Rendering Subjectivity Informative: Field Study Evidence of Subjectivity and Bias Mitigation in Performance Measurement and Reward Systems
Posted: 13 Jul 2017
Date Written: June 28, 2017
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
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