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The Effects of Preventive and Detective Controls on Employee

Performance and Motivation
*
MARGARET H. CHRIST, University of Georgia
SCOTT A. EMETT, Cornell University
SCOTT L. SUMMERS, Brigham Young University
DAVID A. WOOD, Brigham Young University
1. Introduction
As recognized in the law (e.g., the Sarbanes-Oxley Act of 2002), professional risk frame-
works (Committee of Sponsoring Organizations of the Treadway Commission [COSO] 1992,
2004), auditing standards (American Institute of Certified Public Accountants [AICPA]
2007; Public Company Accounting Oversight Board [PCAOB] 2007), accounting textbooks
(Reding et al. 2007; Romney and Steinbart 2009), and management best practices (Merchant
and Van der Stede 2007), formal controls serve a vital role in safeguarding a company’s
operational processes, information, and assets and in providing reasonable assurance regard-
ing the reliability of financial reporting. Although critical to a company’s success, relatively
little is understood about how and why specific types of formal control are effective.
Prior research in accounting and economics examines how formal controls influence
employee behavior, often finding that formal controls can have negative consequences,
such as lower employee effort and firm profit. Recently, research has begun to focus on
how employees’ response to formal controls can be influenced by specific aspects of the
imposed control (e.g., Christ, Sedatole, and Towry 2011). This study extends this line of
research by providing evidence as to how and why two types of formal controls, preven-
tive controls and detective controls, affect employee performance and motivation.
Romney and Steinbart (2009: 200) define preventive controls as controls that ‘‘deter
problems before they arise’’ and detective controls as controls designed to ‘‘discover prob-
lems after they occur’’. These types of formal controls differ in two fundamental ways.
First, preventive controls restrict employees’ autonomy by prohibiting certain behaviors
(e.g., employees cannot enter data or make a payment unless authorized to do so). Alter-
natively, detective controls maintain the decision rights of employees and therefore do not
limit their autonomy (Christ, Sedatole, Towry, and Thomas 2008). Second, the feedback
provided by preventive controls is never delayed, whereas detective controls can provide
immediate or delayed feedback. Importantly, companies can often choose to impose either
preventive or detective controls to address the same control objective.
1
For example, with respect to the expenditure cycle, different types of controls can be
implemented to ensure that only authorized cash disbursements are made. Specifically,
* Accepted by Alan Webb. We are grateful for the comments of the associate editor Alan Webb and two
anonymous reviewers. We also thank Michael Bamber, Jim Cannon, Josh Coyne, Steve Glover, Kathy
Hurtt, Sue McMahon, Jaime Schmidt, Chad Simon, Jason Smith, Bill Tayler, Todd Thornock, Shankar
Venkatraman, Brady Williams, workshop participants at the University of Utah, and conference partici-
pants at the 2010 IS section mid-year meeting for providing helpful comments and suggestions. We thank
Garren Wood for programming the experiment.
1. Preventive controls are often considered to be more costly to implement than detective controls (Hermanson
and Hermanson 1994).
Contemporary Accounting Research Vol. 29 No. 2 (Summer 2012) pp. 432–452 Ó CAAA
doi:10.1111/j.1911-3846.2011.01106.x
management could implement each of the following types of controls: (1) preventive: estab-
lish authorization limits prohibiting employees from initiating disbursements above a pre-
specified amount; (2) detective with immediate feedback: an alert is activated on an
employee and⁄ or supervisor’s computer monitor when a disbursement above a prespecified
amount has been entered; or (3) detective with delayed feedback: a report of all disburse-
ments over the prespecified amount is produced periodically (e.g., monthly). Our research
examines differential costs and benefits of these three types of controls, which should
enable managers to make more informed control decisions.
We examine several of the costs and benefits of these types of formal controls in a set-
ting in which management has implemented an incomplete contract. Specifically, one
dimension of the employees’ responsibilities is directly compensated (i.e., compensated task
dimension) and the other dimension is not compensated, but is subject to a formal control
imposed by management (i.e., controlled task dimension). We examine the effects of for-
mal control on the compensated and controlled dimensions of the task separately so that
we can isolate formal control effects from the incentive contract effects.
We rely on psychology research on salience, norms, and intrinsic motivation to form
our predictions regarding how preventive and detective controls will affect employee per-
formance and motivation. We expect that when a formal control is activated, it will
increase the salience of the employee’s goal to comply with various goals of the organiza-
tion for which s ⁄ he is not explicitly compensated, despite the fact that it may conflict with
the employee’s goal to perform strongly on the compensated dimensions of his ⁄ her task.
We hypothesize that reductions in autonomy caused by a control and increases in the
timeliness of control feedback will increase the salience of the control objective. Thus, we
expect employees subject to preventive controls to exhibit stronger performance on the
controlled dimension than employees in the other control conditions. Employees working
in conditions with detective controls with immediate feedback should be the next best per-
formers on the controlled dimension of the task followed by employees working in condi-
tions with detective controls with delayed feedback and employees operating without
controls, respectively.
Motivational framing research further suggests that it is difficult for individuals to
have multiple (potentially conflicting) goals ⁄ frames activated at the same time (Lindenberg
2001). We therefore predict that when employees focus on the goal of performing well on
the controlled task dimension, they will focus less on the goal to excel on other task
dimensions (e.g., the compensated dimension in our study) and will consequently perform
worse on those dimensions. This suggests a reverse order of how employees facing these
control types will perform on the compensated dimension of the task relative to their per-
formance on the controlled dimension.
To test these predictions, we use a simplified data entry task in an experimental setting
in which participants are financially motivated to enter data as quickly as possible (com-
pensated dimension). Importantly, participants are informed that the company values both
data entry speed and accuracy. However, rather than also compensating participants for
accuracy, the company implements a formal control to encourage accuracy (controlled
dimension).
Our results reveal that participants exposed to preventive controls or detective controls
with immediate feedback perform significantly better on the controlled dimension of the
task (data entry accuracy) than participants in the detective control-delayed feedback con-
dition. This suggests that the timeliness of control feedback is the salient feature influenc-
ing performance. We do not find differences in the overall performance on the
compensated dimension (data entry speed), suggesting that explicit incentives still provide
a powerful motivation despite the activation of formal controls directing attention to other
dimensions of the task.
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In addition to examining how formal controls affect employee performance, we add to
the growing literature on the unintended costs of formal controls by examining how differ-
ent formal control types affect employees’ intrinsic motivation to perform the task. We
expect that because preventive controls restrict autonomy, which likely will be perceived by
employees as ‘‘controlling’’, they will be more detrimental to employees’ intrinsic motivation
than detective controls. Consistent with our expectations, the results show that preventive
controls significantly reduce intrinsic motivation relative to both types of detective controls.
This suggests that the extent to which formal controls restrict employees’ autonomy, and
not the timeliness of the feedback they provide, influences employees’ intrinsic motivation
to perform their responsibilities. Further, we confirm results from prior research finding that
lower intrinsic motivation leads to lower performance on all dimensions of the task.
Taken together, our results suggest that detective controls that provide immediate
feedback can be just as effective at producing high employee performance as preventive
controls (and more effective than detective controls with delayed feedback or no controls),
without causing a decrease in intrinsic motivation that is exhibited by employees subjected
to preventive controls. Therefore, organizations can likely achieve many of their control
objectives by increasing the timeliness of feedback from detective controls, without bearing
the costs associated with preventive controls.
