De Economist

, Volume 153, Issue 3, pp 303–329

The Effects of Performance Measurement and Compensation on Motivation: An Empirical Study


DOI: 10.1007/s10645-005-1990-z

Cite this article as:
Van Herpen, M., Van Praag, M. & Cools, K. De Economist (2005) 153: 303. doi:10.1007/s10645-005-1990-z


This paper analyzes empirically the relationship between pay and performance. Economic and psychological theories predict that the design and implementation of a performance measurement and compensation system affect the motivation of employees. Our survey results demonstrate a positive relationship between the perceived characteristics of the complete compensation system and extrinsic motivation. Intrinsic motivation is not affected by the design of monetary compensation, but by promotion opportunities. The compensation system also significantly affects work satisfaction and turnover intent. Our results have both managerial as well as policy implications.


compensationextrinsic motivationintrinsic motivationpromotionsperformance measurement

Jel classifications


Copyright information

© Springer 2005

Authors and Affiliations

  • Marco Van Herpen
    • 1
  • Mirjam Van Praag
    • 2
  • Kees Cools
    • 1
  1. 1.University of Groningen & The Boston Consulting GroupEH BaarnThe Netherlands
  2. 2.Faculty of Economics and EconometricsUniversity of AmsterdamWB AmsterdamThe Netherlands