The psychological effects of centrality bias: an experimental analysis

Abstract

This paper examines the psychological mechanisms that are activated by centrality bias in the context of subjective performance evaluation. Centrality bias refers to compressed evaluations of subordinates, implying that the variance in the performance of the evaluated employees is higher than the variance in the rewards determined by the superior. Based on insights from the social psychology literature, we argue that centrality bias may trigger different psychological mechanisms which affect the subordinates' willingness to exert work effort. We propose that these effects differ depending on whether employees are above-average or below-average performers. In line with our predictions, we detect a considerable asymmetry in the effects of centrality bias. In particular, we find that the relationship between centrality bias and the willingness to exert work effort is negatively mediated by controlled motivation and procedural fairness perceptions for above-average performers. For below-average performers, we find that centrality bias is positively related to procedural fairness perceptions which are, however, unrelated to the willingness to exert work effort. In addition, we shed light on the role of peer information and find that its disclosure has not a significant impact on the psychological mechanisms at work.

How centrality bias in subjective evaluation affects positive and negative employee work behavior: a real-effort task experiment

“…The rewards obtained from subjective evaluations containing centrality bias tend to be the same as those obtained by low-performing employees. On the contrary, lower-performing employees feel that performance evaluations with centrality bias are just and favorable (Trapp and Trapp, 2019). The compression of values by evaluators causes the rating obtained by the employee to be higher than their actual performance.…”

“…More simply, when employees know that evaluators will compress their evaluations in the direction of the average evaluation results, they have little encouragement to make more effort in the future (Golman and Bhatia, 2012). Centrality bias can impact behavior through this psychological mechanism (Trapp and Trapp, 2019).…”

“…In that case, they can become unmotivated and exert less effort in the future (Moers, 2005). Previous research has proven that centrality bias harms performance improvement (Bol, 2011;Bol et al, 2016;Trapp and Trapp, 2019). Based on the agency perspective, centrality bias negatively influences employee work effort because it creates a disproportionate ratio of pay to performance (Bol, 2011;Holmstrom, 1979).…”

“…The focus on procedural fairness compared to other organizational fairness types is accorded because centrality bias arises as part of the performance evaluation process (Folger and Konovsky, 1989;Hartmann and Slapni car, 2012;Trapp and Trapp, 2019).…”

“…This study emphasizes the activation of psychological mechanisms attributable to centrality bias, which ultimately affects willingness to exert work effort. Trapp and Trapp (2019) found that the effect of centrality bias on a willingness to exert work effort is partially mediated through controlled motivation and is fully mediated through perceived procedural fairness. This research seeks to confirm that perceived procedural fairness is the robust psychological mechanism that mediates the effect of centrality bias on employee behavior.…”