This study provides several important practical and theoretical contributions. First,
this study can inform practitioners, auditors, and regulators who design, implement, and
evaluate formal controls about some of the potential costs and benefits of various types of
formal controls. Formal controls play a critical role in promoting efficiency, reducing risk
of asset loss, ensuring the reliability of financial statements, and promoting compliance
with laws and regulations (COSO 1992). Our study suggests that practitioners can better
achieve many of these control objectives by implementing formal controls that provide
immediate feedback. Furthermore, this study suggests that formal controls which restrict
employee autonomy reduce employees’ intrinsic motivation, and practitioners would there-
fore benefit in many situations by implementing formal controls that provide immediate
feedback but do not restrict user autonomy.
Second, this study contributes to several streams of academic research on formal con-
trols. To our knowledge, ours is the first study to examine the differential impact of pre-
ventive and detective controls on employee performance and motivation. Further, this
study also contributes to a growing body of literature examining some of the unintended
consequences of formal controls (e.g., Frey 1993; Das and Teng 1999; Tenbrunsel and
Messick 1999; Christ et al. 2008; Tayler and Bloomfield 2011).
The remainder of the paper is organized as follows. Section 2 provides theoretical
development of our hypotheses. In section 3 we describe our experiment. We provide
our results in section 4 and conclude and describe potential avenues for future research in
section 5.
2. Literature review and hypotheses development
Classifications and importance of formal controls
Formal controls can take many forms, including, but not limited to, policies and proce-
dures, segregation of duties, performance-based compensation, supervisory reviews, com-
puterized edit checks, and so on. Academics have developed a variety of control
frameworks to classify the many different types of controls. Some focus on the object of
control (e.g., behavior vs. output) (Merchant and Van der Stede 2007), while others focus
on the control method (e.g., boundary systems, belief systems, etc.) (Simons 1990). How-
ever, practicing accountants and auditors generally classify controls as preventive or detec-
tive, based on how risk is mitigated (COSO 1992, 2004; AICPA 2007; PCAOB 2007).
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When determining the specific formal control type to implement, management would
benefit from understanding how different control types influence employee performance
and motivation. Further, prior academic research reveals that formal controls often have
unintended consequences, which can ultimately be detrimental to the organization (e.g.,
Das and Teng 2001). Therefore, management should also consider the potential repercus-
sions of their control design choices when designing formal controls.
In this study, we examine a simplified work environment in which we manipulate the
formal control type and measure employee performance and intrinsic motivation. Similar
to the real world, we use a work environment in which management employs an incom-
plete contract (e.g., Williamson 1985; Ittner, Larcker, and Rajan 1997), using formal com-
pensation contracts to encourage certain types of behavior while implementing formal
controls to encourage other types of behavior. Thus, we examine how different formal
control types impact employees’ performance on both compensated and controlled dimen-
sions of their responsibilities. The control environment used in our experiment is designed
to isolate the effect of various formal control types from the effects of the incentive con-
tract. Therefore, we explicitly do not compensate the employees based on all task dimen-
sions, but rather allow the formal control to induce certain desired behavior.
Effect of formal controls on controlled task dimensions
Standard economic theory predicts that individuals are self-interested and therefore pri-
marily motivated by explicit incentives. Following this logic, employees are expected to
respond only to the financial incentives described in their formal employment contract.
However, a growing body of research on individuals’ preferences for social norms and sit-
uational framing suggests that there are other ways to direct employees’ behavior towards
the best interests of the organization (e.g., Evans, Hannan, Krishnan, and Moser 2001;
Camerer and Fehr 2004; Osterloh and Frey 2004; Hannan 2005; Hannan, Rankin, and
Towry 2006; Fischer and Huddart 2008).
A substantial body of research has developed indicating that individuals are strongly
motivated by stated goals and objectives (e.g., Locke, Shaw, Saari, and Latham 1981;
Locke and Latham 1990; Locke 1996). Indeed, specific performance measures are incorpo-
rated into employment contracts to align employees’ goals with the goals of the organiza-
tion so that employees will focus their efforts on activities benefiting the organization
(Farrell, Kadous, and Towry 2008). One reason goals provide such powerful motivation is
that they can change the way a situation is framed. Lindenberg (2003) describes two
frames linked to employees’ goals that, together, can provide strong governance: the gain
frame and the normative frame. The gain frame relates to one’s goal to improve one’s
resources (i.e., earn money). The normative frame is related to one’s goal to ‘‘act appropri-
ately’’, which can be defined as adhering to institutionalized rules such as policies and pro-
cedures (March and Olsen 1995). When an employee is faced with an explicit contract
tying specific aspects of his ⁄ her performance to financial incentives, it is likely that the
gain frame will be dominant and any other goals will be secondary (Lindenberg 2003).
However, individuals’ behavior can be redirected or refocused when a stimulus is intro-
duced. In this paper, we argue that the activation of a formal control is such a stimulus.
Importantly, formal controls have specific aspects which differ among control types,
and these differences are likely to make certain types of controls stronger stimuli than
others. Therefore, certain controls are more likely to effectively redirect employees’ atten-
tion toward the control objective. In this study, we examine two such aspects of controls
that we expect will increase the likelihood that employees will focus on the control
objective.
First, controls that restrict employees’ autonomy are likely to serve as a stimulus that
makes the controlled dimensions of the task more salient. Prior research shows that
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people have a preference for autonomy and experience decreased motivation when their
autonomy is reduced or threatened (Brehm 1966; Brehm and Brehm 1981; Deci and Ryan
1987; Ryan and Deci 2000). Further, prior research reveals that when employees believe
their autonomy has been restricted by controls they feel less trusted and also trust their
managers less in return. This resultant lack of trust yields negative consequences to the
organization including poor employee cooperation, decreased effort, and reduced profit-
ability (Christ et al. 2008, 2011). As suggested by prior research, restrictions to employ-
ees’ autonomy have a strong impact on the employees’ motivational state, beliefs, and
behaviors. Therefore, formal controls that restrict employees’ autonomy are likely to be
particularly effective at encouraging desired behaviors from employees, but may have a
cost in doing so. In this case, we expect that controls with such a characteristic will act
as effective stimuli in redirecting employees’ attention towards the controlled dimensions
of the employees’ task that, in our experiment, align with the (noncontracted) goals of
the organization.
Importantly, preventive and detective controls do not restrict employees’ autonomy to
the same extent. By nature, preventive controls prohibit various behaviors and actions and
therefore are particularly restrictive. Detective controls, on the other hand, preserve the
decision rights of employees by allowing them to perform their job responsibilities in the
manner in which they prefer and identify errors or undesirable events after they have
occurred. Furthermore, prior experimental research finds that employees do not perceive
detective controls to be more restrictive to their autonomy than no control (Christ et al.
2008).
2
A second dimension on which preventive and detective controls differ and which is
likely to influence the salience of the control objective is the timeliness of control feedback.
