Evaluating management control: the impact of performance appraisal on intrinsic employee motivationMarc HaakmaS 2184869

A Master's Thesis submitted to the University of Groningen - Faculty of Economics and Business, in partial fulfilment of the requirements for the degree of MSc Business Administration: Organizational and Management Control.

Thesis supervisor: B. van der Kolk, MSc.Second assessor: A. R. Abbassi, MSc.

AbstractFirm performance is the general focus of a manager. However, this requires getting the most out of employees, as they are at the core of the organisation. Motivation plays a significant role in this process. This paper examines the effect of performance appraisal as a management control mechanism on intrinsic employee motivation. Applying stewardship theory, it was found that informality and positive or negative feedback in performance appraisals increase intrinsic motivation; this effect is strengthened by frequency. Use of data collected for this study is regulated by a strict nondisclosure agreement, which requires the researcher to protect the company's identity and its proprietary information.

Keywords: intrinsic motivation, management control mechanisms, performance appraisal, public sector, stewardship theory

1. IntroductionEmployees are at the core of an organisation; after all, employees physically represent an organisation

and carry out its mission, and thus, give an organisation the essential opportunity to exist. It is therefore of importance to managers, that

employees feel appreciated and are driven to perform their job. In other words, employee motivation should be regarded as a key factor in determining long-term employer success levels (Kovach, 1995). The field of employee motivation, however, is complex. In its general sense, motivation is already a difficult concept to define, as demonstrated by Kleinginna and Kleinginna (1981) in a laborious attempt to reach a consensual definition. Furthermore, much research has been conducted on what drives employee motivation specifically, which again reflects the complexity of the term.

Rather than investigating which specific factors drive employee motivation, this study will focus on the prevailing organisational relation between managers and employees, by emphasising the role management control. Managers are in charge of making decisions for coping with change, and even though firm performance is the general focus of a manager, they must also consider how employees will be affected (Turner Parish et al., 2008). This is where the field of management control will be included in the research, by focusing on a particular management control mechanism that has a potential influence on employee motivation: performance appraisal.

However, for the particular relation described above, the field of management control misses the concrete grips that give managers insight into what the impact of performance appraisal is on employee motivation. It is however a case that entails a large degree of managerial relevance and importance for organisations, as performance appraisals can be considered as one of the most important human resource practices (Cardinal, 2001; Boswell and Boudreau, 2002).

The field of employee motivation has provided many different views over the years, resulting in numerous theories that all adopt a specific perspective in addressing employee motivation. The stewardship theory will be used in this research, which can be regarded as a relatively novel theory of motivation that focuses on the self-development desires and intrinsic motivation of employees (Donaldson and Davis, 1991). Little empirical research has been conducted regarding stewardship theory; it will therefore benefit from this research, as it will test the views of this theory in a practical setting. Furthermore, the research will be conducted in a public sector organisation; it is believed that public sector employees are more intrinsically motivated than

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private sector employees, and show a high level of commitment to their organisation (Dilulio, 1994). Therefore, this research fits well with stewardship theory.

The main theoretical objective of this research is to contribute to the field of management control by examining the relation between performance appraisal and intrinsic motivation in an organisation. The research does not focus on identifying key tasks that are associated with management control, but rather, focuses on the effects of performance appraisal— a significant management control mechanism— on employee motivation. This mechanism is widely recognised and has been studied in considerable detail in management control literature, but nevertheless is still believed to provide a fruitful opportunity for studying the relationship between management control and intrinsic motivation in an organisational environment, and therefore, maintaining the relevance between management control and its context (Chenhall, 2003; Hage and Aiken, 1967; Otley, 1994; Pugh et al., 1969). The stewardship theory of motivation will be used to maintain a close connection with this literature field. This theory is believed to further solidify the basis for this

research, and the legitimacy of this theory in practical situations will be tested further. Subsequently, the following research question is formulated in the present research:

What is the relation between performance appraisal and intrinsic employee motivation in a public sector organisation?Prior literature will be used to discuss the stewardship theory, and its role in the present study. Based on this, hypotheses will be formulated on the effect that performance appraisal has on employee motivation. Consequently, research will be conducted to verify these hypotheses in a practical setting. It is then analysed whether the examined case demonstrates a confirmation to the formulated hypotheses. Potential observed deviations from the stewardship theory perspective will subsequently attempted to be explained.

The remainder of this paper is structured as follows. Section 2 comprises a literature review, which discusses the background of the research problem by reviewing relevant prior literature to provide a legitimate basis on which the present research is built and hypotheses are formulated. Consequently, this section will address the gap in the literature that this research will

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attempt to fill. Section 3 elucidates the data-gathering process and the research method used in this paper. Section 4 introduces the research setting and presents the findings of the research, which section 5 critically reflects upon by analysing and relating these findings to prior research. Section 6 then reflects on this research in its entirety, by readdressing the research question, the research implications and the limitations of this research.

2. Literature review2.1. Employee motivationMotivation can be defined as “the willingness to exert high levels of effort toward organisational goals, conditioned by the effort's ability to satisfy some individual need” (Robbins, 1991). Based on this, it can be argued that an unsatisfied need creates a tension for employees, which can be acted upon and consequently relieved by an employee through the exertion of effort (Rainlall, 2004). The research on employee motivation is abundant; a large amount of research has been conducted on employee motivation in an attempt to indicate its effects. It is assumed that employee motivation is a crucial factor in organisational performance through this

characteristic exertion of effort (Griffin, 1990; Robbins, 1991; Kovach, 1995), which in turn makes employee motivation a valuable and sought after concept for managers.

In addition to the effects, it is believed that the drivers of employee motivation are also of great practical importance to managers. These drivers will lead to the effects that will impact the organisation in a manner for which the manager is responsible, which consequently seems to offer an opportunity for management to influence employee motivation levels. Moreover, the primary objective of employee motivation research has not been to learn about how certain employee behaviour occurs, but rather to learn how to motivate employees so that they will perform the responsibilities and tasks assigned by the organisation (Wright, 2001). Wiley (1997) for instance, examined what motivates employees by conducting a multi-industry survey and found that good wages, full appreciation for work done, job security, promotion and growth in the organisation, and interesting work were the top five factors that motivated employees in their jobs. A similar list can be extracted from Kovach (1995), in which he discusses a survey that presented interesting work, full

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appreciation of work done, feeling of being in on things, job security and good wages as the five most desired factors that contribute to employee motivation.

