We investigate how performance-to-target (exceeding versus missing prior target) and task type (ability-driven versus effort-driven) affect managers' target-setting decisions in a setting where a manager sets targets for multiple employees. To do so, we use an experiment that involves executives, who average more than 16 years of work experience. We predict and find stronger target adjustments when prior targets are exceeded than when they are missed, especially when tasks are ability-driven. We also predict and find targets are differentiated more between employees within a firm when tasks are ability-driven rather than effort-driven, but this effect is attenuated when prior targets are missed. As prior empirical findings are inconclusive in this area of research, we contribute to the literature by providing controlled experimental evidence about the asymmetric nature of target adjustments. Additionally, we identify an important factor affecting managers' target-setting decisions—task type—that has largely been neglected in prior work.

Employees’ skill development is key to organizations’ competitiveness in a global, knowledge-based economy. Prior research in accounting, however, has mainly focused on motivating the provision of transitory effort. This study investigates how relative performance information (RPI) as a management control influences employees’ willingness to engage in skill development and whether the effect of RPI depends on whether employees face a tradeoff between training and current work performance. We predict and find that RPI increases the likelihood of taking training when a work-training tradeoff is absent but decreases it when a work-training tradeoff is present. We also predict and find RPI increases employee performance when a work-training tradeoff is absent and the effect is less positive (and directionally negative) when a work-training tradeoff is present. Our paper is an important first step in investigating how management controls interfere with employees’ investment in skill development and its tradeoff with transitory effort provision. Data Availability: Data are available upon request.