Specifically, the feedback provided by a preventive control is provided immediately; on the
other hand, feedback from a detective control can be either immediate or delayed, depend-
ing on the control design. That is, each time an employee attempts a prohibited action, a
preventive control will alert him⁄ her of the control and disallow the action before the
action is completed. On the other hand, detective controls may provide feedback immedi-
ately or with a delay. Thus, preventive controls increase the proximity of the prohibited
action to the feedback, thereby providing a stronger signal to focus attention on the con-
trol objective relative to detective controls with delayed feedback, but not relative to detec-
tive controls with immediate feedback.
In summary, we expect that two characteristics of formal controls will influence the
salience of (and employee performance on) the controlled dimensions of a task: restriction
of autonomy and immediacy of feedback. We expect that preventive controls, which
restrict autonomy and provide timely feedback, will be most effective at directing employ-
ees’ attention towards the control objective. Furthermore, we predict that detective con-
trols with immediate feedback, which do not restrict autonomy but provide timely
feedback, will be more effective than detective controls with delayed feedback, which do
not restrict autonomy or provide timely feedback. Finally, we predict that detective con-
trols, which provide feedback that is delayed, will be more effective than no controls at
directing employee behavior towards the controlled dimension of the task. We state these
expectations formally in the following hypotheses:
2. Using a case-based experiment in which participants assumed the role of a firm in a partnership with
another firm, Christ et al. (2008: 43) ask participants: ‘‘To what extent do you feel that your firm has the
autonomy to make decisions regarding operations?’’ Responses from participants in the output control
condition are not significantly different from those in the no control condition. The authors conclude that
‘‘by focusing on outputs, the controlled party is more likely to believe they’re freer to make decisions and
to go about their responsibilities as long as the output meets the requirements of the other party’’.
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HYPOTHESIS 1a. Employees will perform better on the controlled dimension of the task
when a preventive control is imposed as compared to when a detective control with
immediate feedback is imposed (effect of reduced autonomy).
HYPOTHESIS 1b. Employees will perform better on the controlled dimension of the task
when a detective control with immediate feedback is imposed as compared to when a
detective control with delayed feedback is imposed (effect of feedback immediacy).
HYPOTHESIS 1c. Employees will perform better on the controlled dimension of the task
when a detective control with delayed feedback is imposed as compared to when no
controls are imposed (effect of feedback presence).
Effects of formal control on compensated task dimensions
As previously discussed, the salience of different goals can influence how employees frame
a situation, which can have a significant effect on their behavior. We hypothesize that the
differential restriction of autonomy and timeliness of feedback of preventive and detective
controls will affect the salience of the employees’ goal to perform strongly on the con-
trolled task dimension. Although individuals can focus on multiple goals ⁄ frames at a time,
one goal is likely to dominate and therefore monopolize their attention (Lindenberg
2001).
3
Therefore, increased focus on certain goals is likely to come at the expense of other
goals.
If the salience of the controlled dimension of the task dominates an employee’s atten-
tion when a particular formal control type is present, any other goals (i.e., goals related to
a compensated task dimension) are likely to receive less focus. Thus, because we expect
that employees who are exposed to preventive controls will have a significantly greater
focus on the controlled objective, they are likely to focus less on the compensated task
dimension (perhaps unconsciously) and perform worse than employees facing no controls
or those facing detective controls, regardless of feedback timeliness. As previously
described, detective controls can be designed to provide immediate feedback. Thus, we
expect that detective controls with immediate feedback are more likely to refocus an
employees’ attention on controlled task dimensions and away from the compensated
dimensions than are detective controls with delayed feedback. We anticipate that this will
result in weaker performance on the compensated dimension in the detective immediate
feedback condition than in the detective delayed feedback condition. Finally, since detec-
tive controls with delayed feedback differ from a no control condition in terms of the pres-
ence of control feedback, detective controls with delayed feedback should diminish
performance on the compensated dimension relative to the no control condition. Stated
formally:
HYPOTHESIS 2a. Employees will perform worse on the compensated dimension of the task
when a preventive control is imposed as compared to when a detective control with
immediate feedback is imposed (effect of reduced autonomy).
HYPOTHESIS 2b. Employees will perform worse on the compensated dimension of the task
when a detective control with immediate feedback is imposed as compared to when a
detective control with delayed feedback is imposed (effect of feedback immediacy).
3. The extent to which one goal dominates other goals and relegates them to the background depends on the
strength of those goals and their compatibility with the dominant goal (Lindenberg 2001).
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HYPOTHESIS 2c. Employees will perform worse on the compensated dimension of the task
when a detective control with delayed feedback is imposed as compared to when no
controls are imposed (effect of feedback presence).
Effects of formal control on intrinsic motivation
In addition to considering the relative effects of preventive and detective controls on
employee performance, managers must understand and weigh the potential costs associ-
ated with formal controls. A large body of research finds that formal controls often have
unintended consequences that can undermine their objectives (e.g., Frey 1993; Das and
Teng 1999; Tenbrunsel and Messick 1999; Christ et al. 2008). For example, formal con-
trols have been found to reduce employees’ trust in management, resulting in diminished
cooperation (e.g., Christ et al. 2008), reduced effort (e.g., Christ 2011), and increased
employee fraud (e.g., Packard 1995).
Most recently, accounting research has focused on understanding the specific aspects
of formal controls that can cause these unintended consequences. For example, Christ et
al. (2008) compare outcome controls (i.e., controls related to the outputs generated from
an activity) to behavioral controls (i.e., controls that constrain employee behavior) and
find that behavioral controls are more detrimental to trust and cooperation because
employees perceive them to be more intrusive and to limit their autonomy to a greater
extent. In a separate study, Christ et al. (2011) consider the effects of control framing on
employee trust, finding that while negatively framed formal controls (i.e., penalties for
missed performance targets) reduce employee trust, positively framed controls (i.e.,
bonuses for achieving performance targets) enhance trust.
Prior research suggests there may be other costs of formal controls as well. One notable
example is the degradation of employees’ intrinsic motivation.
4
Frey and Jegen (2001) argue
that managers often unintentionally ‘‘crowd out’’ intrinsic motivation through extrinsic incen-
tives and formal controls. Research on intrinsic motivation suggests that these external inter-
ventions can erode employees’ intrinsic motivation ‘‘if the affected individuals perceive them
to be controlling’’ (Frey and Jegen 2001: 594, emphasis added). Researchers find that when
employees perceive an external intervention to be controlling, it not only reduces intrinsic
motivation, but their work performance and effort are also likely to be diminished over time
(e.g., Deci 1975; Deci and Ryan 1987; Frey 1993; Chang and Lai 1999; Frey and Jegen 2001;
Fessler 2003; Baard, Deci, and Ryan 2004).
5
In these studies, the central factor in reducing
intrinsic motivation is the employee’s perception that s ⁄ he is being controlled (Deci 1975).
To understand the influence preventive and detective controls have on employees’ intrinsic
motivation, we consider whether each formal control type is likely to be considered particularly
controlling. If some formal control types are not perceived by employees to be controlling,
then management may be able to achieve its control objectives (i.e., induce desired employee
behavior) without causing the negative effects of diminished intrinsic motivation.
In the previous sections we argue that preventive and detective controls can differ in
terms of the timeliness of control feedback and the extent to which the control restricts
employees’ autonomy. We do not expect the control feedback timeliness to induce a
4. Intrinsic motivation has been shown to be one of the strongest predictors of job satisfaction (Kalleberg
1977), which provides many benefits to organizations, including decreased absenteeism, low turnover, and a
willingness to help other employees and to engage in activities without compensation (i.e., working unpaid
overtime, suggesting process improvements, etc.). Employees who are intrinsically motivated also tend to
exhibit better work performance, as measured by work performance evaluations (Baard et al. 2004).
