Compensation or feedback: Motivating performance in multidimensional tasks

Employees often perform tasks with multiple dimensions. In this study, we examine how employees' performance on multidimensional tasks differs under different control structures. We conduct two experiments in which we manipulate the presence of compensation controls and the presence of feedback controls on multiple task dimensions. Our findings suggest that when employees are compensated on multiple dimensions they commit to multiple goals and divide their attention among those task dimensions. However, when feedback controls are implemented on one task dimension with compensation controls on another dimension, employees can improve performance on individual dimensions as well as their overall task performance. As a result, we find that employee performance on a multidimensional task can be higher when firms compensate employees on one task dimension and provide feedback on the other task dimension than when firms compensate on both task dimensions. This study highlights the benefits of complementing compensation-based controls (i.e., incentive pay) with non-compensation based controls (e.g., feedback), and provides a theoretical basis to help explain the prevalence of this approach in practice.