Targets That Create Jobs? Performance Goals, Incentive Pay, and Employment Growth in Ghanaian Enterprises

Abstract

Formal performance targets can focus organizational attention, while incentive pay can encourage employees to pursue those targets. However, the employment consequences of combining the two practices are uncertain, especially in developing economies. This study examined whether production or service targets were associated with annual employment growth in Ghanaian enterprises and whether performance bonuses linked to targets strengthened that relationship. The analysis used the Ghana World Bank Enterprise Survey 2023. The management-practices module was administered to 307 establishments with at least 20 employees at screening. After invalid responses and incomplete employment histories or controls were removed, the analytical sample contained 244 establishments. Annual employment growth was calculated with the World Bank symmetric formula from permanent full-time employment in the last fiscal year and three fiscal years earlier. Survey-weighted least-squares regression controlled for nonlinear initial employment and firm-age relationships, training, foreign ownership, realized industry and region. The weighted mean annual employment growth rate was 11.2%; 73.0% of establishments reported formal targets and 57.1% reported target-based bonuses. In the full model, target setting was negatively associated with growth when bonuses were absent, b = -7.68 percentage points, 95% confidence interval [-14.34, -1.02], p = .024. The bonus coefficient was not significant when targets were absent, b = -4.19, p = .365. The target-by-bonus interaction was positive but nonsignificant, b = 6.22, 95% confidence interval [-4.05, 16.49], p = .235. Adjusted growth was 16.2% for firms with neither practice, 8.6% for targets without bonuses and 10.6% for firms combining targets and bonuses. Alternative weights, a logically coherent three-category model, alternative growth measures and 1,000 stratified bootstrap replications did not support positive moderation. The findings suggest that targets may be adopted in response to operational pressure rather than functioning as simple growth devices. Bonuses may partially offset the negative target association, but the evidence does not establish that they generate additional employment growth. Managers should connect targets to realistic capacity plans, employee participation and broader growth opportunities rather than treating target-linked pay as an automatic job-creation mechanism.