Often, research on employee motivation is conducted on the basis of an underlying motivation theory. Along with the amount of research conducted on employee motivation, the number of theories that are used in this field can also be characterised as abundant. To provide a theoretical foundation for this discussion, this section will draw from this extensive range of employee motivation theories. Although a synthesis of employee motivation theories lies beyond the scope of the present research, a brief overview of a number of dominant theories is presented below to provide a foundation that theoretically solidifies the way employee motivation is to be perceived, and, consequently, to obtain a rudimentary understanding of employee motivation.

The two-factor theory on motivation states that factors leading to job satisfaction are separate and distinct from the factors that lead to job dissatisfaction, and assumes a neutral ground between satisfaction and dissatisfaction. Moreover, the theory distinguishes between

motivators, which arise from intrinsic job conditions and lead to job satisfaction, and hygiene factors, which are of an extrinsic nature and lead to job dissatisfaction when they are absent. Thus, hygiene factors are necessary to maintain job satisfaction, but do not lead to increases in job satisfaction (Hackman and Oldham, 1976; Herzberg et al., 1959; Herzberg, 1966). It is stated that, in order to increase job satisfaction and consequently motivation, the intrinsic aspect of the job should be emphasised through job enrichment (Herzberg, 1986). Another well-known employee motivation theory is the expectancy theory developed by Vroom (1964). The expectancy theory takes a different approach in that it does not provide specific employee motivation suggestions. Rather, it suggests that employees believe there are relationships between work effort, achieved performance and the rewards they receive from their effort and performance (Vroom, 1964). It follows that this theory focuses on selfish individuals that want to maximise satisfaction, referring to extrinsic and intrinsic values which management must discover. While the preceding two theories provide unprejudiced support for extrinsic influences, self-determination theory

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seems to focus primarily on intrinsic sources of motivation. It suggests that self-determination and intrinsic motivation are triggered through the presence of competence, relatedness and autonomy (Deci and Ryan, 2002).

To summarise, regardless of which theory is followed, it seems that there are specific factors that should be considered by management when focusing on employee motivation. In short, it can be stated that these theories focus on either an intrinsic, extrinsic or mixed approach, much in the same way as the drivers of motivation described above can be characterised by either an intrinsic or extrinsic nature. However, it can be argued that using such a theory in this research may result in an inaccurate, ambiguous perspective on motivation, when the selected theory does not suit the scope and setting of the research. Therefore, an employee motivation theory that provides a good fit with the present research setting must be identified.

2.2. Employee motivation in the public sectorIt can be stated that research regarding specific characteristics of employee motivation in the public

sector plays a subordinate role in the field of employee motivation; in spite of the fact that the motivation of employees is of great importance to public sector organisations, less attention is paid to this sector by public sector scholars (Frey et al., 2013; Wright, 2001). However, the observation that motivation literature tends to concentrate too much on industrial and business organisation employees in the private sector is not new, but rather stems from several decades ago (Perry and Porter, 1982). As this study focuses on the public sector, progress will be made regarding this issue.

Prior literature provides evidence that differences exist between public and private sector employees, in particular with respect to their motivation (Buelens and Van den Broeck, 2007; Frey et al.,2013). Specifically, there is a broad consensus that intrinsic motivation provides the main drive for public sector employees, through motivation by aspects such as self-development opportunities, recognition, autonomy and learning opportunities. This notions contrasts extrinsic motivation focus of private sector employees through financial rewards, prestige and status (Buelens and Van den Broeck, 2007; Houston, 2000). Consequently, it can be argued that

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self-interest theories are not sufficient for analysing motivation in the public sector, as this does not fit well with the public sector research setting. This generates a notable point of consideration, as a deviation from the dominant agency theory in the management control literature must be made; the agency theory assumes that managers are self-interested actors that rationally maximise their own personal economic gain (Donaldson and Davis, 1991), and therefore suits the description of a self-interest theory. Alternately, a different theory must be adopted, to avoid compromising the values that prevail in public sector motivation.

2.3. Stewardship theoryAn alternative theory is stewardship theory, which provides a different model of human behaviour, which assumes these managers are not agents motivated by individual goals and personal gain, but rather stewards whose motives are aligned with the principals' objectives (Davis et al., 1997). In other words, it states that managers' goals are in line with the organisational goals, thus, it assumes goal congruence. Even in cases that are characterised by goal incongruence, managers will prefer to pursue organisational goals

instead of individual goals (Corbey, 2010).

This more altruistic perspective further assumes that an employee's motivation is of an intrinsic nature, which counterbalances the agency theory focus on extrinsic motivation. This perspective is regarded as appropriate for this study, as it acknowledges the importance of intrinsic motivation in the public sector and accordingly suits the present research setting. Therefore, this study will adopt the stewardship theory.

Although stewardship theory focuses on intrinsic motivation, it is important to recognise the approach this research takes regarding the interplay between extrinsic and intrinsic motivation. While this research places a clear focus on intrinsic motivation, it is believed that intrinsic motivation does not yield an absence of extrinsic factors (Covington and Müeller, 2001; Kauffman et al., 2011). Thus, this research deviates from a potentially problematic continuum-view of intrinsic and extrinsic motivation, and assumes that a balance of intrinsic and extrinsic motivation is attainable, with the proportions of intrinsic and extrinsic motivation varying across employees and

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organisations. Therefore, a dichotomous nature of intrinsic and extrinsic motivation is not supported in this research, as the two types of motivation are not believed to be jointly exhaustive nor mutually exclusive (Covington and Müeller, 2001). Nevertheless, this research focuses on intrinsic motivation, in accordance with the abovementioned fit with the public sector research setting.

It must also be noted that this research will apply the stewardship theory on a different hierarchical relationship within an organisation than is described above, namely the manager and the manager's subordinates. Not only does this provide a fruitful opportunity to expand on current stewardship theory knowledge and thus place it in a wider perspective, it also paves the way for analysing the relationship between management control and employee motivation from a different theoretical perspective, therefore fitting well with the current research setting.

2.4. Management controlManagement control is concerned with coordination, resource allocation, motivation, and performance measurement (Maciariello and Kirby, 1994).

