Managing the Ratcheting Risk in Target Setting in the Nigeria Financial Sector

Adebawo O. Owolabi, R.I. Akintoye, Adebawojo Oladipupo


Target setting and performance measurement are very crucial roles of the managers while harnessing the resources of the organization together to achieve its objectives.  Ratchet build-up is a risk and counter productive within organization system due to communication gaps among members hence, it must be well managed.  The study was a descriptive research which used the data obtained from 239 staff in the marketing departments of the 15 quoted banks operating in Lagos, Nigeria. It documented that communication with subordinates during target setting has insignificant impact on the expected performance (P- Value = 0.074 which is >0.05).  Also, bonus award, job rotation and performance measure have significant impact on the expected performance of the subordinates (P-value =.021, .000 and .003) respectively which is <0.05.  The study established that communication will encourage ratchet build-up when the workforce have the opportunity to discuss and share experiences among themselves to inter-temporal manage their output. However, it has its positive side when an active interaction with the subordinate is allowed. It helped the superior to determine the level of reliance to be placed on past performance of the subordinate to set new targets.

Keywords: Ratchet, Performance measurement, Target setting, communication, job rotation.

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