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Articles (2016), Journal of Management Control, 27 (2), pp. 251-280

Fostering Strategic Renewal: Monetary Incentives, Merit-Based Promotions, and Engagement in Autonomous Strategic Action

Autonomous strategic actions (ASA) of an organization’s middle and lower level members can be a powerful source of strategic renewal. Yet, we still know little about whether monetary incentives and promotion policies are effective means of fostering ASA. I therefore discuss and experimentally test the effects of such incentives on organizational members’ engagement in ASA. The evidence suggests that switching from seniority-based promotions to merit-based promotion practices enhances ASA. At the same time, it seems to lead to what some scholars have termed a “crowding out” of autonomous motivation by extrinsic incentives. That is, for individuals who are autonomously motivated to engage in ASA, this motivation leads to higher ASA in a setting of seniority-based promotions than under merit-based promotions. Since autonomous motivation has been proposed to be particularly valuable for tasks requiring creativity and innovation, caution in the use of merit-based promotions thus seems advisable if individuals are autonomously motivated to engage in ASA. In contrast, switching from a flat salary system to a pay-for-performance system seems not to affect the role played by autonomous motivation for engagement in ASA; however, the effect of pay-for-performance in general on ASA seems to be marginal. Results thus suggest that when designing incentive schemes, practitioners are well-advised to consider that pay-for-performance and merit-based promotions do not have the same effects, and to take into account whether their middle managers are autonomously or extrinsically motivated to engage in ASA.

LINDER, S. (2016). Fostering Strategic Renewal: Monetary Incentives, Merit-Based Promotions, and Engagement in Autonomous Strategic Action. Journal of Management Control, 27(2), pp. 251-280.