Anthony and Govindarajan (2007) defined management control as the “process by which managers influence other members of the organisation to implement the organisation’s strategies”. Guided by these definitions, it becomes clear that employee motivation plays a key role in management control practices; exploring the attitudes that employees hold concerning motivational factors allows the creation of an environment that fosters employee motivation (Wiley, 1997). However, it can be stated that further classification of such practices is needed, so that the selection of specific management control mechanisms is theoretically solidified.

The field of management control provides a classical trichotomy of control classes: input, output and behaviour controls (Ouchi, 1979; Rockness and Shields, 1984). Input controls regulate the antecedent conditions of performance, and assess whether individuals suit the organization, regarding internalised norms and professional standards (Cardinal, 2001; Frey et al., 2013). Although input control increases the variety of ideas produced and exposure to scientific knowledge, it is also more demanding as it is not observable

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(Cardinal, 2001; Frey et al., 2013). Therefore, concerning the present research setting, a focus on input control is regarded as a suboptimal decision. As output control concentrates on assigning a value to the realised output, these control mechanisms are not deemed to fit well with the public sector, which is central to this research, as public service could be characterised by output ambiguity (Burgess and Ratto, 2003). Moreover, a high degree of interdependence exists among tasks, which impedes the attribution of outputs to individuals (Frey et al., 2013). Due to the fact that output ambiguity prevents the existence of a reliable and valid measure of the desired outputs, a focus is placed on behaviour control, following the framework of Ouchi (1979). Behaviour control focuses on the monitoring of employee behaviour in the process that leads to output, and regulates how the work should be done through the use of rules and procedures (Cardinal, 2001; Ouchi, 1979; Rockness and Shields, 1984). However, behaviour control has been predominantly viewed as a mechanism that hampers creativity and fosters employee dissatisfaction, and could lead to rigidity and a decrease in flexibility (Adler and Borys, 1996; Cardinal, 2001).

Therefore, a focus on adaptation to changing environments seems to be necessary (Frey, 2013). However, as control is necessary in an organisation, it is prudent to make an effort to understand what sorts of behaviour control mechanisms are effective, particularly in settings that are affected by significant changes. Guided by this reasoning, the present research will focus on behaviour control, as it is believed that this type of control provides a relevant and important point of focus regarding management control. Close attention will be paid to the way performance appraisal affects the level of employee motivation within the organisation.

2.5. Hypothesis developmentPerformance appraisals are a means to carry out the monitoring function of behaviour control, and can be considered one of the most important human resource practices (Cardinal, 2001; Boswell and Boudreau, 2002). The effect of performance appraisal on motivation, however, is not straightforward. Employees could perceive frequent performance appraisal as threatening, which could consequently cause their behaviour to become safer and more routine-based (Burgelman and Sayles, 1988; Cardinal, 2001). However, it could

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also be argued that performance appraisal is necessary for employees, as this feedback provides the information that is needed to make a judgement on the employee's competence, which is indicated as a focal point by intrinsic motivation (Deci, 1975; Hackman and Oldham, 1976; Ilgen et al., 1979 ). Guided by the latter line of reasoning and in line with stewardship theory, it is expected that employees will interpret the performance appraisals as contributing to their self-development and thus intrinsic motivation (Buelens and Van den Broeck, 2007; Davis et al., 1997; Houston, 2000).

To enhance the tangibility of the performance appraisal control mechanism, the measure will be investigated on the basis of the construct of feedback richness, to represent several performance appraisal characteristics. More importantly, this procedure allows for variance to be measured, which consequently enhances the transparency of the conclusions of this research. A feedback-rich environment can be defined as a performance appraisal environment where employees receive specific, frequent and positive feedback (Kinicki et al., 2004). Kinicki et al. (2004) find that a feedback-rich

environment is positively related to the perceived accuracy of performance appraisals. This accuracy notion can subsequently be connected to employee motivation in terms of implications, as prior research found that rich feedback enhances performance through an increase in motivation (Roberson and Stewart, 2006; Taylor et al., 1995). The present study will elaborate on the frequency and positive nature characteristics of a feedback-rich environment by placing a nuance on the positive motivation effect of performance appraisal through a focus on intrinsic motivation. Moreover, it will include negative feedback, arguing that negative feedback in performance appraisals also yields a positive effect on intrinsic motivation. In line with stewardship theory, it can argued that employees value negative feedback, in a sense that they can reflect on it and use it as a self-development opportunity. To further develop the variance measurement process, the effect of performance appraisal on intrinsic motivation will also be judged on the basis of a distinction between formal and informal performance appraisal. Prior literature states that generally, employees perceive a more informal, more reciprocal nature of

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performance appraisal as preferable (Pearce and Porter, 1986). This notion seems to reserve a central role for employee perception, on which this study will focus. Moreover, in line with Kinicki et al.'s (2004) feedback-rich environment notion, it can be stated that informal performance appraisals are desired more for intrinsic motivation, due to a higher degree of feedback specificity, through spontaneity and greater relevance and recency of the feedback. However, in line with stewardship theory, it assumed that formal performance appraisals also yield a positive effect, given that they also provide learning and self-development opportunities (Buelens and Van den Broeck, 2007; Davis et al., 1997; Houston, 2000). Notwithstanding this, it is still expected that informal performance appraisals have a stronger positive effect on intrinsic motivation than formal performance appraisals.

Based on this literature review, the following hypotheses are formulated:

H1: A high frequency of performance appraisals has a positive impact on intrinsic

employee motivation.

H2a: Positive feedback in performance appraisals has a

positive impact on intrinsic employee motivation.H2b: Negative feedback in

performance appraisals has a positive impact on intrinsic

employee motivation.

H3a: Formal performance appraisals have a positive impact on intrinsic employee motivation.

H3b: Informal performance appraisals have a larger positive impact on intrinsic employee

motivation than formal performance appraisals have.A critical note regarding these hypotheses must be made. Although the hypotheses are in line with the stewardship theory perspective, an implicit requirement must be met. Management controls should be used in a behavioural way that satisfies employees' intrinsic desires; an intrinsic approach should be adopted rather than an extrinsic approach (Van der Kolk, 2013). If the latter approach is adopted, this may have counterproductive effects on intrinsic motivation, as employees are assumed to desire an intrinsic approach. This statement also clarifies the role of perception in this research; employees form opinions on the basis of which these hypotheses will be verified.

