Chapter 8 Flashcards
What is signaling?
Incentives don’t just motivate behavior; they send signals
But mismatch in signals can lead to unintended interpretations
Mixed Signals?
These are signals that can conflict with the desired outcome
What do Incentives need to be aligned with?
Incentives need to be aligned with the intended behavior to avoid confusion and conflicting motivations; they could have unintended side effects
What kind of Signals are there? And what do they influence?
Social-Signaling: People care about how they are perceived by others
Self-Signaling: People care about how they see themselves
Incentives can shift the meaning of behaviours due to different interpretation
How do financial incentives affect intrinsic motivation according to the case of German apprentices?
In the case study, tying financial bonuses to attendance decreased intrinsic motivation. Apprentices started seeing attendance as extraordinary behavior rather than a job expectation, leading to lower intrinsic motivation.
What were the four groups in the case study on store managers and their incentives?
Control Group (Information Only): Received product margin information with no extra incentives
Bonus Group: Given financial bonuses for increasing profits.
Performance Review Group: Received biweekly performance reviews with feedback on profits and challenges.
Bonus and Performance Review Group: Received both financial bonuses and performance reviews.
What was the effect of financial bonuses alone on store performance?
Financial bonuses alone had no significant effect on store profits compared to the control group, suggesting that extrinsic financial rewards were insufficient without guidance or structured feedback.
What is the crowding-out effect in the case study with the Bonus and Performance Review Group?
The crowding-out effect occurred when financial bonuses were combined with performance reviews. Managers became less transparent about challenges, fearing that seeking help might jeopardize their bonuses. This reduced the effectiveness of the feedback process, leading to no significant improvement in performance.
Why did the Bonus and Performance Review Group fail to improve store profits?
The combination of financial bonuses and performance reviews caused managers to withhold information about challenges, shifting the conversation dynamics. Managers became more self-reliant and less open to seeking help, which neutralized the positive effects of performance reviews
What is the Triple Bottom Line (TBL) Framework?
The TBL Framework extends traditional financial metrics to include social and environmental performance, suggesting businesses should measure success by their contributions to people (social) and the planet (environmental), not just profits.
How does sustainability integrate into managerial accounting through the Balanced Scorecard 2.0?
The Balanced Scorecard 2.0 incorporates financial, customer, internal process, learning, and growth perspectives along with social and environmental metrics, providing a holistic view of company performance
What is the “Growing the Pie” concept in sustainability?
The “Growing the Pie” concept illustrates that businesses can expand value for all stakeholders, not just shareholders. For example, Merck’s Mectizan donation improved their social impact and reputation, leading to long-term financial gains.
What tension exists between extrinsic and intrinsic motivators in managerial accounting?
Extrinsic motivators like financial bonuses can crowd out intrinsic motivation, reducing the effectiveness of performance reviews and collaborative problem-solving.
