Return and report: the role of leadership and performance measurement systems in employee engagement

Abstract

This dissertation integrates theories in accounting and organizational behavior to address the important issue of motivation and performance management. Specifically, the research draws on elements of agency theory, leadership theory, contingency theory, employee engagement and motivation, and management control and performance measurement system (PMS) literature. This study examines the effect the more comprehensive PMS has on employee engagement. In addition, it examines the role that contextual factors, such as leadership style and organizational structure, have on the use of comprehensive PMS as it relates to employee engagement. A major premise behind the development of more comprehensive PMS is that they can help to improve productivity. Agency Theory, integrated with organizational behavior theories, suggests that a heightened level of organizational justice obtained through more comprehensive PMS, provides the mechanisms through which employees are motivated (Burney, Henle, & Widener, 2009), and the agency problem is mitigated and employee performance is improved. Data collected from a survey of 312 employees are used to test the SEM model. Results from the structural model tested indicate that transformational leadership is directly related to employee engagement. In addition more comprehensive PMS leads directly to a higher level of engagement. This study provides evidence that the employee's supervisor's leadership characteristics play an important role in cultivating the engagement of employees and also offers evidence that more comprehensive PMS result in the more heightened engagement of an employee. Alternative title: Return & report : the role of leadership and performance measurement systems in employee engagement