Promotion, Performance Rating Granularity, and Decision Spillover Effects
40 Pages Posted: 31 Aug 2018
Date Written: August 1, 2018
We examine how managers’ consideration of a future promotion decision can influence their subjective evaluation of workers’ past job performance as well as their subsequent promotion decision. We predict that whether such effects manifest depends on the rating granularity (i.e., the number of ratings managers assign to workers) of the performance evaluation system. In our experimental setting, managers first evaluate workers’ past performance and then decide to promote either the worker best at the current job or the worker best suited for promotion. Results indicate that managers evaluate the worker best suited for promotion most favorably under a single-rating system when managers anticipate making a future promotion decision. This in turn increases managers’ likelihood of promoting that worker later, thereby effectively sorting workers to their jobs and mitigating the Peter Principle problem. Our study informs practice of the environmental factors and motivations that influence managers’ subjective evaluations and promotion decisions.
Keywords: Subjective Performance Evaluation, Promotion, Rating Granularity, Managerial Decision-Making
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