5. In the ‘‘crowding out’’ literature, researchers have demonstrated that monetary formal controls (see, e.g.,
Frey and Jegen 2001; Fessler 2003) as well as nonpecuniary formal controls (e.g., see Frey 1993) can
crowd out intrinsic motivation.
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CAR Vol. 29 No. 2 (Summer 2012)
feeling of being controlled in employees. In fact, timely feedback may be viewed favorably
by employees, in that it can be helpful as they complete their tasks (Nadler, Mirvis, and
Cammann 1976; Michaelsen and Schultheiss 1989). However, controls that restrict auton-
omy (i.e., preventive controls) are likely to be viewed as more controlling because, by
design, they limit employees’ behavior. Indeed, prior research on intrinsic motivation
suggests that intrinsic motivation is positively related to one’s perceived autonomy when
performing an action (Ryan and Deci 2000). Thus, since preventive controls reduce auton-
omy more than detective controls (irrespective of the timeliness of detective control feed-
back), we expect employees working in conditions with preventive controls to have lower
intrinsic motivation than employees working in conditions with detective controls or no
formal controls. Further, as described in prior literature, detective controls are not
perceived to limit autonomy more than no controls (Christ et al. 2008). Therefore we do
not predict a difference between detective controls and no controls.
HYPOTHESIS 3. Preventive controls will negatively impact intrinsic motivation to a greater
extent than detective controls with immediate feedback, detective controls with
delayed feedback, and no controls.
Our hypotheses are summarized and illustrated in Figure 1. In addition to testing Hypoth-
eses 1–3, we also test whether greater intrinsic motivation leads to higher performance, as
shown in prior research (e.g., Baard 2002; Baard et al. 2004). Although extrinsic interven-
tions can crowd out intrinsic motivation, to the extent they do not completely remove all
intrinsic motivation, the remaining intrinsic motivation should be positively associated
with performance. Thus, while we expect different types of formal controls to differentially
impact intrinsic motivation, we also expect that greater intrinsic motivation should be
positively associated with task performance.
3. Experimental method
Participants
We recruited 136 graduate and undergraduate business students to participate in the study.
Five participants could not complete the task due to computer problems and were
excluded from the analysis. We therefore report the results for 131 participants.
Salience of
Controlled
Task
Timeliness of
Control
Feedback
Restriction of
Autonomy by
Controls
+
+
+
Intrinsic
Motivation

Performance on
Compensated
Task Dimension

+
+
Performance on
Controlled Task
Dimension
+
Dimension
Figure 1 Conceptual model
Notes:
The conceptual model presents our expectation for how controls can influence compensated goals,
controlled goals, and intrinsic motivation. Each type of control has differential characteristics
in terms of the timeliness of feedback or autonomy of the control. Timeliness of feedback and
autonomy of the control are both expected to positively influence the salience of controlled
goals which in turn positively influences accuracy and negatively influences speed. The restric-
tion of autonomy also negatively affects an employee’s intrinsic motivation.
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CAR Vol. 29 No. 2 (Summer 2012)
Student participants are appropriate in this experiment for two reasons: (1) the same
type of task is performed by students (or people of similar background) in the ‘‘real’’
world and (2) previous psychology research does not suggest age ⁄ experience should matter
in this task. With regards to the first point, our task, data entry, is often performed by stu-
dents as part-time or full-time employment. Further, typing is a standard skill required of
and practiced by college students. With regard to the second point, we are unaware of any
research on goals, frames, and salience that would suggest our results would be systemati-
cally biased by using student participants for our task. The phenomena we are examining
are general in nature and are unlikely to differ based on age ⁄ experience.
Experimental task and manipulations
We employ a 1 · 4 experimental design. The four conditions we examine vary the type of
formal control (preventive and detective), which implicitly varies the extent to which the
control limits the participants’ autonomy and the timeliness of the feedback it provides.
We describe each condition after introducing the experimental task.
The experimental task consisted of seven parts: the introduction, demographic ques-
tions, a pretest task, instructions (and the introduction of the experimental manipulation
for that participant), a test of understanding, the experimental (data entry) task, and addi-
tional questions. Participants arrived at a computer lab that was equipped with standard-
ized computers and keyboards. Upon arrival, the participants logged on to a secure
Internet website and read a brief introduction to the experimental task. The introduction
stated (emphasis as in the experiment):
For today’s study you will perform a data entry task (i.e., a typing tutor type task). We
want you to type as quickly and as accurately as possible. You will be compensated based
on how fast you enter the data on the screen—the faster you type, the more money you
will make.
We informed participants that they would be compensated based on how fast they
entered data relative to a fixed, predetermined benchmark (based on pilot testing) and not
relative to the other participants, and that payoffs would range from $5.00 to $15.00 with
an expected average payoff of $10.00.
6,7
Because participants were paid based on the speed
with which they entered data, we use data entry speed as a proxy for their performance on
the compensated dimension of the task. Similarly, because participants were controlled on
accuracy, we use data entry accuracy as a proxy for performance toward the controlled
dimension of the task. Next, we gave participants specific instructions about how to com-
plete the task, which included an example.
6. The scale, based on extensive pretesting, ranged from payment of $6 for participants who entered at least
40 words per minute to $15 for those whose data entry speed exceeded 77.4 words per minute (with a $10
payoff for 60 words per minute). The scale was designed to create a uniform distribution of payouts over
the advertised payout range. Consistent with several studies in experimental economics, we did not inform
participants of the exact conversion rate between their actions and their payouts, but did provide the
range and expected average payoff that would be earned (see, e.g., Bowlin, Hales, and Kachelmeier 2008).
7. We did not disclose the specific performance benchmark to participants because we wanted to hold con-
stant the economic incentive to perform well on both typing speed and accuracy across conditions. Given
our expectation that speed and accuracy would differ across conditions, revealing specific benchmarks
could cause perceptions of expected earnings to differ by condition, while the intent of this study was to
understand the effect of controls irrespective of perception of expected earnings. In order to isolate the
effect of controls, we wanted to hold constant perceptions of pay and therefore chose to use a ‘‘do-your-
best’’ goal rather than provide specific benchmarks. Future research may wish to investigate how specific
benchmarks interact with controls.
440 Contemporary Accounting Research
CAR Vol. 29 No. 2 (Summer 2012)
After the introduction, participants answered demographic questions and began the
pretest task. In the pretest, all participants entered the same 1,011 characters (12 lines of
data on three screens). No controls were implemented on any characters. This task was
meant to establish a baseline of performance for each participant. Participants were paid
based on their performance during the pretest task in the same manner as they were com-
pensated for the main task.
After finishing the pretest task, we provided additional instructions to participants.
First, we reminded participants of the importance of both accuracy and speed and the gen-
eral rules for performing the data entry task. Second, we introduced one of the four exper-
imental manipulations (varied among participants).
1. No control condition: no controls were implemented and the task was identical to
the pretest task.
2. Preventive control condition: controls were implemented on some characters such that
if participants did not enter the correct character: (1) they could not advance to the
next character until they had entered the correct character and (2) the incorrectly
entered character would turn red. As part of the instructions, participants were given
an example and told to try entering the wrong characters to observe what happened.
