The Determinants and Performance Effects of Managers’ Performance Evaluation Biases

Bol, Jasmijn C.

doi:10.2139/ssrn.1089077

Cited by 58 publications

(123 citation statements)

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“…Providing workers with more favorable performance ratings could increase workers' motivation to work. Consistent with this argument, Bol (2011) finds that leniency bias has a positive effect on workers' future performance because workers perceive the incentive system to be fairer when they receive higher performance ratings.…”

Section: Advantagesmentioning

confidence: 75%

Promotion, Relative Performance Information, and the Peter Principle

Chan

2017

The Accounting Review

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PROMOTION, RELATIVE PERFORMANCE INFORMATION, AND THE PETER PRINCIPLE Eric Wai Yeung Chan, PhDUniversity of Pittsburgh, 2015 My dissertation consists of two main parts. In the first part, I present my experimental study in which I examine the effects of providing workers with relative performance information (RPI) on employers' promotion decisions and the impact of those decisions on worker performance. In my experimental setting, the job after promotion requires higher-level abilities than the current job. I find that workers increase their effort to improve their current job performance after a promotion opportunity is announced because they expect this to increase their chances of promotion even though the new task requires higher-level abilities. Moreover, because employers anticipate that workers who have RPI will react negatively if they see that the best current job performer is not promoted, employers promote the best current job performer rather than the worker best suited for the next job more often when workers have RPI than when they do not. Finally, consistent with the Peter Principle, I find that the promoted worker's performance after promotion is lower when workers have RPI than when they do not because the v promoted worker lacks the ability to perform the new job well. My results suggest that providing workers with RPI can have a downside that offsets the benefits documented in previous studies.In the second part of my dissertation, I discuss how three common firm practices could potentially help firms mitigate the sorting problem I identified in my experimental study.Specifically, I discuss how the communication of the promotion criteria, group incentive plans, and subjective performance evaluation could help employers improve the sorting of workers through promotions. However, while each approach has advantages, each also has drawbacks. It appears that there is no promotion-based incentive system that provides optimal effort incentives to workers while simultaneously achieving the best match between workers and their jobs. This conflict between the incentive and sorting roles of promotion is difficult to resolve and firms must ultimately trade-off between them. INTRODUCTIONPromotions are integral to most organizations and serve two important and distinct roles (Milgrom and Roberts 1992, p.364). The first is to motivate and reward workers (incentive role) and the second is to sort workers into jobs that best match their abilities (sorting role). However, the incentive and sorting roles may conflict when the nature of the tasks changes between hierarchical job levels such that workers' performance in the current job is not fully informative about their performance in the next job. In such cases, the best performer at one level of the hierarchy is often not the best candidate for the next higher-level job.The situation described above occurs quite often, such as when salespersons are promoted to sales managers, engineers are promoted to project managers, and teachers are promoted ...

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Section: Advantagesmentioning

confidence: 75%

Promotion, Relative Performance Information, and the Peter Principle

Chan

2017

The Accounting Review

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“…Engellandt and Riphahn (2008), Bol (2009), Kampkötter and Sliwka (2010) and Ahn et al (2008) give some indication that rating compression is associated with lower subsequent performance. Direct empirical evidence on the e¤ects of forced distributions is very scarce.…”

Section: Introductionmentioning

confidence: 99%

Performance Appraisals and the Impact of Forced Distribution—An Experimental Investigation

2013

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. www.econstor.eu The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit organization supported by Deutsche Post Foundation. The center is associated with the University of Bonn and offers a stimulating research environment through its international network, workshops and conferences, data service, project support, research visits and doctoral program. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. Terms of use: Documents in D I S C U S S I O N P A P E R S E R I E SIZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author.IZA Discussion Paper No. 5020 June 2010 ABSTRACT Performance Appraisals and the Impact of Forced Distribution: An Experimental InvestigationA real effort experiment is investigated in which supervisors have to rate the performance of individual workers who in turn receive a bonus payment based on these ratings. We compare a baseline treatment in which supervisors were not restricted in their rating behavior to a forced distribution system in which they had to assign differentiated grades. We find that productivity was significantly higher under a forced distribution by about 8%. But also in the absence of forced distribution, deliberate differentiation positively affected output in subsequent work periods.JEL Classification: C91, D83, J33, M52

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“…Centrality bias is the inclination to group performance ratings closer together than actual performance dictates which leads to less variance, while leniency bias provides employees with unrealistically high subjective performance ratings. Bol (2011) state that the causes of supervisor bias include:…”

Section: Introductionmentioning

confidence: 99%

Hiring and escalation bias in subjective performance evaluations: A laboratory experiment

Angelovski

Brandts

Solá

2016

Journal of Economic Behavior & Organization

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In many organizations the measurement of job performance can not rely on easily quantifiable information. In such cases, supervising managers often use subjective performance evaluations. We use laboratory experiments to study whether the way employees are assigned to a manager affects managers' and co-employees' subjective evaluations of employees. Employees can either be hired by the manager, explicitly not hired by him and nevertheless assigned to him or exogenously assigned to him. We present data from four different treatments. For all four treatments we find escalation bias by managers. Managers exhibit a positive bias towards those employees they have hired or a negative one towards those they have explicitly not hired. For three treatments we find that managers' and employees' biases are connected. Exogenously assigned employees are biased in favor of employees hired by the manager and against those explicitly not hired.

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The Determinants and Performance Effects of Managers’ Performance Evaluation Biases

Cited by 58 publications

References 0 publications

Promotion, Relative Performance Information, and the Peter Principle

Promotion, Relative Performance Information, and the Peter Principle

Performance Appraisals and the Impact of Forced Distribution—An Experimental Investigation

Hiring and escalation bias in subjective performance evaluations: A laboratory experiment

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