In summary, this section has demonstrated that a fruitful

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contribution can be made to prior literature, regarding the relation between performance appraisal and intrinsic motivation. This has resulted in the formulation of five hypotheses. Specifically, it is argued that performance appraisals have a positive impact on motivation of employees, as employees will perceive them as contributing to their development, consequently increasing their intrinsic motivation. This positive relation is included in five hypotheses, covering positive feedback and negative feedback in performance appraisals, formal and informal performance appraisals and the frequency of performance appraisal. It follows that this distinction should be clearly maintained in the execution of this research, to provide optimal results. This matter will be discussed in depth in the following section.

3. Methodology3.1. Research designIn this research, a theory testing approach will be adopted; stewardship theory will serve as a foundation to identify the effect of performance appraisal on intrinsic motivation. Theory testing is an appropriate approach in view of the present theoretical gap that is to be

filled, guided by the formulated hypotheses that is derived from relevant prior literature. In order to verify these hypotheses, a case study is conducted. Furthermore, an interpretive approach predominates this qualitative research, as the present research is based on a wide array of perceptions of individuals (Hopper and Powell, 1985). Therefore, the subjective nature of the social world is emphasised in this research, as it attempts to understand it primarily from the frame of reference of those being studied, rather than assuming an independent reality that might exist external to them (Hopper and Powell, 1985; Laing, 1967).

3.2. Data collectionTo examine the nature of the relationship between performance appraisal as a management control mechanism and intrinsic motivation in this particular case, thirteen semi-structured interviews will be conducted among employees, serving as the primary data collection method. The interviews will be conducted at Omrop Fryslân, the regional radio and television broadcasting organisation of Friesland, a province of the

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Netherlands. The research setting will be further elaborated upon in the findings chapter that follows this chapter. As the unit of analysis in this research is the individual, the research focuses on the perception of respondents, in collecting data concerning the formulated hypotheses. Therefore, the semi-structured interview is believed to be a suitable instrument, as it possesses qualities that emphasise this aspect of the research, through the facilitation of probing respondents for more information and the exploration of new themes (Louise Barriball and While, 1994). Moreover, interviews are regarded as an important instrument in a case study approach (Yin, 2013).

The employee satisfaction survey, which has recently been conducted at Omrop Fryslân by an external consultancy bureau, will serve as the secondary data collection method of this study. This report provides an insight into the organisation-wide views and opinions of employees, which are relevant to the management control and employee motivation concepts studied in this research. Of the 205 distributed questionnaires that were sent out to Omrop Fryslân's employees, 142 were returned. These questionnaires were all virtually

complete and thus usable, which equates to a response rate of 69,3%. Notwithstanding the fact that this survey could be regarded as an internally initiated investigation effort, therefore being subjected to organisational legitimacy and pressure, this response rate is argued to be favourable given the length and depth of the survey.

The interview content is included in the appendix, and is structured as follows. Following the introductory questions, performance appraisal will be discussed in relation with intrinsic motivation, following a two-stage structure. The first stage focuses on indicating how strong the mechanism is in terms of presence and influence on respondents, and is based on the following data sources. Performance appraisal is assessed as the extent to which behaviour is measured and evaluated, and was based on empirical work by Abbey (1982) and Kinicki et al. (2004). The second sub-stages of the interview concerns the link between the given behaviour control mechanism and employee motivation. Given the semi-structured nature of the conducted interviews, the second sub-stage is less structured than the first stage, consequently providing the opportunity to provoke discussion about and exploration of the topics.

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In these sub-stages, the focus is placed on critical values of the stewardship theory.

In addition, two key components of organisational structure will be briefly discussed, in an effort to map the structure of the organisation, following the same two-stage structure. Centralisation is assessed as the extent to which decision-making authority is concentrated in the organisation, and was based on empirical work by Aiken and Hage (1968), Dewar et al. (1980) and Khandwalla (1974). Formalisation is assessed as the extent to which behavioural procedures and rules are explicitly formulated, and was based on empirical work by Aiken and Hage (1968), Desphande and Zaltman (1982), Dewar and Werbel (1979) and Hall (1968).

3.3. Data analysisThe primary data gathering instrument will produce a large amount of textual data, which implicitly involves a great responsibility for the researcher, as the researcher must ensure that the gathered information is collected in a clear and unbiased manner. To assist and to provide convenience in this matter, a recording device will be used in cases in which the given

respondent agrees and the attention of both parties is not breached (Yin, 2013). Consequently, the interviews can be transcribed and coded efficiently and effectively after they have been conducted.

In addition, a major challenge of the semi-structured interview based research process is to attain credibility, which holds that the research must be reliable and valid (Brink, 1991). Regarding reliability, this study adopts a classification of four sources of bias that must be avoided to ensure that the research results are independent of particular research characteristics and can therefore be replicated in other studies (Swanborn, 1996; Yin, 2013). Firstly, reliability is enhanced through the usage of multiple research instruments. The use of a semi-structured interview instrument and the consultation of the employee satisfaction report is regarded as such a triangulation approach, as multiple sources of evidence are combined (Van Aken et al., 2012; Yin, 2013). Therefore, instrument bias is reduced through triangulation, which remedies shortcomings and biases of the used data collection instruments by complementing and correcting each other (Van Aken et al., 2012). Secondly, as interviews leave relatively more room for biases as a

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data collection interview, standardisation is of importance; this yields that explicit procedures for data collection, analysis and interpretation should be followed (Van Aken et al., 2012). As the interviews conducted in this research are of a semi-structured nature, this strategy is not fully exploited. Hence, the software package Atlas.ti is used to reduce researcher dependence by assisting the researcher to work in a systematic manner (Van Aken et al., 2012). Moreover, it can be stated that researcher bias is combated by the triangulation approach, as researcher independency is improved through the use of multiple researchers and working towards consensus. (Swanborn, 1996). Thirdly, as people within an organisation can have widely diverging views and opinions, it is of importance to gather a mixture of perspectives (Van Aken et al., 2012). Therefore, this study selects a diverse set of respondents, on the basis of age, tenure, position and department, which provides a source of information about organisational reality. Fourthly, a potential threat to the reliability of this study lies in the fact that this study is carried out in a limited time period, and therefore it does not consider a multitude of circumstances (Van Aken et al.,

2012). Therefore, this source of situation bias could potentially have a restricting impact on the data collection process. However, as this research also investigates a recently conducted survey, two different time periods are included, hence reducing the situation bias.

