Does the Co-Development of Performance Measures with Branch Managers Improve Branch Target Achievement?

The purpose of this paper is to investigate if employee participation in the design of performance measures will improve the incentive effects (according to the controllability principle) and branch performance in a real estate brokerage chain. In contrast to most prior studies that observed how employees perceive their incentive plans, this paper focuses on whether employee participation in the design of performance measures will increase the sensitivity of reward-effortand result in better branch performance. On the basis of some branch-level sample data provided by the largest real estate brokerage company in Taiwan from 2010-2016, we found that when branch managers were allowed to offer their opinions on the design of performance measures, there was an increase in the sensitivity of the bonus to the fees paid to the headquarters besides an improvement in the performance of the branch offices, compared with the situation when using a statistical approach that identified controllable and non-controllable KPIs. These results provide evidence that allowing subordinates to express their voice in the development of performance measures makes it more likely that incentive pay will reflect employee efforts. Moreover, empirical evidence also indicates that giving employees the opportunity to express their opinions whiledesigning their incentive plans can increase the sensitivity of reward-effort and motivate them to improve branch performance.