmann & Philipp Schreck, 2018. "Rankings, Performance, and Sabotage: The Moderating Effects of Target Setting," European Accounting Review, Taylor & Francis Journals, vol. 27(2), pages 363-382, March.
    • Handle: RePEc:taf:euract:v:27:y:2018:i:2:p:363-382
    DOI: 10.1080/09638180.2016.1244015
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    Cited by:

    1. van Rinsum, M., 2019. "Utilizing Incentives and Accountability: In Control in Control?," ERIM Inaugural Address Series Research in Management EIA 2019-078-F&A, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam..
    2. Philipp Schreck, 2020. "Volume or value? How relative performance information affects task strategy and performance," Journal of Business Economics, Springer, vol. 90(5), pages 733-755, June.
    3. Petra Nieken & Anna Ressi, 2022. "Which Peer Group to Choose? The Effects of Relative Performance Information on Employee Self-Selection and Performance," CESifo Working Paper Series 9940, CESifo.
    4. Simon Piest & Philipp Schreck, 2021. "Contests and unethical behavior in organizations: a review and synthesis of the empirical literature," Management Review Quarterly, Springer, vol. 71(4), pages 679-721, October.
    5. Lisa-Marie Wibbeke & Maik Lachmann, 2020. "Psychology in management accounting and control research: an overview of the recent literature," Journal of Management Control: Zeitschrift für Planung und Unternehmenssteuerung, Springer, vol. 31(3), pages 275-328, September.

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