Relative Performance Information and Employee Performance: The Role of Need for Cognition

Abstract

Relative performance information (RPI) can be a valuable performance feedback mechanism within a management control system. However, it is likely that not all types of employees respond similarly to the implementation of RPI. Since firm resources are constrained and RPI requires considerable resources, our study seeks to understand what type of employees benefit most from the expectation of RPI. Specifically, we examine the personality trait of need for cognition (NFC). Using a laboratory experiment, we predict and find that an expectation of RPI results in increased performance for individuals low in NFC because it increases the amount of time they spend seeking out information in an effort-sensitive decision-making task. In contrast, an expectation of RPI has no effect on individuals high in NFC as they naturally seek performance-relevant information in the absence of expecting RPI. In an effort to increase the application of our findings, we employ a broadly-distributed survey to gather descriptive information on NFC by industry and job types. The results of this study provide important nuance to our understanding of RPI and how managers can better implement RPI to achieve the greatest effect.