Effectively managing new product development is critical to many businesses. A recent study examined the Spanish manufacturing sector for the combined effects of process based rewards and process controls on new product performance and job satisfaction. Results found that both process-based rewards and process controls can have either positive or negative effects depending on the performance considered. Process-based rewards were found to have a positive effect on adherence to budget, adherence to schedule, and team’s job satisfaction, while having a negative effect on new product quality.
Key Topics: New product development; Process-based rewards; Job satisfaction
Title of Reviewed Article: The individual and joint effects of process control and process-based rewards on new product performance and job satisfaction.
Researchers: Pilar Carbonell (York University) and Ana I. Rodnguez-Escudero (University of Valladolid).
Publication: Business Research Quarterly, 2016, Vol. 19, pp. 26-39.
Setting the Scene
A perennial issue for many companies is how to effectively control new product development (NPD) in order to meet project goals (Rijsdijk & van den Ende, 2011). This study examined two types of control systems, namely process-based rewards and process control, and their effect on NPD performance. Process controls relates to the monitoring and manipulation of activities, behaviours, and activities needed to meet project goals (Bonner et al., 2002). Process-based rewards, on the other hand, relates to the compensation of employees in order to effectively meet project goals (Atuahene-Gima & Murray, 2004; Li e t al., 2010). While a number of studies have examined these relationships (e.g., Bonner et al., 2002; Li et al., 2010), the results have not given clear direction.
The current study examines primarily three elements of control that are seen as fundamental to NPD success, which are new product quality, adherence to budget, and adherence to schedule. Additionally, this study examines the effect of process-based rewards and process control on job satisfaction. Prior research has established job satisfaction’s importance to team effectiveness and performance (e.g. Rodriguez-Escudero et al., 2010), yet there is limited research on how it relates to process-based rewards and process control.
The researchers posited a series of research questions:
Hypothesis 1a – “Process control has a positive effect on product quality.”
Hypothesis 1b-d – Process control has a negative effect on (b) adherence to schedule, (c) adherence to budget, and (d) job satisfaction.
Hypothesis 2a-d– Process-based rewards have a positive effect on (a) product quality, (b) adherence to schedule, (c) adherence to budget, and (d) job satisfaction.
Hypothesis 3a-d– There is a positive interaction effect of process control and process-based rewards on (a) product quality, (b) adherence to budget, (c) adherence to schedule, and (d) job satisfaction.
How the research was conducted
This study was based on data collected from 197 Spanish manufacturing companies from various industries. Industries were chosen which had high innovation rates, particular those classified as high-tech or medium-high-tech, and those with high Research and Development spending.
Data was collected via questionnaires completed by senior executives managing NPD activities for each company. Participants provided information on a new product which was developed and launched within the previous three years and in the market for more than 12 months.
Information was collected in relation to process controls, process-based rewards, adherence to budget, adherence to schedule, commercial success, product quality, team job satisfaction, output control, professional control, and participative decision-making
Key Research Findings
The results supported Hypotheses 1a, 1b, 1c, and 1d, which had correctly predicted a positive relationship between process control and product quality, and a negative relationship between process control and adherence to schedule, adherence to budget, and job satisfaction.
The results did not support Hypothesis 2a, as a negative relationship between process-based rewards and product quality was found.
Hypothesis 2a was supported, as a positive relationship was found between process-based rewards and adherence to schedule.
Hypothesis 2c was not supported, as a relationship was not found between process-based rewards and adherence to budget.
Hypothesis 2d was supported, as a positive relationship was found between process-based rewards and job satisfaction.
Hypothesis 3a was supported, while no support was found for Hypotheses 3b, 3c, and 3d.
The use of process control by companies has been shown to facilitate the development of high quality products (Bonner et al., 2002). This study further supports this assertion, with results indicating that process controls were beneficial for greater new product quality, while indicating that process controls can have a negative effect on adherence to schedule, adherence to budget and job satisfaction.
The researchers suggest that these negative effects of process controls may relate to such controls leading to an overly bureaucratic development process which can lead to greater delays and project costs, while job satisfaction may be reduced as a results of controls imposing constraints on the autonomy of team members.
The findings relating to process-based rewards were mixed. A positive effect on adherence
to schedule and job satisfaction were found, indicating that such rewards are conducive towards team members focusing on and delivering on the project schedule effectively and feeling satisfied in their work. On the other hand, reward was found to not have a significant effect on adherence to budget, which the researchers suggest might be due to team’s members placing greater importance on the schedule.
Interestingly, the results found that process-based rewards had a negative impact on new product quality, which goes some way to support previous research that suggested that rewards can undermine creativity (Woodman et al., 1993).
Organizational and Reward Implications
The finding that rewards have positive or negative effects depending on the type of performance outcome is an interesting one for reward practitioners to contend with. This study found that rewards improved adherence to schedule, adherence to budget and job satisfaction, but had negative impact of new product quality. These results provide further evidence that rewards don’t ‘cure all ills’ and a nuanced approach to reward is the most advisable, with companies giving careful thought to what aspects of performance they wish to target, whilst also being mindful of unnecessary consequences. This study also highlights the need to analyse the effectiveness of a reward program once it has been implemented to ensure the desired effect.
This study reviewed the effects of process-based rewards and process control on adherence to schedule, adherence to budget, product quality and job satisfaction. As such, this is one of the few studies that takes such a nuanced approach to reviewing new product performance, and provides valuable results. Given the data was taken exclusively from Spain, further studies in other countries would be worthwhile in validating further the effects observed in this study.
Source Article: Carbonell, P., & Rodríguez-Escudero, A. I. (2016). The individual and joint effects of process control and process-based rewards on new product performance and job satisfaction. BRQ Business Research Quarterly,19(1), 26-39.
Published by: Elsevier
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Bonner, J. M., Ruekert, R. W., & Walker, O. C. (2002). Upper management control of new product development projects and project performance. Journal of Product Innovation Management, 19(3), 233-245.
Li, C. R., Chu, C. P., & Lin, C. J. (2010). The contingent value of exploratory and exploitative learning for new product development performance. Industrial Marketing Management, 39(7), 1186-1197.
Rijsdijk, S. A., & van den Ende, J., (2011). Control combinations in new product development projects. Journal of Product Innovation Management, 28(6), 868-880.
Rodriguez-Escudero, A. I., Carbonell, P., & Munuera-Aleman, J. L. (2010). Positive and negative effects of team stressors on job satisfaction and new product performance. Journal of Product Innovation Management, 27(6), 856-868.
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