The Role of Performance Transparency and Monetary Rewards in Task Assignment Decisions of Managers

Abstract

This study examines the impact of performance transparency and monetary incentives on managers' task assignment decisions. In each organization, there will be tasks that no one wants to do. In each organization, there will be tasks that no one wants to do. Managers, who need to assign such tasks face a dilemma: should they assign it to the employee who will likely do the best job even if this employee resents the task, or should they instead assign it to a weaker performer? We hypothesize that managers’ propensity to assign an undesirable task to the most suitable candidate is higher when they can provide employees a specific reward for doing the task and when transparency about individual performance levels is low. Moreover, we predict that reward availability and transparency interact in affecting task assignments such that the probability that the task will be assigned to the best candidate is exceptionally low in transparent firms where there is no reward available. Using an experiment, we find evidence that the assignment of undesirable tasks is indeed affected by the availability of a reward but we find no evidence of the hypothesized effects of transparency. The results of this study contribute to extending our understanding of the role of incentives and controls in performance management.

Keywords: task assignment, relative performance information, performance transparency, monetary rewards, fairness perceptions

JEL Classification: M41, M52