Target Setting in a Multi-Task Environment: An Empirical Investigation

Abstract

ABSTRACTIn a setting with two tasks, we investigate the use of performance targets to motivate effort allocation. In addition to the classic target ratcheting relating to the performance on the same task, we predict a cross-task effect: good current-period performance on the lower-value task positively influences the future target set for the task with greater value. We use data from a Taiwanese firm whose strategy emphasizes the sales of select products in its portfolio, and that sets separate revenue targets for these select and other products. We find the predicted positive association between the sales performance on other products and the revision rates of targets set for select products. We find no evidence of the reverse relation. We further document that the cross-task effect is weaker when a salesperson's current period allocation exhibits greater congruity with the goals of the firm.