3. Detective control, immediate feedback condition: controls were implemented on some
characters such that, if participants entered the wrong character, the missed charac-
ter would turn red but the cursor would advance (i.e., participants could not correct
the mistake, but would immediately see that they had made the mistake). As part
of the instructions, participants were instructed to try entering the wrong characters
on an example line of text.
4. Detective control, delayed feedback condition: controls were implemented on some
characters such that, if participants entered the wrong character, the missed character
would turn red after the participant finished entering all of the characters on the
screen. Specifically, the participant would finish entering all text on a screen, hit con-
tinue, and a second screen would show what characters (with controls) the partici-
pant had missed. Similar to the detective, immediate feedback condition, participants
in this condition could not correct their mistakes. As part of the instructions, partici-
pants were instructed to try entering the wrong characters on an example line of text.
Once participants finished reading the second set of instructions, they began the data
entry task (i.e., the main experimental task). Participants completed 3,209 characters (38 lines,
eight screens) of data entry.
8
Formal controls were assigned to a random set of approximately
20 percent of the characters. The formal controls were imposed on the same characters in all
conditions. Next, participants answered debriefing questions. Finally, participants were paid
based on their performance on the compensated dimension of the task (i.e., data entry speed).
Measures
To test our hypotheses, we develop measures of data entry accuracy (performance on the
controlled dimension), data entry speed (performance on the compensated dimension), and
intrinsic motivation. To measure accuracy, we test whether participants enter the correct
character for each character that does not have a formal control.
9
We examine only those
8. The data entry material for both pretesting and testing came from the company history and a news release
of Millenniata, Inc., a start-up company that produces archival quality DVDs (and DVD writers) that
‘‘will preserve data for generations’’ (Millenniata 2011). The material described the history of Barry Lunt,
the originator and founder of the company, how he developed the technology, and the benefits of the
technology.
9. To compare the same characters in all conditions, for the no control condition we only analyze the equiva-
lent characters for which there was no control in place in the conditions with controls.
Effects of Preventive and Detective Controls 441
CAR Vol. 29 No. 2 (Summer 2012)
characters without formal controls because, by definition, participants must enter the cor-
rect character in the preventive control condition, which ensures the correct character will
eventually be entered. Further, examining characters for which controls are not in place
allows us to examine how formal controls influence behavior in a task in which controls
are only activated at key times (i.e., it provides insights into how the existence of a formal
control influences the control environment). To observe differences in accuracy, we prevent
the alteration of any uncontrolled characters in all conditions and in both pretask and task
sections of the experiment.
10
Participants have only a single opportunity to enter the correct character for uncon-
trolled characters. For each participant, we calculate the ratio of errors to total uncon-
trolled characters in the experimental task and subtract it from the participant’s ratio of
errors to total uncontrolled characters in the pretest task.
11
A positive value for this metric
suggests the participant’s performance improved relative to the pretest task and a negative
value suggests they performed worse. To restate using mathematical notation, the accuracy
measure we use for testing is computed as follows:
Accuracy ¼
Total uncontrolled errors made in pretest task
Total uncontrolled characters ðpretestÞ
À
Total uncontrolled errors made in test task
Total uncontrolled characters ðtestÞ
To measure data entry speed (compensated dimension), we time, to the thousandth of a
second (i.e., 0.001), how long it takes participants to enter each (uncontrolled) character.
Similar to our measure of accuracy, we calculate a ratio of time per uncontrolled character
in the test task and subtract it from a ratio of time per uncontrolled character in the pre-
test task. A positive value suggests the participants entered data faster relative to the pre-
test task, and a negative number suggests they entered data slower in the experimental
task than in the pretest task. To restate using mathematical notation, the speed measure
we use for testing is computed as follows:
Speed ¼
R Time spent entering uncontrolled characters in pretest task
Total uncontrolled characters ðpretestÞ
À
R Time spent entering uncontrolled characters in test task
Total uncontrolled characters ðtestÞ
To measure intrinsic motivation, we follow the method developed by Rosenfield,
Folger, and Adelman 1980 and ask participants to rate the data entry task based on
several dimensions. Using a seven-point scale, participants rated the task in terms of how
10. All accuracy and speed results are qualitatively similar to those reported if we include in the analysis all
characters regardless of whether they have formal controls in place. Further, all results relating to the
compensated dimension (data entry speed) are qualitatively similar if we exclude characters on which a
participant entered an incorrect character. Thus, the measures of speed and accuracy can be considered
independent of each other in this task. For the purpose of this paper, qualitatively similar results mean
that the results are in the same direction and of the same level of statistical significance (i.e., moderate sig-
nificance = p-value < 0.10, significant p-value < 0.05).
11. Subtracting the pretest score from the task score, in addition to randomization, helps remove any differ-
ences that could have been caused by factors other than the manipulations (e.g., differences in intrinsic
typing ability).
442 Contemporary Accounting Research
CAR Vol. 29 No. 2 (Summer 2012)
interesting, entertaining, enjoyable, and exciting they perceived the task. We sum their
responses to these scales to form our measure of intrinsic motivation.
12
To test our hypotheses, we conduct contrasts of the different conditions using analysis
of variance. We attribute differences between the detective, delayed control feedback con-
dition and the detective, immediate control feedback condition to differences in the timeli-
ness of feedback whereas differences between the preventive control condition and the
detective, immediate control feedback condition are likely caused by differences in restric-
tion of autonomy. Finally, to confirm the positive association between intrinsic motivation
and performance, we include our measure of intrinsic motivation in our tests. We note all
results are qualitatively similar if we exclude intrinsic motivation from the analyses.
4. Results
Descriptive statistics
The participants included undergraduate (78 percent) and graduate (12 percent) level stu-
dents. Sixty-nine percent of participants were male. We asked participants how fast they
believed they typed both before and after the task. The average response before the task
was 59 words per minute and 56 words per minute at the completion of the task. The task
took on average 24.3 minutes to complete.
To ensure participants understood the formal control imposed, we asked them to
explain (in narrative form) the differences between the pretest instructions and the instruc-
tions for the main experiment (where the manipulation was introduced). Coding of the
open-ended manipulation check suggests that, overall, participants understood their con-
trol condition. Dropping participants who failed the manipulation check yields qualita-
tively similar results.
13
Table 1 contains descriptive results. Turning first to performance on the controlled
dimension of the task, accuracy, the descriptive results are consistent with our expectations
in Hypotheses 1a–1c in that participants exposed to preventive controls exhibit the best
performance (i.e., most accurate data entry) followed by those in the detective immediate
feedback condition (DetectiveIMFB), then the detective delayed feedback condition
(DetectiveDFB), and finally the no controls condition, respectively. The reported accuracy
score in Table 1 suggests that in the preventive control condition, participants made errors
on 15.8 (6.6) percent of the characters entered into the pretest (test) task. The variable used
for testing, 0.092, suggests that in the preventive control condition, participants entered
incorrect responses on 9.2 percent fewer characters in the experimental task that had been
erroneous in the pretesting task.
