How Formal Performance Evaluation Affects Trust between Superior and Subordinate Managers

38 Pages Posted: 1 Aug 2006

See all articles by Frank G. H. Hartmann

Frank G. H. Hartmann

Radboud University Nijmegen - Institute for Management Research

Sergeja Slapničar

University of Queensland

Date Written: October 2006

Abstract

An important question in the control literature concerns the role of interpersonal trust in the design and functioning of formal control systems for collaborative settings. Although some studies regard trust and formal controls as independent phenomena, recently studies have explored how formal controls affect interpersonal trust. These studies provide mixed results, as they show both positive and negative effects of formal control on trust. This suggests that our understanding of the mechanisms through which, and the conditions under which, formal control affects trust is important, but still limited. In this paper we aim to enhance our understanding of this relationship by investigating the relationship between formal control and interpersonal trust for the collaborative setting of superiors and subordinates. We argue that subordinate's trust in the superior depends on the formality of the performance evaluation procedure, that this relationship is mediated by managerial perceptions of justice and feedback, and that these effects differ across managerial functions. We test our expectations using survey data from a sample of 160 managers in 11 commercial banks. Overall, we find that formal performance evaluation affects trust, and that this relationship is mediated by managerial perceptions of justice and feedback. Furthermore, we find that formality matters more for managers in functions with less contractible outputs. The paper contributes to the literature by providing empirical evidence on the antecedents of trust in a performance evaluation setting. Furthermore, it provides additional evidence of positive effects of controls on trust, yet shows that these positive effects are contingent on the exact managerial setting.

Keywords: trust, formality, performance evaluation system, procedural justice, feedback quality

JEL Classification: M49, M52

Suggested Citation

Hartmann, Frank G. H. and Slapničar, Sergeja, How Formal Performance Evaluation Affects Trust between Superior and Subordinate Managers (October 2006). AAA 2007 Management Accounting Section (MAS) Meeting, Available at SSRN: https://ssrn.com/abstract=915354 or http://dx.doi.org/10.2139/ssrn.915354

Frank G. H. Hartmann (Contact Author)

Radboud University Nijmegen - Institute for Management Research ( email )

Postbus 9108
Nijmegen, 6500 HK
Netherlands

Sergeja Slapničar

University of Queensland ( email )

St Lucia
Brisbane, Queensland 4072
Australia