How managers use PMS to induce behavioural change in enhancing governance

This study uses the psychology theory to explore how managers use the performance measurement system (PMS) to induce behavioural change in employees in enhancing governance. This study utilizes a semistructured interview of 14 Indonesian senior bankers. Data were analysed using qualitative analysis software, Nvivo. The results suggest that PMS improves employees’ task and goal cognition, and intrinsically motivates them by creating habit, promoting a comfortable working environment and healthy competition. Employees are also extrinsically motivated as PMS produces rewards and punishments, making employees ashamed of poor performance, including non-financial behavioral aspects in performance goals. The most significant is how the perceptions of fairness and shame are enacted through multiple PMS uses and processes. This study was conducted in the Indonesian context. Therefore, the findings of the study may not be generalized to the banking industries in other countries, especially the Western ones. These findings will likely have significant implications for managers in designing and implementing the PMS to maximize employees’ efforts and performance.