Long-Term Incentives, Managerial Effort and Supervisor Evaluation Bias

33 Pages Posted: 10 Aug 2011 Last revised: 1 Dec 2011

See all articles by Nicola Dalla Via

Nicola Dalla Via

Free University of Bozen-Bolzano

Frank G. H. Hartmann

Radboud University Nijmegen; Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM)

Paolo Collini

University of Trento - Department of Economics and Management

Date Written: December 1, 2011

Abstract

We study the incidence of supervisors’ evaluation biases in a biannual incentive system in an Italian public administration. Using performance reports for 106 employees over three biannual evaluation periods (2001-2006), we analyze supervisors’ intertemporal evaluation biases. We find evidence for lenient and compressed performance ratings especially in the second year of each biannual evaluation period. We explain these biases, and their intertemporal variation, by supervisors’ relative emphasis on subjective and objective performance metrics. We further analyze the effect of performance categorization and find that leniency is enhanced for ratings closer to the lower boundary of each performance category. The results have important implications for understanding the trade-offs supervisors face when enhancing their subordinates’ long-term performance, and short-term performance measure accuracy.

Keywords: performance evaluation, leniency bias, centrality bias, long-term performance

JEL Classification: C12, M52

Suggested Citation

Dalla Via, Nicola and Hartmann, Frank G. H. and Collini, Paolo, Long-Term Incentives, Managerial Effort and Supervisor Evaluation Bias (December 1, 2011). AAA 2012 Management Accounting Section (MAS) Meeting Paper, Available at SSRN: https://ssrn.com/abstract=1907682 or http://dx.doi.org/10.2139/ssrn.1907682

Nicola Dalla Via (Contact Author)

Free University of Bozen-Bolzano ( email )

Faculty of Economics & Management
piazza Università, 1
Bozen-Bolzano, BZ 39100
Italy

Frank G. H. Hartmann

Radboud University Nijmegen ( email )

Postbus 9108
Nijmegen, 6500 HK
Netherlands

Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM) ( email )

P.O. Box 1738
Room T08-21
3000 DR Rotterdam, 3000 DR
Netherlands

Paolo Collini

University of Trento - Department of Economics and Management ( email )

Via Inama 5
Trento, I-38100
Italy

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