Groupcentric budget goals, budget-based incentive contracts, and additive group tasks

• Published in: Review of accounting & finance 2015-05, Vol.14 (2), p.189-206
• Main Authors: Farrar, Jonathan, Libby, Theresa, Thorne, Linda
• Format: Article
• Language: English
• Subjects: Accounting & Finance; Accounting/accountancy; Correlation analysis; Expected values; Goal setting; Hypotheses; Incentives; Literature reviews; Management accounting; Monetary incentives; Social responsibility; Studies
• ISSN: 1475-7702; 1758-7700
• DOI: 10.1108/RAF-12-2013-0141

Purpose – The purpose of this paper is to examine the effects of three different types of budget goals (egocentric individual, groupcentric individual and group) on group performance of an additive task, assigned within an individual budget-based incentive contract. While previous research has established that budget-based incentive contracts motivate higher group performance than piece rate contracts for additive group tasks, no studies, which we are aware of, have considered explicitly the type of goal within this context. Design/methodology/approach – We conduct a 3 × 2 experiment in which we manipulate the presence of an individual goal (egocentric, groupcentric and absent) and a group goal (present and absent) on group performance of an additive task. Findings – Group performance is higher for groups assigned groupcentric individual goals than for groups assigned egocentric individual goals, either alone or in combination with a group goal. Practical implications – Egocentric individual goals may reinforce an individualistic orientation, which may work against the potential gains from having group members adopt more of a group focus. Originality/value – This paper considers how groupcentric individual goals may improve group performance. The management accounting literature typically examines just egocentric individual goals.