ABSTRACT
We examine how the alignment of performance measurement and strategy affects performance on a multidimensional task. Our experiment varies both the strategy (speed versus accuracy) of the hypothetical firm for which participants work and the individual performance measure that is reported to them, creating two conditions of clear alignment and two of clear misalignment. We find that although workers are responsive to the performance measure regardless of its alignment, they are also sensitive to the strategy such that costly alignment effects are observed. We also predict and find that workers respond asymmetrically to misalignment in accuracy performance but not in speed performance, demonstrating that the effects of misaligned performance measurement depend on the fit between firm strategy and the nature of the task being performed.
Data Availability: Data are available from the authors upon request.
JEL Classifications: M40; M41; M50.