Turning next to the participants’ performance on the compensated dimension of the
task, data entry speed, the descriptive results reported in Table 1 are inconsistent with
Hypotheses 2a–2c. Specifically we find that participants’ performance on the compensated
12. Results are qualitatively similar if we use any single measure or average the measures. We also conduct a
confirmatory factor analysis and find that the four variables load reasonably well on the latent construct
of intrinsic motivation (v
2
= 5.77, p-value = 0.077; AGFI = 0.904; RMSEA = 0.11). If we then use the
intrinsic motivation factor created from the confirmatory factor analysis in our analyses, the results are
qualitatively similar to those reported.
13. A research assistant (RA) who was unfamiliar with the nature of this experiment and one author, blind to
the experimental condition, coded the open-ended responses to determine whether participants understood
the new instructions. If initial coding differed, a second author resolved the differences. Open-ended
responses were coded in several ways (of increasing specificity): (1) whether the participant indicated that
a control was imposed (1 initial disagreement between RA and coauthor); (2) whether the participant indi-
cated the control was preventive or detective (8 initial disagreements); and (3) whether the participant dif-
ferentiated between detective controls with immediate or delayed feedback (13 initial disagreements).
Responses from nine of 131 people were incorrect at some level. Analysis of the data after omitting these
nine responses yields qualitatively similar results.
Effects of Preventive and Detective Controls 443
CAR Vol. 29 No. 2 (Summer 2012)
dimension of their task is best when a preventive control is imposed, followed by detective
control with delayed feedback, no control and, finally detective control with immediate
feedback.
14
The interpretation of the reported numbers in Table 1 are similar to those
TABLE 1
Descriptive statistics: Mean [Stdev]
Description Preventive DetectiveIMFB DetectiveDFB No Controls
Number of participants 33 32 33 33
Controlled goal:
Pretest accuracy 0.158 [0.159] 0.131 [0.133] 0.118 [0.136] 0.132 [0.150]
Testing accuracy 0.066 [0.045] 0.053 [0.038] 0.074 [0.091] 0.115 [0.107]
Accuracy 0.092 [0.150] 0.078 [0.108] 0.044 [0.071] 0.017 [0.098]
Compensated goal:
Pretest typing speed (in seconds) 0.217 [0.049] 0.221 [0.074] 0.218 [0.071] 0.221 [0.053]
Testing typing speed (in seconds) 0.206 [0.041] 0.216 [0.066] 0.207 [0.047] 0.214 [0.049]
Speed (in seconds) 0.011 [0.017] 0.005 [0.015] 0.011 [0.029] 0.007 [0.013]
Intrinsic motivation
(sum of four variables)
12.212 [5.678] 14.500 [6.511] 15.515 [5.906] 14.333 [5.085]
Interesting 3.576 [1.888] 4.281 [1.888] 4.576 [1.855] 4.333 [1.362]
Entertaining 2.788 [1.709] 3.719 [1.800] 3.667 [1.652] 3.424 [1.621]
Enjoyable 3.212 [1.516] 3.406 [1.757] 4.03 [1.667] 3.545 [1.394]
Exciting 2.636 [1.558] 3.094 [1.729] 3.242 [1.714] 3.03 [1.667]
Average of four intrinsic
motivation variables
3.053 [1.419] 3.625 [1.628] 3.879 [1.477] 3.583 [1.271]
Notes:
Accuracy and speed are defined as follows:
Accuracy ¼
Total uncontrolled errors made in pretest task
Total uncontrolled characters ðpretestÞ
À
Total uncontrolled errors made in test task
Total uncontrolled characters ðtestÞ
Speed ¼
R Time spent entering uncontrolled characters in pretest task
Total uncontrolled characters ðpretestÞ
À
R Time spent entering uncontrolled characters in test task
Total Uncontrolled characters ðtestÞ
Pretest scores (testing scores) are the scores of participants before (after) they were introduced to the
manipulation. That is, the pretest accuracy (testing accuracy) score is the first (second) frac-
tion of the accuracy formula and the pretest typing speed (testing typing speed) score is the
first (second) fraction in the speed formula. For accuracy and speed, only characters that
did not have a control in place are used (or for the no control condition the equivalent
character for which there was no control in place in the conditions with controls). Intrinsic
motivation is the sum of four questions about how interesting, entertaining, enjoyable, and
exciting the task was. Higher scores indicate greater intrinsic motivation.
14. The accuracy and speed rates in the pretest are not identical between groups; however, these differences
are not statistically significant (both p-values > 0.10). These differences provide justification for using the
changes in the performance measures rather than raw performance differences so that any observed differ-
ences caused by the manipulations will not be contaminated by the small, albeit insignificant, differences
in typing ability between groups that were not completely removed through random assignment.
444 Contemporary Accounting Research
CAR Vol. 29 No. 2 (Summer 2012)
discussed for accuracy. Finally, consistent with Hypothesis 3, the descriptive results also
show that intrinsic motivation is substantially lower in the preventive control condition
relative to the other conditions.
Hypothesis testing
Tables 2–4 present the results of the statistical tests. For Hypotheses 1a–1c, we hypothesize
an ordering of which formal controls will be most effective in improving performance on
the controlled task dimension (data entry accuracy). The results reveal that the control
conditions are significantly different from each other (see Table 2, panel A, F = 3.55, p-
value = 0.008).
We use contrast tests to test our specific hypotheses (Hypotheses 1a–1c) which predict
differences in performance on the controlled task dimension, data entry accuracy, based
on the type of formal control that is imposed (see Table 2, panel B). Hypothesis 1a pre-
dicts that participants would perform the best (i.e., be the most accurate) when exposed to
preventive controls. We find that preventive controls are not significantly different
from detective controls with immediate feedback (t = 0.70, p-value = 0.244), but are
significantly different from the detective control with delayed feedback and no control
TABLE 2
Effects of different types of variables on controlled task dimension – Data entry accuracy
Panel A: ANOVA test of differences in control conditions for controlled goal of accuracy
Num. df Den. df F-value p-value
Control conditions 3 126 3.55 0.008
Intrinsic motivation 1 126 1.80 0.091
Panel B: Contrast comparison tests of differences in control conditions for controlled task dimen-
sion – Data entry accuracy (reported values are t-statistics, comparisons testing hypotheses are
labeled with the hypothesis number and letter)
Preventive DetectiveIMFB DetectiveDFB
DetectiveIMFB 0.70, H1a
DetectiveDFB 2.06** 1.38*, H1b
No Controls 2.97*** 2.26** 0.89, H1c
Panel C: Comparison of whether performance on the controlled task dimension (accuracy) is greater
than zero (significant positive values suggest performance improved because of manipulation)
Mean Std Error t-value p-value
Preventive 0.096 0.019 5.05 <0.001
DetectiveIMFB 0.078 0.019 4.06 <0.001
DetectiveDFB 0.040 0.019 2.14 0.035
No Controls 0.017 0.019 0.89 0.373
Notes:
*, **, *** = p-value £ 0.10, 0.05, and 0.01 level of significance, respectively. p-values are one-tailed
when a directional prediction is made and the results are consistent with the directional
prediction. The titles Preventive, DetectiveIMFB, DetectiveDFB, and No Controls correspond
to the preventive, detective immediate feedback, detective delayed feedback, and no control
experimental conditions.
