Managers' Self-Serving Incentives: Information Avoidance in Performance Evaluation
(Job market paper)
Abstract: In many organizational contexts, managers might have self-serving incentives whereby giving high evaluations to employees comes at the expense of their own payoff. In this study, I examine the impact of managers’ self-serving incentives on the collection and use of information for the purpose of subjective performance evaluation. I find that managers with self-serving incentives collect less information than managers with no self-serving incentives. When managers do collect all available information, I find that managers with self-serving incentives interpret that information in a more self-interested way by giving lower upward adjustments to employees’ compensation than do managers with no self-serving incentives. However, information avoidance under self-serving incentives is mitigated when employees propose self-evaluations and managers observe these self-evaluations afterwards. My findings increase our knowledge about the role of subjective performance evaluations in modern organizational contexts where managers might have self-serving incentives, such as business units operating as profit centers and profit-accountable teams.
Real-Time Feedback Systems, Recordkeeping and the Task Selection Bias
Farah Arshad and Bart Dierynck
Abstract: With the emergence of new technologies, the use of real-time feedback systems where employees have a choice over whether and how frequently they want to get feedback is increasing. In this study, we experimentally examine individuals’ tendency to choose easier tasks over difficult tasks (also known as the task selection bias) under real-time feedback systems. We find that real-time feedback systems lead to a higher task selection bias and that recordkeeping can reduce the task selection bias induced by real-time feedback systems. Our findings also reveal that planning and dynamic sequencing (where the system suggests the next task based on a plan) do not have an incremental effect over recordkeeping in reducing the task selection bias. Our study uncovers how modern accounting systems influence task selection and tests how real-time feedback systems could be modified to mitigate the task-selection bias induced by real-time feedback systems.
Facing a Calibration Committee: The Impact on Costly Information Collection and Subjective Performance Evaluation
Farah Arshad, Eddy Cardinaels and Bart Dierynck
Abstract: Recently, many organizations have installed calibration committees to review and correct subjective performance evaluations of supervisors about their employees. This study uses an experimental setting to examine the impact of calibration committees on supervisor evaluation behavior. We predict and find that a calibration committee instigates supervisors to collect additional costly information that helps to better explain the performance of their employees. We also find that the presence of a calibration committee leads to better differentiated performance evaluations through supervisors’ collection of additional costly information. We also study two different types of calibration committees; those consisting of only supervisors compared to those with both supervisors and a third party in the form of a HR-manager. Our results reveal that the presence of a third party (i.e. HR-manager) in the calibration committee leads to better information transfer during discussion in the calibration committee such that supervisors are more likely to consider other supervisors’ information about employees to reach a consensus about their evaluations. Our study opens the black box of calibration committees by eliciting behavioral mechanisms that instigate supervisors to make more thorough evaluations.
Does Managerial Reporting Still Matter? An Experimental Investigation of Laboratory Hierarchies
Farah Arshad, Bart Dierynck and Victor van Pelt
Abstract: Over the past several decades, technological advancements in information technology and data science have increasingly enabled firms to produce and distribute information, which challenges long-standing ideas about the role of managerial reporting in firms. We design a series of laboratory hierarchies to examine whether granting reporting responsibility to managers has a purpose beyond eliciting information from managers. Using three experimental treatments, we disentangle the different effects produced by managers' reporting choices, and we establish that granting managers responsibility for reporting may have a purpose beyond the elicitation and distribution of information managers possess. We discuss the implications of our findings for managerial reporting research and practice.