| For decades the compensation system has been recognized as a means for motivating individuals to achieve high levels of performance. Only recently, however, has the executive compensation system been described as a way to direct executives' efforts toward the accomplishment of corporate, strategic goals.;The present study offered the first empirical investigation of the contribution of the compensation system to executive motivation. In order to examine this relationship, a motivational framework emphasizing the direction of executive effort was established. Specifically, the motivational perceptions that were utilized as outcomes in this project were (1) executives' perception that attainment of performance goals is instrumental to personal (monetary, advancement, influence) and/or corporate (contribution to corporate goals) outcomes; and (2) executives' perception that performance goals are attainable through their own efforts (effort-goal attainment).;Various design and administrative features of the executive compensation system may serve to strengthen these motivational perceptions and, consequently, to influence the direction of executive effort toward the accomplishment of performance goals. This premise was tested using correlation and multiple regression analysis and 95 executives from the retailing industry. The results showed that executive understanding of how performance goal attainment contributes to corporate goals; performance feedback emphasizing the executives' impact on corporate performance; and the percentage of executive compensation tied to quantitative performance goals each made positive and unique contributions to the instrumentality of performance goal attainment to corporate outcomes. The design and administrative characteristics positively and uniquely contributing to personal goal instrumentality were: executive understanding of how performance goal attainment contributes to corporate goals and performance feedback emphasizing personal improvement. In addition, executives' perceived control over bias in performance evaluation (subjectivity, politics), which was initially conceptualized as one dimension of the effort-goal attainment outcome, was found to positively and uniquely contribute to corporate goal instrumentality.;Based on these findings, an integrated model was developed. In this model, it was shown that bias in performance evaluation can negatively influence the instrumentality of performance goal attainment to corporate outcomes, possibly as a result of the allocation of executive resources (time and energy) to corporate political activities. |
