The Effects of Group Incentives and Transparency on Managers' Strategic Promotion Behavior

Posted: 14 Feb 2018 Last revised: 8 Apr 2020

See all articles by Gary Hecht

Gary Hecht

University of Illinois at Urbana-Champaign

Victor S. Maas

University of Amsterdam - Amsterdam Business School

Marcel Van Rinsum

RSM Erasmus University

Date Written: April 3, 2020

Abstract

We investigate managers’ propensity to engage in strategic promotion behavior. Strategic promotion behavior occurs when managers pursue personal economic interests when contributing to employee promotion decisions, such that the probability that relatively higher (lower) performing employees are selected for a promotion is decreased (increased). We develop theory about how two important control system design variables – the presence of group incentives and transparency about individual performance – jointly affect managers’ tendency to strategically influence promotion decisions. Using a stylized lab experiment, we find that transparency about individual performance levels decreases strategic promotion behavior to a greater extent when group incentives are absent than when group incentives are present. In fact, we find some evidence that in the presence of group incentives transparency can lead to an increase in strategic promotion behavior. Our study contributes to the literatures on control system design and employee promotion, and has important practical implications.

Keywords: Promotion, Performance Evaluation, Transparency, Incentives, Strategic Behavior

Suggested Citation

Hecht, Gary and Maas, Victor S. and Van Rinsum, Marcel, The Effects of Group Incentives and Transparency on Managers' Strategic Promotion Behavior (April 3, 2020). Available at SSRN: https://ssrn.com/abstract=3116797

Gary Hecht

University of Illinois at Urbana-Champaign ( email )

601 E John St
Champaign, IL 61820
United States

Victor S. Maas (Contact Author)

University of Amsterdam - Amsterdam Business School ( email )

Spui 21
Amsterdam, 1018 WB
Netherlands

Marcel Van Rinsum

RSM Erasmus University ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands

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