Crafting Incentive Systems That Actually Work

Willie Choi

Willie Choi

Control is a central theme of accounting. It’s no coincidence that in many companies the head accountant is called the controller. Companies use both formal and informal controls to motivate employees.  Formal controls include the carrot (performance incentives) and the stick (audits), and provide explicit incentives to encourage employees to exert effort and to refrain from engaging in opportunistic activities.  In contrast, informal controls include corporate culture and values, norms such as interpersonal trust and reciprocity, and informal information exchange, and they provide implicit incentives to exhibit organizationally desirable behaviors.  In my research, I explore how formal and informal controls affect employee behavior.

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