Screening Talent: Absolute or Percentile Thresholds?

57 Pages Posted: 20 Aug 2020

See all articles by Ramji Balakrishnan

Ramji Balakrishnan

University of Iowa - Department of Accounting

Haijin Lin

University of Houston

Shiva Sivaramakrishnan

Rice University

Date Written: April 17, 2020

Abstract

Matching talents to tasks is an important part of job design. Organizations routinely use performance thresholds to group agents by talent. We see thresholds defined both in terms of an individual's own performance (absolute value) and in terms of peer performance (percentiles). Intuition suggests a preference for percentile thresholds because the resulting rank-order statistic is sufficient to assess relative talent. Yet, in the context of a task assignment problem in which the objective is to match talent with task type (using two agents and two task types), we show that absolute thresholds can dominate percentile thresholds under either of two conditions. First, flexibility in task assignment tilts the balance toward absolute thresholds. Second, performance manipulation can adversely affect the inherent advantage of percentile thresholds because they motivate agents to invest relatively more in personally costly influence activities that cast their performance in a favorable light. We examine how these results hold up when there are countably large number of agents and discuss empirical implications.

Keywords: Incentives, Measurement System, Relative Performance Evaluation

JEL Classification: D82, G32, G34, M51, M53

Suggested Citation

Balakrishnan, Ramji and Lin, Haijin and Sivaramakrishnan, Shiva, Screening Talent: Absolute or Percentile Thresholds? (April 17, 2020). Available at SSRN: https://ssrn.com/abstract=3624369 or http://dx.doi.org/10.2139/ssrn.3624369

Ramji Balakrishnan (Contact Author)

University of Iowa - Department of Accounting ( email )

108 Pappajohn Business Building
Iowa City, IA 52242-1000
United States
319-335-0958 (Phone)
319-335-1956 (Fax)

Haijin Lin

University of Houston ( email )

390F Melcher Hall
Bauer College of Business
Houston, TX 77204-6021
United States
7137437771 (Phone)

Shiva Sivaramakrishnan

Rice University ( email )

6100 South Main Street
Houston, TX 77005-1892
United States

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