The Impact of the Number of Performance Measures and Incentive Framing on Performance in a Multidimensional Task Environment

This paper reports on the results of a 2x2 experiment, examining the impact of multiple performance measures (PM) and incentive framing on performance in a multidimensional environment. A comparison is made between the performance of people working under one PM and those working under three PM. Additionally, the performance of participants working under a bonus scheme is compared with a penalty-framed incentive scheme. The results indicate that it is better to use multiple PM, because it inspires higher effort intensity and better effort allocation. Furthermore, it is better to frame incentives as a penalty scheme, instead of as a bonus scheme, because loss aversion has a higher performance impact than perceived fairness. However, the difference between bonus and penalty schemes is not larger with multiple versus a single PM, because loss aversion under multiple PM is higher for bonuses than for penalties. Consequently, no additive effects were identified.