Subjectivity in Professionals' Incentive Systems: Differences between Promotion- and Performance-Based Assessments

Jasmijn C. Bol, Justin Leiby

Research output: Contribution to journalArticle

Abstract

We examine how managers assess performance and promotion prospects—that is, the ex ante likelihood of promotion—and the conditions under which these assessments diverge. We argue that managers apply different cognitive schemas when they make different assessments. To the extent that a signal provides different information about future versus current contributions, assessed performance and promotion prospects are likely to diverge. In two experiments, we manipulate professionals' promotion eligibility and level of consultative decision making. We find that experienced managers assess performance and promotion prospects differently, but only when professionals are promotion eligible. Specifically, more (as opposed to less) consultative decision making decreases promotion prospects while not affecting assessed performance (Experiment 1) or even improving it (Experiment 2). By contrast, more consultative decision making improves both assessments when professionals are not eligible for promotion. We shed light on the relations between subjective assessments, including that promotion is not necessarily the consequence of superior assessed performance.

Original languageEnglish (US)
Pages (from-to)31-57
Number of pages27
JournalContemporary Accounting Research
Volume35
Issue number1
DOIs
StatePublished - Mar 1 2018
Externally publishedYes

Keywords

  • M41
  • M42
  • M51

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

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