The Role Od the Firm's Accounting System for Motivation.

Abstract Motivating employees to work for the goals of the firm has long been one of management's most important and vexing problems. The search for methods that motivate effectively, that induce the employee to work harder for the firm's goals, led to experimentation with a wide diversity of devices. In recent years, several writers emphasized that the firm's accounting system has a direct influence on the motivation of managers. This paper (a) surveys the available findings of research done in the behavioral sciences and organization theory as they bear on motivation and (b) critically examines the accounting system and reports in the light of such findings. Decentralization contributes to effective motivation. The firm's accounting system facilitates decentralization and hence has an indirect but important impact on motivation. The direct use of accounting reports, such as budgets, for motivation can result in reduced performance, if the budget is imposed on the department manager. The accounting system facilitates decentralization, which is conducive to effective motivation. Furthermore, the careful use of accounting reports can directly contribute toward effective motivation by expressing goals and by supplying knowledge of performance.