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Scott, T. W. and P. Tiessen. 1999. Performance measurement and managerial teams. Accounting, Organizations and Society 24(3): 263-285.

Summary by James R. Martin, Ph.D., CMA
Professor Emeritus, University of South Florida

Behavioral Issues Main Page | Performance Measures Main Page | Teamwork Main Page

The purpose of this paper is to develop and test a model that addresses the following questions.

1. Should team performance be measured, and if so, how?

2. Is it important to integrate team performance into individual compensation?

3. What role does participation in setting performance targets play?

4. Does employing team performance measures improve team performance? (p. 264)

The basis of the model is the link between teams and complexity. After establishing this link, the authors develop nine hypotheses related to teams, participation in setting performance targets, performance measurement, compensation, and team performance.

Why Teams?

The section includes a discussion of the literature related to teams and the need for teams when complex tasks are required. This includes comments related to different types of tasks ( pooled, sequential, and reciprocal) and both intra-departmental and inter-departmental teams. This section establishes the link between complexity and teams, and provides the basis for the model development.

The Model

The model is illustrated in an adaptation of Figure 1 below.

Complexity, Teams, Compensation, Measurement, and Performance

The hypotheses that appear in the graphic illustration are provided below.

H1a: The diversity of team performance measurement is positively associated with greater involvement in intra-departmental teams.

H1b: The diversity of team performance measurement is positively associated with greater involvement in inter-departmental teams.

H2a: The weight given team performance in an individual's compensation is associated with greater involvement in intra-departmental teams.

H2b: The weight given team performance in an individual's compensation is associated with greater involvement in inter-departmental teams.

H3a: The weight of team performance in an individual's compensation is associated with the use of diverse team performance measures.

H3b: The weight of team performance in an individual's compensation is greater if team performance measurement is accompanied by greater participation in setting performance targets. 

H4a: Team performance is better when performance measures are more diverse and include both financial and non-financial measures.

H4b: Team performance is better if performance measurement is accompanied by greater participation in setting performance targets.

H5: Team performance is better the greater the weight team performance is given in compensation.

Sample and Method

The sample included 248 completed surveys (out of 193 from twelve for-profit organizations and 390 from 15 not-for-profit organizations). The measurements used are indicated in the table below adapted from Table 1 on p. 273.

Adaptation of Table 1: Variable Names & Definitions
Complexity Variables Task complexity Perrow's technology, aggregate of eight (5-point) items ranging from most routine and certain to least routine and certain.
Reciprocal Proportion of a department's work that passes to another department and then returns.
Hierarchical flatness Degree to which an organization's hierarchy is vertical. Measured as the inverse of the number of levels in the organization divided by the log of the number of employees.
Place-in-hierarchy Respondent's relative place in hierarchy, measured as the respondent's level divided by the total number of levels.
Proportion
of time
spent in teams variables
Intra-departmental Proportion of the respondent's time spent working in teams consisting of members drawn exclusively from his/her own department.
Inter-departmental Proportion of the respondent's time spent working in teams consisting of members drawn from at least one other department external to the respondent's own department.
Team performance
measurement variables
Measure 012 Respondent's teams have no performance measures (0), at least one financial or one non-financial performance measure but not both (1), at least one financial and one non-financial performance measure (2).
Measure 6 Number of performance measurement categories (0-6) used in respondent's teams (financial, productivity, quality, service, innovation, personnel).
Participation in setting performance targets variables Part Average participation across all performance measures used in the respondent's teams based on a five-point scale ranging from almost never, to almost always.
Part (H/L) The above divided into high/low at mean response level.
Partnon Average participation across all non-financial performance measures used in the respondent's teams.
Partin Participation in setting financial performance measures in the respondent's teams.
Compensation variables Compensate Proportion of respondent's compensation attributable to team performance.
Team Performance Variables Performance Performance of respondent's teams, five-point scale ranging from far below to far above expectations, mid-point is met expectations.

The statistical method used is referred to as simultaneous multivariate path analysis. According to the authors, "Path analysis has the advantage of estimating all the relationships indicated in Fig. 1 simultaneously" (p. 275). Two models were used. The first model uses an interval scale performance measurement variable in interaction with participation. The second model uses discrete combinations of performance measurement and high versus low participation.

Results

The results are presented in Table 4, p. 278. Panel A (adapted below) shows the results for the interval scale. Panel B (not provided here) shows the results for the discrete combinations of performance measurements and high versus low participation. The authors state the following in reference to Figure 1 and Table 4. "When variables appear at a node they are referred to as dependent variables, and the R2 at the end of the row corresponds to the percentage of the variance of each node that is explained by the paths leading to it."

Table 4: Results for Path Analysis
  Independent Variables
  Complexity Proportion of time Performance measurement    
Dependent variables Task complexity Reciprocal Place-in-
hierarchy
Hierarchical flatness Intra-
departmental
Inter-
departmental
Measure012 Measure012
Hi-Participation
Weight in compensation R2
Proportion of time in intra-department -.13 .18 .13 -.08           .067
Proportion of time in inter-department .21 .03 .18 .04           .097
Measure012 -.15 .10 -.11 -.15 .23 .13       .146
Weight in compensation -.04 -.09 -.12 .10 -.04 .25 .11 .19   .127
Team performance .12 -.06 -.01 -.01 .11 .07 .19 .071

Results

H1a: The diversity of team performance measurement is positively associated with greater involvement in intra-departmental teams. - Strongly Supported

H1b: The diversity of team performance measurement is positively associated with greater involvement in inter-departmental teams. - Strongly Supported

H2a: The weight given team performance in an individual's compensation is associated with greater involvement in intra-departmental teams. - Strongly Supported

H2b: The weight given team performance in an individual's compensation is associated with greater involvement in inter-departmental teams. - Strongly Supported

H3a: The weight of team performance in an individual's compensation is associated with the use of diverse team performance measures. - Supported

H3b: The weight of team performance in an individual's compensation is greater if team performance measurement is accompanied by greater participation in setting performance targets. - Supported

H4a: Team performance is better when performance measures are more diverse and include both financial and non-financial measures. - Supported

H4b: Team performance is better if performance measurement is accompanied by greater participation in setting performance targets. - Weakly Supported

H5: Team performance is better the greater the weight team performance is given in compensation. - Supported

Discussion - Questions and Findings

The authors discuss the findings in terms of the original questions and indicate that their study "provides a wide scope for future work." I have briefly summarized their discussion below.

1. Should team performance be measured, and if so, how?

Teams are formed in response to complexity and require both financial and non-financial measures to adequately capture performance.

2. Is it important to integrate team performance into individual compensation?

Comprehensive performance measurements and linking team performance to compensation enhances performance.

3. What role does participation in setting performance targets play?

Most of the influence of participation is related to participation in setting non-financial measures.

4. Does employing team performance measures improve team performance?

When team performance is measured more comprehensively, includes participation in setting performance targets, and includes team performance into compensation, team performance is enhanced.

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