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

Abstract

We examine how managers assess performance and promotion prospects, i.e., 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.

Keywords: Subjectivity, incentive systems, subjective performance assessment, promotions, professional services firms, decision making processes