Promotion, Performance Rating Granularity, and Decision Spillover Effects

40 Pages Posted: 31 Aug 2018

See all articles by Eric W. Chan

Eric W. Chan

University of Texas at Austin - Department of Accounting

Todd A. Thornock

University of Nebraska at Lincoln - School of Accountancy

Date Written: August 1, 2018

Abstract

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

Suggested Citation

Chan, Eric W. and Thornock, Todd A., Promotion, Performance Rating Granularity, and Decision Spillover Effects (August 1, 2018). Available at SSRN: https://ssrn.com/abstract=3236952 or http://dx.doi.org/10.2139/ssrn.3236952

Eric W. Chan (Contact Author)

University of Texas at Austin - Department of Accounting ( email )

Austin, TX 78712
United States

Todd A. Thornock

University of Nebraska at Lincoln - School of Accountancy ( email )

307 College of Business Administration
Lincoln, NE 68588-0488
United States

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