Can Gender and Race Dynamics in Performance Appraisals be Disrupted? The Case of Social Influence

Abstract

Performance reviews in firms are common but controversial. Managers’ subjective appraisals of their employees’ performance and employees’ self-evaluations might be affected by demographic characteristics, interact with each other as self-evaluations are typically shared with managers before they decide (“anchoring”), and these supply-side and demand-side dynamics may contribute to gender or race differences in performance ratings. Analyzing the data of a multi-national financial services firm, we find that supply-side effects were mostly driven by gender: women (particularly, women of color) gave themselves lower self-ratings. Demand-side effects were shaped by gender and race: holding self-evaluations constant, managers lowered the ratings of female and White employees less, reversing the gender gap in ratings induced by the supply side for Whites but introducing a race gap. The race-based demand-side effects were particularly pronounced in the US, negatively affecting Black, Asian and Latinx employees. Counterfactual simulations suggest that 22-28% of Black employees’ ratings would have to be increased for this race gap to disappear. Finally, we evaluate a potential intervention. In 2016, a quasi-exogenous shock led to self-evaluations not being shared with managers before they appraised employees. While this disruption of supply-side influences led to “de-anchoring” with lower average manager ratings, it generally did not change any gender or race dynamics, as these were mostly shaped by demand-side factors. A possible exception were employees of color hired in 2016: when managers were not anchored by self-ratings (and were unaffected by previous years), the race gap disappeared for women (but not for men) of color.