The effect of feedback, assigned goal levels and compensation schemes on task performance

Purpose: The purpose of this paper is to examine the joint effects of performance feedback, assigned goal levels and types of compensation schemes (i.e. fixed-pay, piece-rate and goal attainment bonus) on subordinates’ task performance. Design/methodology/approach: A laboratory experiment was employed to collect data. The subjects consisted of a total of 133 Australian business executives. The study used ANCOVA for data analyses, controlling subject’s practice trial scores as covariate. Findings: The results provide strong support for a three-way interaction between performance feedback, assigned goal levels and types of compensation schemes on subordinates’ task performance. Specifically, the results reveal that the reliance of a piece-rate compensation scheme resulted in higher task performance when compared to fixed-pay and goal attainment bonus compensation schemes in the presence of performance feedback and assigned difficult goal levels situations. In addition, the results reveal that a goal attainment bonus compensation scheme leads to higher task performance when compared to a fixed-pay compensation scheme in the presence of performance feedback and assigned difficult goal levels situations. Originality/value: These findings have important implications for compensation schemes design in firms that aim to achieve higher employees’ performance and organizational effectiveness.