The Forward-Looking Role of Subjectivity in Performance and Promotion Evaluations: Evidence from Professional Services

We examine how non-contractual signals affect managers’ subjective measurements of employees when objective team measures are present, and whether these effects differ for measures of performance and worthiness for promotion (hereafter, “promotability”). Leveraging the combined strengths of field and experimental methods, we provide evidence that subjective performance and promotability assessments are incrementally affected by employee actions that provide a forward-looking signal. We conduct an experiment with experienced consulting managers (mean experience = 24.95 years) and ask them to assess two employees who have the same position but have different tenures at that position. We hold employees’ objective team measure constant but manipulate an action that provides a non-contractual signal, specifically advice-seeking. We argue that this non-contractual signal will have either an incremental effect or no effect beyond the objective team measure, depending on whether it provides a relatively clear signal of employee effort or skills that are valued by the firm and that are not captured by the objective output measure. We find results consistent with our prediction. For example, relatively frequent advice-seeking positively affects subjective performance measures because it signals learning and development. Our results also show that promotability assessments are affected positively only by relatively infrequent advice-seeking, which suggest that managers base subjective performance and promotion assessments on different criteria.  In sum, we identify conditions under which promotability measures differ, even when objective and subjective performance measures do not.

Jasmijn C. Bol is an assistant professor with the Department of Accountancy at the University of Illinois, Urbana-Champaign (UIUC). She holds a Master degree in International Business from Maastricht University (The Netherlands) and a Ph.D. from IESE Business School, University of Navarra (Spain). Her research interest is the use of accounting information for managerial decision making, with a special focus on performance measurement and compensation systems. Professor Bol joined the UIUC faculty in 2007.

Paolo Perego

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