When Subtle Performance Monitoring Helps, Really Helps, and Hurts: The Impact of Psychological Entitlement and Monitoring Environment on Performance and Misreporting

• In Event: Fraud/Forensic Accounting

Abstract

Aligning the goals of employees with those of owners is an ever-present dilemma facing managers. A common tool used to assist with this problem is performance monitoring. Knowing that one’s performance will be reviewed can motivate and control behavior. However, responses to control mechanisms vary with individual characteristics. Recent research on psychological entitlement attests to this varied pattern of responses (Holderness et al. 2014; Harvey and Harris 2010). Psychological entitlement represents one’s sense of deservingness for rewards, regardless of effort or performance (Campbell et al 2004). Since rewards are often based on performance, understanding how the trait of psychological entitlement affects responses to the monitoring environment is of particular interest to managers and management accountants. This study examines how the personality trait of psychological entitlement interacts with the performance monitoring environment to affect performance and misreporting. Using a paper-based maze task (Freeman and Gelber 2010), we find that subtle, ex-post performance monitoring increases performance and decreases misreporting compared to no ex-post performance monitoring. Further, we find that this effect is amplified for high levels of psychological entitlement such that performance (misreporting) is greater (lower) for higher levels of psychological entitlement with some monitoring compared to lower levels of psychological entitlement. Lastly, we find in a supplemental analysis that for high levels of psychological entitlement, outside-the-box thinking is significantly reduced by subtle, ex-post monitoring.

Authors

• Darin Kip Holderness, West Virginia University

• Kari Joseph Olsen, University of Southern California

• Todd A Thornock, Iowa State University