Rendering Subjectivity Informative: Field Study Evidence of Subjectivity and Bias Mitigation in Performance Measurement and Reward Systems

Posted: 13 Jul 2017

See all articles by Anne M. Lillis

Anne M. Lillis

University of Melbourne

Mary A. Malina

University of Colorado at Denver - Business School

Julia Mundy

University of Greenwich

Date Written: June 28, 2017

Abstract

Subjectivity is pervasive in performance measurement and reward systems (PMRS). Yet, subjective judgments are known to be corruptible, prone to cognitive errors and bias. We address this paradox by examining how managers render subjectivity informative. Our findings, drawn from 38 interviews with supervisory and subordinate managers in four large firms provide unique, holistic field insights into subjectivity. We find that subjectivity is pervasive, sometimes hidden in seemingly formulaic processes, frequently used in a confirmatory role, and purposeful rather than a residual solution adopted when objective measures fail. We observe subjectivity being used to reduce firm risk, capitalize on the observability of agent action choices, discourage incongruent actions, and enhance employee sorting. Our research design enables us to identify interdependencies among subjective interventions across PMRS processes, to document risk mitigation strategies and identify residual biases remaining despite mitigation.

Keywords: Subjectivity, Performance Measurement, Informativeness, Field Study

JEL Classification: M12

Suggested Citation

Lillis, Anne and Malina, Mary A. and Mundy, Julia, Rendering Subjectivity Informative: Field Study Evidence of Subjectivity and Bias Mitigation in Performance Measurement and Reward Systems (June 28, 2017). Available at SSRN: https://ssrn.com/abstract=2998471

Anne Lillis (Contact Author)

University of Melbourne ( email )

Victoria
Parkville, Victoria 3010
Australia

Mary A. Malina

University of Colorado at Denver - Business School ( email )

1250 14th St.
Denver, CO 80204
United States

Julia Mundy

University of Greenwich ( email )

30 Park Row
Greenwich
London, SE10 9LS
United Kingdom

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