Effects of Preventive and Detective Controls 445
CAR Vol. 29 No. 2 (Summer 2012)
conditions (t = 2.06, p-value = 0.021, and t = 2.97, p-value = 0.002, respectively). Con-
sistent with our prediction for Hypothesis 1b, we find that participants operating under
detective control with immediate feedback perform better (i.e., are more accurate) than
those with detective control with delayed feedback (t = 1.38, p-value = 0.085). Finally,
inconsistent with Hypothesis 1c, we find that the performance of participants in the detec-
tive control delayed feedback condition and the no controls condition are not significantly
different (t = 0.89, p-value = 0.188).
While the results are somewhat inconsistent with two of our specific hypotheses
(Hypothesis 1a and Hypothesis 1c), the pattern of results provides important insights into
which of the underlying aspects of these formal controls has the strongest influence on
participants’ performance on the controlled dimension of the task. Specifically, we find
that the timeliness of feedback provided by the control has the strongest influence on per-
formance. Further, the lack of significance between preventive controls and detective con-
trols with immediate feedback suggests that differences in restriction of autonomy do not
cause a sufficiently strong change in the salience of the participant’s goal to focus on the
controlled dimension of his ⁄ her task to affect accuracy. In contrast, the significant differ-
ence between the two detective feedback conditions and between the preventive feedback
TABLE 3
Effects of different types of controls on compensated goal of speed
Panel A: Analysis of variance test of differences in control conditions for compensated goal of speed
Num. df Den. df F-value p-value
Control conditions 3 126 0.75 0.522
Intrinsic motivation 1 126 4.00 0.024
Panel B: Post hoc contrast comparisons of differences in control conditions for compensated goal of
speed (reported values are t-statistics, comparisons testing hypotheses are labeled with the hypothesis
number and letter)
Preventive DetectiveIMFB DetectiveDFB
DetectiveIMFB 1.08, H2a
DetectiveDFB )0.25 )1.35, H2b
No Controls 0.63 )0.46 0.90, H2c
Panel C: Comparison of whether compensated goal of speed is greater than zero (significant positive
values suggest performance improved because of manipulation)
Mean Std Error t-value p-value
Preventive 0.010 0.003 3.00 0.002
DetectiveIMFB 0.005 0.003 1.46 0.146
DetectiveDFB 0.011 0.003 3.40 0.001
No Controls 0.007 0.003 2.14 0.034
Notes:
*, **, *** = p-value £ 0.10, 0.05, and 0.01 level of significance, respectively. p-values are one-tailed
when a directional prediction is made and the results are consistent with the directional pre-
diction. The titles Preventive, DetectiveIMFB, DetectiveDFB, and No Controls correspond to
the preventive, detective immediate feedback, detective delayed feedback, and no control
experimental conditions.
446 Contemporary Accounting Research
CAR Vol. 29 No. 2 (Summer 2012)
condition and the detective delayed feedback condition suggest that the timeliness of the
feedback is a critical element in activating this goal and influencing accuracy.
15
Finally, in Table 2, panel C, we present statistical tests examining whether the data
entry accuracy measure for each condition is significantly different from zero. If a control
improved performance relative to a participant’s accuracy in the pretest assessment, then
these values should be significantly greater than zero. For all control conditions the
improvements are statistically greater than zero (p-values < 0.05), indicating that each for-
mal control condition was effective in improving the accuracy of participants. Performance
improvement in the no control condition is not significantly greater than zero (t = 0.89,
p-value = 0.373). This latter result suggests that participants did not exhibit significant
learning effects in the task if controls were not present.
16
Table 3 shows the results of our hypotheses tests related to Hypotheses 2a–2c. We pre-
dict that because a formal control will redirect participants’ attention towards the control
objective (i.e., data entry accuracy) it will negatively impact participants’ performance on
the compensated dimension (i.e., data entry speed). Specifically, we anticipate a reverse
ordering of effects for the formal control conditions from Hypotheses 1a–1c. The results
do not support Hypothesis 2 as there are no statistically significant differences between
conditions (see panel A, F = 0.75, p-value = 0.522). Comparisons of each condition
TABLE 4
Effects of different types of controls on intrinsic motivation
Panel A: Analysis of variance test of differences in control conditions for intrinsic motivation
Num. df Den. df F-value p-value
Control conditions 3 127 1.94 0.063
Panel B: Contrast comparisons of differences in control conditions for intrinsic motivation (reported
values are t-statistics)
Preventive DetectiveIMFB DetectiveDFB
DetectiveIMFB )1.61*
DetectiveDFB )2.34** )0.72
No Controls )1.51* 0.12 0.84
Notes:
*, **, *** = p-value £ 0.10, 0.05, and 0.01 level of significance, respectively. p-values are one-tailed
when a directional prediction is made and the results are consistent with the directional pre-
diction. The titles Preventive, DetectiveIMFB, DetectiveDFB, and No Controls correspond to
the preventive, detective immediate feedback, detective delayed feedback, and no control
experimental conditions.
15. We also compare the preventive and detective immediate feedback conditions to the detective delayed
feedback and no controls conditions and find that these groups are significantly different (F = 9.36, p-
value = 0.003). This provides additional support that feedback timeliness is the important determinant
for activating the controlled aspect.
16. We also examined whether participants exhibited learning effects, defined as differential improvement
(decline) in performance over time (Hodge, Hopkins, and Wood 2009), by comparing average performance
(in terms of accuracy and speed) from the first half of the task to the second half. Analysis shows that for
both dimensions the first ⁄ last half dummy variable does not interact with the control conditions. Partici-
pants increased their speed (but not their accuracy), conditioned on their pretest score, over time, but
there are no differences across conditions.
Effects of Preventive and Detective Controls 447
CAR Vol. 29 No. 2 (Summer 2012)
confirm that there are no significant differences between conditions (see panel B, all p-val-
ues > 0.10), even though panel C shows that all conditions other than the detective imme-
diate feedback condition showed slight improvements from the pretest.
17
We perform additional analyses to further understand whether and how data entry
errors may have impacted data entry speed. First, we conduct our analysis using only
those characters for which the participant entered the correct character (and no control
was imposed). The results (untabulated, all p-values > 0.10) are qualitatively similar to
those used in the main analysis. Second, we consider the possibility that participants in the
preventive or detective-immediate feedback conditions spent time processing the error
which may have hindered their ability to complete the task quickly. To this end, we per-
form a sensitivity analysis by directly examining how participants respond immediately
after the activation of a control. We examine each character immediately following the
activation of a control (i.e., immediately following an inaccurate character) and find that
the preventive and detective immediate feedback control conditions do significantly reduce
data entry speed for approximately 11 characters after the activation of a control relative
to the other two conditions.
18
The combination of these speed results suggests that the performance measures explic-
itly provided in the employment contract and used for employee compensation still effec-
tively align the employees’ goals with those of the organization, despite the imposition of
formal controls directing employees’ attention towards other objectives. These results are
consistent with a boundary condition suggested by the goal framing literature that indi-
cates that the strength of the competing goal (i.e., the goal to enter data quickly) is an
important determinant of whether that goal is abandoned when the new goal (i.e., data
entry accuracy) is activated (Lindenberg 2001).
Table 4 presents the results for tests of Hypothesis 3 which predicts that preventive
controls will reduce intrinsic motivation to a greater extent than all other experimental
conditions. Panel A of Table 4 shows that intrinsic motivation differs between conditions
(F = 1.94, p-value = 0.063).