Validity presupposes reliability, as a research result is valid when it is justified by the way it is generated (Audi, 1998; Van Aken et al., 2012). This research relies on a trichotomy of validation criteria (Swanborn, 1996; Yin, 2013). To maintain a high level of construct validity, the present research pursues a high degree of adequacy and completeness of the measurement instruments. This is reached by making an effort to cover the relevant concepts of management control and employee motivation completely during the interviews. Moreover, as the semi-structured interview instrument is combined with a survey investigation, construct validity is enhanced through this triangulation approach (Yin, 2013). Internal validity is pursued through the use of a theoretical triangulation approach, as the multiple perspectives could facilitate the discovery of all causes, therefore ruling out alternative explanations regarding the proposed relationship (Van Aken et al., 2012). Moreover, by

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conducting systematic analysis, internal validity is maintained. Concerning the potential generalisability implications of this research, it is important to note that the investigation of the employee satisfaction report increases the number of studied objects, which consequently improves external validity (Van Aken et al., 2012).

4. FindingsThe findings are structured as follows. Firstly, the research setting will be introduced; the notions of centralisation and formalisations will be used to provide a more comprehensive view of the research setting. Secondly, covering the main objective of this study, performance appraisal will be discussed, in relation to intrinsic motivation. In quoting respondents' statements, a numbering system is used to ensure confidentiality, while still allowing for distinction.

4.1. Research settingThe research will be carried out at Omrop Fryslân: the regional radio and television broadcasting organisation of Friesland, a province of the Netherlands. Omrop Fryslân is an organisation with a strong brand name and has held a leading position

in the regional society over the years due to its distinctive and innovative approach to broadcasting. Being part of the Dutch regional broadcasting system, Omrop Fryslân is a public sector organisation, therefore suiting the formulated description of an appropriate research setting. The case of Omrop Fryslân is particularly interesting because of the turbulent organisational climate it currently operates in; due to governmental pressures regarding an announced budget cut in the Dutch public broadcasting system. Consequently, as Omrop Fryslân is partially dependent on government funding, it may have to implement cost reduction measures. Considering the focus of the present research, this case provides a fruitful opportunity to study the relationship between management control mechanisms and employee motivation.

In terms of organisational structure, centralisation and formalisation have proven to be two valuable notions in the interviews as well as in the employee satisfaction report, with regards to the forthcoming discussion regarding intrinsic motivation. Firstly, centralisation was shown to be a familiar term to a large number of employees; it was stated that it is present in the organisation, although

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the focus was laid on quality rather than the degree of centralisation, in terms of consequences for intrinsic motivation. Employees stated that decisions should be taken in a consistent manner, should originate from a legitimate source in terms of knowledge of facts, and should be conveyed in a manner that enables employees to recognise and understand the value and usefulness of these decisions. Moreover, it was deemed important that employees should be involved in decision-making, so that their voice is heard, and that their initiatives and ideas are taken into consideration. An excessively high degree of centralisation, however, was perceived by employees as obstructive, as it is believed to limit their actions. It was consequently perceived as having a negative effect on intrinsic motivation, as employees stated that it would limit their level of autonomy and responsibility; intrinsic motivation increases through an increase of freedom, and in this case, an increase in creativity.

Regarding formalisation, employees stated that formalisation is not perceived to be present to a high degree, or at least not strikingly due to automatisms in workflows. They did, however, provide a clear-cut image of the relation between

formalisation and intrinsic motivation. Based on observations, it can be argued that a moderate but steadfast degree of formalisation leads to an increase in intrinsic motivation, as it provides a grip for employees in their work procedures. However, overlapping with the centralisation notion, an excessively high degree of formalisation was perceived to lead to a decrease in autonomy and self-development opportunities, consequently decreasing intrinsic motivation. Strikingly, an increase in formalisation is felt by a number of employees, and has consequently been linked to the uncertain future of the organisation. The new work procedures project, which is currently taking place in the organisation, is a concrete example of this according to the interviewed employees and the employee satisfaction report. This project aims to sharpen the degree of formalisation by providing a clearer structure for it. Employees stated that, for intrinsic motivation to be maintained, formalisation should be implemented in a way that includes employees in the process, maintains employee flexibility, yields consistency, adds value and makes sense to employees.

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4.2. Performance appraisal and intrinsic motivationDrawing further on the interview and employee satisfaction report data sources, as well as the abovementioned statements, it can be argued that generally many statements can be traced back to the organisational relation that is central to the present study: the relation between employee and manager. Concentrating on this study's main objective— investigating the impact of performance appraisal— it is observed that intrinsic motivation plays a central role in the organisation, as is clearly illustrated by the following respondent's statement.

Omrop Fryslân operates on the basis of intrinsic motivation; things are not always well organised, but then people think to themselves "I want this to be a good broadcast, that's what I want."; it's a passion. We all work together to ensure that it

doesn't go wrong. That is something we recognise in each other, we want to produce work of

quality. And in that sense, it's a very cosy organisation, there are many relationships, people get along well. Sometimes there are

difficulties, but people know each other well, there are a lot of things that connect us. [12]

Moreover, according to the employee satisfaction report, employees state that managers serve an important role regarding this. Employees expect their manager to motivate them intrinsically; they desire opportunities for self-development in their work and want to feel appreciated. On the basis of this, and in line with the current study's main objective, a fruitful opportunity ensues, as it can be argued that performance appraisal is an excellent opportunity to put this key task in the relation between manager and employee into practice.

To enhance the clarity of the results regarding the main research,

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the main findings of this study are divided into three sections, representing the three different characteristics of performance appraisal as they were included in the three sets of formulated hypotheses. The frequency of performance appraisal and the effect on intrinsic motivation will be discussed in the first sub-paragraph, along with a verdict regarding hypothesis 1. In the second sub-paragraph, positive and negative performance appraisal feedback in relation to intrinsic motivation will be discussed, resulting in a verdict regarding hypotheses 2a and 2b. The third sub-paragraph will discuss performance appraisal of a formal and informal nature, in relation to intrinsic motivation, resulting in a verdict regarding hypotheses 3a and 3b.

