Outcome Feedback, Incentives, and Performance: Evidence from a Relatively Complex Forecasting Task

Abstract

This study extends prior research by examining a fairly common sequence of business events: numeric outcome information is produced and reviewed, decisions are influenced by this information, and the process repeats (i.e., a feedback loop occurs). We find that incentivized decision makers exhibit substantial decision improvement after only one iteration of summary outcome feedback. In contrast, other between-subjects groups fail to improve performance across iterations of Luft and Shields' (2001) forecasting task. Our results suggest that financial incentives and outcome feedback are both critical to performance improvement in relatively complex iterative tasks. When either incentives or feedback is absent, performance suffers. While prior research has found outcome feedback relatively ineffective at improving complex task performance, our results indicate that outcome feedback and incentives complement each other to improve performance. We believe exploring the interaction of incentives and feedback offers interesting avenues for future accounting research. Data Availability: Study data are available from the authors upon request.

Development of Management Control System Research: Study on Behavioral Research in Accounting Journal (2006–2018)

“…In this study, two articles that used external contingency were found, namely Buchheit et al (2012) and Dekker et al (2012). Buchheit et al (2012) examined environmental uncertainty, which include volatility, complexity and strategic relation related to outcome feedback and incentive towards performance improvements. The result suggested that financial incentives and outcome feedback are both critical to performance improvement in relatively environmental uncertainty.…”

“…Some examples of studies that studied individual factors, namely Buchheit et al (2012) examined individual factors such as motivation, commitment and attitude related to the relation between outcome feedback and incentive towards performance improvements. The result suggested that financial incentives and outcome feedback are both critical to performance improvement in relatively individual factors.…”

An Increased on Firm Value: Insight in State Owned Enterprises That Listed on the Indonesia Stock Exchange 2013-2018

“…(Herrera and Sanchez-Gonzalez, 2012;Oh et al, 2014). (Buchheit et al, 2012;Martins and Lopes, 2016).…”

Reward and Feedback in the Control over Dynamic Events

“…There is an implicit assumption that the link between rewards and performance is based on a mechanism by which rewards increase effort, which in turn improves performance (Bonner & Sprinkle, 2002;Buchheit et al, 2012). But, what counts as reliable metrics of cognitive effort is by no means settled (for discussion see Bonner and Sprinkle, 2002).…”

“…This is often referred to as the crowding out effect (Deci, 1976;Frey, 1997;Lepper & Greene, 2015). Moreover, there is evidence to suggest that monetary incentives alone are not sufficient, and need to be presented in combination with output feedback in order to improve decision-making performance (Buchheit et al, 2012). To complement this, an association has been made between monetary rewards and expertise such that the greater the skill required to perform the decision-making task accurately the less likely financial incentives positively impact on performance (Vera-Munoz, 1998).…”