Employee participation in developing performance measures and job performance: on the role of measurement properties and incentives

Involving employees in the development of performance measures often results in better employee job performance. Yet not all prior studies find such a direct effect. This study explains these inconsistent findings. It focuses on the measurement properties of performance measures and using them for incentive purposes. We expect different uses of performance measures for incentive purposes have offsetting effects, which removes the overall relation between PM participation and employee job performance. A survey was completed by 86 pairs of operators/professionals in various jobs and industries, and their supervisory managers. We used structural equation modeling to test the hypotheses, and many were supported. PM properties and using the performance measures for incentive purposes were found to mediate in the relation between PM participation and employee job performance: the indirect effect via PM properties and use of performance measures for evaluation purposes was positive, and the indirect effect via PM properties and use of performance measures for monetary rewards was negative. These opposite effects of both types of incentives explain why previous studies did not find a direct relation between PM participation and employee job performance.