4.2.1. Frequency of performance appraisal and intrinsic motivationThe findings that concern hypothesis 1— the effect of performance appraisal frequency on intrinsic motivation— will be discussed here. In general, employees view a high frequency of performance appraisals as positive; this is especially linked to a desire to know where one stands.

The employee satisfaction report confirms this relation; communication and transparency are valued highly on the work floor, and informal performance appraisal is regarded as a means to accomplish this. Regarding their intrinsic motivation, specifically, a positive effect is experienced by employees, as a high frequency of performance appraisal yields a high number of opportunities for self-development.

Having many feedback and evaluation moments causes you to think deeply about things that

might not be developed properly yet, or that you're struggling with a little. It gives you the opportunity to develop, which of course is a big part of intrinsic motivation. [13]

Focusing on the employee-supervisor relationship, it can be argued that the supervisors do not sufficiently meet this desire of employees at times. Several employees have stated that there is little time to talk about matters, that they do not hear enough from their supervisor and that performance appraisal suffers from these time constraints as well. Moreover, it seems that performance appraisal is not high on the list of priorities, resulting in negligence.

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It's always under time pressure, an item has to be ready for a certain programme. And to

discuss it the next day in peace doesn't work either. So it becomes quick, or at the coffee

machine; something that comes across badly. [7]

This desire for a higher frequency revealed a clear enterprising and perhaps venturous character of some employees, triggered by a sense of responsibility, and enabled by confidence, trust and communication.

I am someone who does not always know how things work, so I walk up to him myself. I feel like I can always knock on his door, that I can always ask things. I'm also someone who appreciates responsibility. I think people can

flourish in that, when you take action yourself. I believe it should come from both sides. You

should not wait until the action is taken higher up in the organisation, you have to do something yourself too. You can complain, but then are you doing enough yourself? [4]

However, a limit is set for this desire for high frequency; too many

performance appraisals may convey feelings of restlessness and oppression, and may consequently hamper their intrinsic motivation. Notwithstanding this, it can be concluded that frequency generally has a positive effect on intrinsic motivation, therefore, hypothesis 1 is supported.

Employees often linked this frequency notion to the other two sets of hypotheses; a high frequency magnifies the effect of positive or negative feedback in performance appraisals, and formal and informal performance appraisals on intrinsic motivation. Hence, it is believed that interweaving these connections in the forthcoming discussion, in the two following sub-paragraphs, will result in a more clear cut structure of findings, as well as providing a more comprehensive view regarding the relation between these aspects.

4.2.2. Positive and negative performance appraisal feedback and intrinsic motivationThis sub-paragraph will discuss the findings regarding hypothesis 2a and 2b: the effect of positive and negative performance appraisal feedback on intrinsic motivation. On the basis of this distinction, striking findings arise. Positive feedback in performance appraisals is desired

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and is claimed to have a positive effect on intrinsic motivation; it drives employees and makes them feel appreciated. Moreover, it allows them to focus on a satisfactory goal to work towards.

It is true that positivity drives me more, it gives me a thrill. You then keep doing what you're doing. If I deliver a performance, and both

supporters and antagonists react overwhelmingly positive, then it motivates me. [6]

Compliments are nice to hear in our profession. Positivity has an effect on intrinsic motivation; it is a form of appreciation that works well, you are being recognised. [12]

An exception to this relation is found in the source of this positive performance appraisal feedback. If employees question the legitimacy of the information that is provided to them, the positive effect is reduced. For instance, this is the case when the manager is believed to have insufficient knowledge of the facts.

I cannot take the performance appraisals seriously; they are retrospective, but due to a lack

of knowledge I cannot debate with my supervisor. [8]

However, this positive relation with intrinsic motivation does not provide a full picture; in line with the stewardship theory notion that employees are intrinsically motivated by self-development opportunities, negative performance appraisal feedback contributes to this positive relation as well by offering such self-development opportunities. However, conditions are imposed on the structure of the criticism expressed by a manager, in order for intrinsic motivation to indeed increase. For instance, not only does criticism need to be grounded, constructive and relevant, it also has to lead to personal growth opportunities.

I always have to be able to do something with it, I can't deal with negativity and that's it, I have

problems with that. Then I am only trying to please people. I am solution- oriented. We have

had discussions with points of criticism, and afterwards I am glad that the facts are presented,

on the basis of which you can make agreements. Criticism must yield the opportunity to do

something with it. [12]If you're doing your best, under

difficult circumstances, but you get a negative response like

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“this isn't good, that doesn't work”, so it's not constructive criticism- because that's always

good- but just something negative, then it has a

demotivating effect. So, give me constructive feedback, not things that are irrelevant. And we're dealing with that more and more often. Or that costs are too high, it takes too long, this or that. You don't have control over that. The result has then become less important than the total cost package. [6]

Although negative feedback in performance appraisals has a positive effect on intrinsic motivation, it must not gain the upper hand. The employee satisfaction report reinforces this line of reasoning; although employees desire managers to take a critical look at the current situation, negative performance appraisal feedback must not suppress positive performance appraisal feedback to a point where the latter is absent. Again, this is linked to the subordinate role that negative performance appraisal feedback fulfils in relation to intrinsic motivation; positive performance appraisal feedback is desired more. However, there seems to be a limit for both positive and negative

performance appraisal feedback, which can be linked to the frequency notion. Too much positive or negative performance appraisal feedback, too often, is experienced as tiresome, as the credibility of the performance appraisals decreases. Notwithstanding this, it was derived from the employee satisfaction report that the current frequency of positive and negative performance appraisal feedback was regarded as unsatisfactory to barely satisfactory. Frequency is therefore, in principle, positively related to positive and negative performance appraisal feedback. It can be concluded that both positive or negative performance appraisal feedback generally have a positive effect on intrinsic motivation, therefore, hypothesis 2a and 2b are supported.