19
We provide individual comparisons between conditions in
panel B, which shows that the significant differences shown in panel A are driven by par-
ticipants’ (lack of) intrinsic motivation in the preventive control condition. Specifically,
participants’ intrinsic motivation is significantly lower in the preventive control condition
than all other conditions (all p-values < 0.10) and the other conditions do not differ from
each other in terms of intrinsic motivation to perform the task (all p-values > 0.10). To
formally test Hypothesis 3, we conduct a contrast statement comparing the preventive
control condition to the two detective control conditions and the no control condition.
The result of this test shows that participants in the preventive control condition have
17. The improvements from the pretest for the no controls condition is consistent with participants learning
to type faster or the typing being slightly easier (in terms of speed) for the test versus the pretest. We can-
not distinguish between these two possible explanations, but given that there was no learning effect for the
no controls condition in terms of accuracy, we view the latter possibility as more probable. We note that
the improvement of the no controls condition of 0.007 seconds per character equates to a very modest
improvement in typing speed of approximately 2.1 words per minute (assuming standard word length of 5
characters, computation = 0.007*5*60).
18. For this analysis, we examined on a character by character basis whether there were differences between
conditions for each character after a control was activated (i.e., an error occurred). For the first 11 charac-
ters, the difference between the preventive and detective immediate feedback condition was significantly
different from either (and both) the no controls and the detective delayed control feedback conditions.
There were no differences between the detective delayed feedback and the no control conditions.
19. As discussed by Deci, Koestner, and Ryan 1999, several studies have shown that tasks that are particu-
larly boring sometimes moderate the underlying effects of intrinsic motivation, suggesting that boring
tasks sometimes create a floor effect for intrinsic motivation. Our results suggest that intrinsic motivation
was high enough in this particular task that we were able to test our hypothesis.
448 Contemporary Accounting Research
CAR Vol. 29 No. 2 (Summer 2012)
significantly lower intrinsic motivation than participants in the other three conditions
(F = 4.98, p-value = 0.014). Although we did not predict a difference between the detective
controls and no controls conditions, we conduct a contrast statement comparing these condi-
tions and find, not surprisingly, a nonsignificant difference (F = 0.30, p-value = 0.582).
Because the preventive control condition differs from the detective-immediate feedback
condition and the two detective control conditions do not differ, this suggests that it is the
extent to which the control restricts one’s autonomy that drives the differences in intrinsic
motivation and not the timeliness of the feedback provided by the control. This result is
consistent with prior research suggesting that the restriction of employees’ autonomy has
significant negative effects (e.g., Christ et al. 2008; Deci and Ryan 1987; Ryan and Deci
2000).
We also examine whether intrinsic motivation has a significant effect on both dimen-
sions of the task. This allows us to test the findings of prior research in a new setting and
to provide a more complete picture of the effects of these formal controls on performance.
In Table 2, panel A, and Table 3, panel A we report that our measure of intrinsic motiva-
tion has a significant effect on both the controlled task dimension, data entry accuracy
(F = 1.80, p-value = 0.091) and on the compensated task dimension, data entry speed
(F = 4.00, p-value = 0.024). Specifically, participants that report higher intrinsic motiva-
tion perform the task more accurately and faster than participants who report lower
intrinsic motivation (regardless of their control condition). Thus, we provide results consis-
tent with the findings of prior research indicating that intrinsic motivation is positively
associated with performance.
5. Conclusion
The purpose of this study is to examine whether preventive and detective controls have
different effects on employee performance and motivation. Preventive controls differ from
detective controls in terms of the extent to which they restrict employees’ autonomy and
the timeliness of feedback they provide. We hypothesized that these differences would
affect participant’s performance on both the controlled (accuracy) and compensated
dimensions (speed) of their tasks and would influence their intrinsic motivation to perform
the task.
The results reveal that employees exposed to preventive controls perform better on the
controlled dimension of the task (data entry accuracy) than do those regulated by detec-
tive controls with delayed feedback or without formal controls. However, detective con-
trols with immediate feedback are equally as effective in improving employees’
performance on the controlled dimension. Further, detective controls with immediate feed-
back are more effective than detective controls with delayed feedback (and no controls).
These results suggest that the timeliness of the feedback provided by the formal control,
not the extent to which the control limits autonomy, is the key control aspect that influ-
ences performance. We find no difference in performance on the compensated task dimen-
sion (data entry speed) across conditions, suggesting that the incentives provided by the
employment contract are sufficiently strong to maintain goal alignment between the
employee and the organization despite the introduction of a formal control directing the
employee to focus on another task dimension. Finally, we find that preventive controls
reduce intrinsic motivation for the task relative to all other conditions.
The study is subject to several limitations that provide opportunities for future
research. First, we use an abstract task to test whether the most basic differences between
preventive and detective controls (i.e., restriction of autonomy and timeliness of feedback)
impact performance and motivation. While the specific effect sizes we observe are likely
dependent on the task and environment, we see no reason why the pattern of results
should not generalize to other control settings. That is, controls that provide immediate
Effects of Preventive and Detective Controls 449
CAR Vol. 29 No. 2 (Summer 2012)
feedback are likely to improve performance relative to controls that provide delayed feed-
back. Furthermore, restrictions in autonomy are likely to reduce intrinsic motivation to
perform the task. Therefore, the results of this study provide important theoretical contri-
butions that enhance our understanding of the attributes of formal controls that produce
desired results.
Second, our experimental task is designed to isolate the effects of formal controls from
the effects of financial incentives, which provides a particularly strong test of our theory
because the formal control influences behavior despite the lack of compensation on the
controlled dimension. As such, we do not examine other potential incentive compensation
arrangements (e.g., compensating both dimensions, varying compensation between dimen-
sions, compensating neither dimension, etc.) Therefore, although we believe our findings
will generalize to other incentive settings, we are limited in the inferences that we can
make about settings in which other incentive arrangements are used. While this study
enhances our understanding of the effect of formal controls on employee behavior, future
researchers may wish to study formal controls in other incentive settings.
Third, it could be argued that because we paid participants based on their data entry
speed, those participants randomly assigned to the preventive control condition may have
been concerned that the nature of the preventive control would have slowed data entry,
resulting in lower pay, and therefore would have diminished their intrinsic motivation for
the task. Although the data entry speed of participants in the preventive control condition
did not significantly differ from other conditions, our experimental design does not allow
us to rule out this possibility. Future researchers may wish to study formal controls and
their effect on intrinsic motivation in settings such as those in which speed is not explicitly
compensated.
Finally, our results suggest that preventive controls reduce intrinsic motivation. How-
ever, because our experimental design was limited to a short duration, we do not investi-
gate the long term effects of this decreased motivation on performance. While prior theory
suggests that diminished intrinsic motivation will be detrimental to performance in the
long run, future research should test this explicitly to further develop our understanding of
the potential consequences of certain types of formal controls.
In sum, this study provides evidence that the immediacy of control feedback improves
employee performance with respect to organizational control objectives. However, formal
controls that are perceived to restrict employees’ autonomy (such as preventive controls)
reduce employees’ intrinsic motivation relative to other types of controls (e.g., detective
controls). Overall, these results provide an important contribution to the current literature
on formal controls and provide several avenues for future research.
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