MEDIATING EFFECT OF EMPLOYEE EFFORT IN EMPLOYEE INFORMATIVENESS AND PERFORMANCE

Contract Theory explains the problems that may arise in designing incentive contracts and the possible solutions for those problems. One of the problems mentioned to the principal agent contract problem is moral hazard and the reason for that problem is the lack of sufficient information. Employee Informativeness is suggested as a solution to alleviate the moral hazard problems which will help in inducing the effort decision in employee and thereby improves the performance. This paper attempts to check whether the employee informativeness influences the effort of the employee and thereby performance. Here effort is considered as a mediating variable in the relation between Employee Informativeness and Performance. The study is conducted among 117 sales personnel in Automobile dealer industry where incentives contribute as a major part of their compensation. The tools used in the analysis is Spss tools and process macro. The study reveals that Employee effort act as a mediator in the relation between employee informativeness and employee performance.