4.2.3. Formal and informal performance appraisal and

intrinsic motivationThe findings that regard to the effect of formal performance appraisal, as formulated in hypothesis 3a, and informal performance appraisal, as formulated in hypothesis 3b, on intrinsic motivation, will be discussed here. Scrutinising the effect of formal performance evaluations has not resulted in a clear direct relation

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with intrinsic motivation. A small group of respondents has stated that their intrinsic motivation would increase if formal performance appraisals had a more informal character. However, contrasting this notion, one employee stated that formal performance appraisals should be more critical for intrinsic motivation to increase. Therefore, although informality is desired and appreciated— even in formal performance appraisals— formality should not disappear completely; firm guidance is also desired.

Drawing further on this line of reasoning, it is argued that informal performance appraisals prevail in relation to intrinsic motivation, due to the positive effect of high frequency. Formal performance appraisals generally occur twice a year, in the form of a retrospective performance evaluation interview and a functional assessment interview that focuses on the future. In general, formal performance appraisals are perceived as more top-down and artificial in nature, compared to informal performance appraisals, due to the fact that they are planned in advance, yielding more time to prepare feedback. Moreover, they are less frequent than informal performance appraisals and thus are regarded as a more

important event. In contrast, informal performance appraisals are of a more spontaneous nature. In summary, it can be argued that formal performance appraisals do not have a clear-cut effect on intrinsic motivation, while informal performance appraisals have a positive effect on intrinsic motivation.

Formal is twice a year, informal happens on a daily basis for me, particularly because I am a professional perfectionist; you want to know what you have done, you want to move forward and get better, that is my motivation to develop. [3]

It can be concluded that, while formal performance appraisals do not have a straightforward effect on intrinsic motivation, informal performance appraisals have a positive effect on intrinsic motivation; therefore, hypothesis 3a is rejected and hypothesis 3b is supported. Table 1 presents an overview of the hypotheses that were included in this research, along with their status resulting from the findings discussed in this chapter. In the forthcoming discussion, the findings will be compared to the literature from the literature review. The same structure

23

as in previous chapters will be adopted for this discussion.

Hypothesis StatusHypothesis 1 SupportedHypothesis 2a SupportedHypothesis 2b SupportedHypothesis 3a RejectedHypothesis 3b Supported

Table 1. Hypotheses overview.5. Analysis5.1. Frequency of performance appraisal and intrinsic motivationA perceived high frequency of performance appraisals has a positive effect on intrinsic motivation, as employees regard this as a high number of opportunities for learning and self-development. This is in line with stewardship theory, which states that employees are intrinsically motivated by these opportunities, as they enable them to reflect on themselves, and to improve (Buelens and Van den Broeck, 2007; Donaldson and Davis, 1991; Houston, 2000). Furthermore, as frequency is part of the feedback-rich environment description, this proved to be suiting for the positive relation between frequency and intrinsic motivation (Kinicki et al., 2004). This relation has been proven to be strong, as employees took the

initiative to approach their supervisor, thus increasing the frequency of performance appraisals themselves. Based on this critical evidence, hypothesis 1 is confirmed.

Moreover, this positive relation between performance appraisal frequency and intrinsic motivation also affects the other two sets of hypotheses; a high frequency magnifies the effect of positive or negative feedback in performance appraisals, and informal performance appraisals on intrinsic motivation. This is in line with Kinicki et al's (2004) feedback-rich environment description. Frequency does not have a clear effect on formal performance appraisal, due to the ambiguous relation between formal performance appraisal and intrinsic motivation. Although frequency has a clear effect on three of the performance appraisal characteristics, it also sets a limit; the positive effect of positive or negative performance appraisal feedback diminishes when performance appraisals are deployed excessively, which attenuates the strength of the relevant formulated hypotheses. This line of reasoning also applies to informal performance appraisal. Formal performance appraisal is excluded from this line of reasoning, as employees did not formulate a consistent relation

24

between formal performance appraisal and intrinsic motivation.

5.2. Positive and negative performance appraisal feedback

and intrinsic motivationPositive feedback in performance appraisals is regarded as positive by employees, in relation with intrinsic motivation, as it offers employees a learning opportunity as well as an opportunity for self-development This conclusion is in line with stewardship theory and the description of a feedback-rich environment, which states that frequent and positive feedback is desired by employees (Buelens and Van den Broeck, 2007; Donaldson and Davis, 1991; Houston, 2000; Kinicki et al., 2004). Moreover, the same line of reasoning applies for negative feedback in performance appraisals.

However, these lines of reasoning must be clarified. It should be noted that a balance between positive or negative performance appraisal feedback must be attained, for intrinsic motivation to increase. This balance includes more positive than negative performance appraisal feedback, which is in line with Kinicki et al.'s (2004) feedback-rich environment description. This is also where the current research contributes to literature. By

narrowing the focus from motivation to intrinsic motivation, and by including the negative aspect of performance appraisals, it is found that negative performance appraisal feedback plays an important role in the positive relation with intrinsic motivation as well. This is in line with stewardship theory, which states that self-development opportunities are valued by employees; negative feedback is perceived as an opportunity to critically reflect upon performance, and consequently as an opportunity for self-development, thus increasing intrinsic motivation (Buelens and Van den Broeck, 2007; Houston, 2000). Sufficient supporting evidence has been identified, which leads one to confirm hypothesis 2a and 2b; though it should be noted that the positive relation in 2a is stronger, as positive performance appraisal feedback is desired more than negative performance appraisal feedback.

5.3. Formal and informal performance appraisal and

intrinsic motivationCompared to prior literature on performance appraisals and intrinsic motivation, it can be concluded that the distinction between formal and informal performance appraisal has proven to be sensible, as clearly

25

distinctive effects have been found on intrinsic motivation. Formal performance appraisals are regarded as both pressuring and desired by some employees, leading to an ambiguous and therefore insignificant relation with intrinsic motivation. Although a weaker positive effect of formal performance appraisals was formulated, this relation proved to be weaker and less clear than expected. Therefore, a nuance should be given to the unconditional nature of the self-development stewardship theory notion; not all self-development opportunities lead to an increase of intrinsic motivation (Buelens and Van den Broeck, 2007; Donaldson and Davis, 1991; Houston, 2000). Informal performance appraisals, on the other hand, do have a straightforward effect on intrinsic motivation. In line with stewardship theory and the feedback-rich environment notion, it can be argued that informal performance appraisals provide frequent self-development opportunities of a spontaneous nature, which results in an increase in intrinsic motivation (Buelens and Van den Broeck, 2007; Donaldson and Davis, 1991; Houston, 2000). Moreover, this line of reasoning also suits the feedback-rich environment notion, which also offers an

explanation for the difference in effect compared to formal performance appraisals; informal performance appraisals are believed to be more desired for intrinsic motivation, due to a higher degree of specificity, through spontaneity and greater relevance and recency of the feedback (Kinicki et al., 2008).

In summary, regarding the performance appraisal characteristics that were included in this research, it can be concluded that the results are compatible with Van der Kolk's (2013) statement that management controls should be used in a behavioural way that satisfies employees' intrinsic desires. Only formal performance appraisal did not withstand this test, due to a lack of frequency and therefore insufficient opportunities for self-development.

6. Conclusion This study was conducted to address specific gaps in the literature regarding the effect of management control mechanisms and intrinsic motivation. Specifically, the main theoretical objective was to reveal the relation between performance appraisals and intrinsic motivation, which is in line with the research question. In summary, it was shown that positive and negative

26

performance appraisal feedback, and performance appraisal of an informal nature have a positive effect on employee motivation; this effect is mainly explained by the self-development desire of employees. Moreover, a similar effect was triggered by a high frequency of performance appraisals. Formal performance appraisals, however, did not show a straightforward relation with intrinsic motivation. The findings of this study contribute to the field of management control, representing a clear and comprehensive picture of the effect of performance appraisal as a behaviour control mechanism on intrinsic motivation. Moreover, focusing on intrinsic motivation, this study contributed to the stewardship theory, by testing and consequently confirming its views regarding intrinsic motivation in a practical setting. Therefore, this study contributes to the scarce volume of empirical research on stewardship theory and bridges a potential relevance gap. In addition, as this study was conducted in the public sector, a contribution has been made to strengthen the current, subordinate role of the public sector in employee motivation research, in relation to the private sector.

On the basis of these theoretical implications, two implications for practice arise. Firstly, it shows how performance appraisal affects intrinsic motivation. This presents a tailored guideline for managers; concrete requirements have been imposed by employees that should be met when implementing specific changes or additions to this specific behaviour control mechanism. Secondly, focusing on the intrinsic motivation notion, it was shown that intrinsic motivation can be of utmost importance in an organisation; it has proven to be a powerful driver that employees expect to be created and maintained by managers.

A number of limitations to this research must be recognised. Firstly, the primary limitation of this study stems from the specificity of the research setting; the study covered one organisation, and the primary data collection method included only thirteen respondents. In spite of the fact that the organisation-wide employee satisfaction report reinforces the findings in this study, this leads to generalisability concerns, as generalising the findings to alternate contexts and organisations may prove to be difficult. Secondly, this study has focused on one behaviour control

27

mechanism. Aside from excluded behaviour control mechanisms, it must also be noted that input and output control mechanisms could yield effects on intrinsic motivation. It has been stated that forms of control typically do not exist in isolation, but rather are combined to influence the attainment of a specific aim (Cardinal 2001; Kirsch 1996). Due to the focus of this study, this statement has not fully been taken into account.

The findings of this study, along with its limitations, suggest interesting avenues for future research. Firstly, through the research on performance appraisal characteristics and their effect on intrinsic motivation, this study has opened up opportunities to further analyse the effects of these characteristics, and consequently increase the generalisability of this study's findings. Moreover, future research could further analyse the interconnectedness and interplay of these performance appraisal characteristics. Secondly, the performance appraisal notion could be broken down further, potentially identifying other characteristics that could conform or contradict the effects on intrinsic motivation which have been identified by this study. This would paint a fuller picture,

resulting in more steadfast conclusions. Thirdly, it would be interesting to conduct a longitudinal case study in one or more companies, before, during and after a turbulent period, change or event. This would allow for variance to be measured, which stems from a change in perception potentially triggered by this change in the organisational environment.

AcknowledgementsI gratefully acknowledge the people that stood by me during this intensive period, which was preluded by an accident and required a considerable time period in recovery. I would like to thank my mum and dad, and my brother Sander, for supporting me in this time. I would also like to thank Emily, my girlfriend, who stood beside me from start to finish, for taking care of me and guiding me through this turbulent period- and also for proofreading my work. Furthermore, I am grateful for the helpful comments and suggestions received from my supervisor Berend van der Kolk, as well as Remi and Remco, my peers, who provided me with solid grips in finishing my Master's Thesis. I would also like to thank Omrop Fryslân, for granting me the opportunity to interview

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employees, and thus conduct my research.

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Appendix A. Interview questions: variables and items at the individual unit level.

Variables Items References

IntroductionWhen did you start working for Omrop Fryslân?Could you briefly describe the goal of your department?What is your role within this department?For how long have you held this position already?What are the core tasks that are part of your function?

What has changed in terms of management control, over the past five years?What is your opinion on these changes?

Behaviour Control Mechanisms:Performance appraisal

Stage 1: measuring the frequency and nature of performance appraisal Abbey (1982) What are the performance appraisals based on? Kinicki et al. (2004)What is the ratio between formal and informal performance appraisals?What is the ratio between positive and negative performance appraisals?How often do performance appraisals occur?

Stage 2: measuring the impact of performance appraisalWhat is your opinion on the performance appraisals? How do the performance appraisals affect your intrinsic work motivation?

CentralisationStage 1: measuring the level of centralisation Aiken and Hage (1968)How large is the ability to take action yourself, without supervisor approval? Dewar et al. (1980)What are the consequences if an unauthorised decision is made or action is taken? Khandwalla (1974)

Stage 2: measuring the impact of centralisationWhat is your opinion on the centralisation that you have to cope with? How does the present degree of centralisation affect your intrinsic work motivation?

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FormalisationStage 1: measuring the level of formalisation Aiken and Hage (1968)

Are formulated rules available for every work situation?Desphande and Zaltman (1982)

Are standard procedures established for every work situation?Dewar and Werbel (1979)

Do these rules and procedures need to be strictly followed; are there consequences? Hall (1968)

Stage 2: measuring the impact of formalisationWhat is your opinion on the formalisation that you have to cope with? How does the present degree of formalisation affect your intrinsic work motivation?

35