Utilizing Incentives and Accountability: In Control in Control?



Objectivity and transparency are often considered to be desirable attributes of a performance measurement and incentive system. Subjectivity, on the other hand, is typically equated with bias and has a negative connotation. But accounting research shows us that a degree of subjectivity, in other words allowing leeway for supervisors’ judgments in evaluations, is usually optimal. I argue that we should switch to the term ‘discretion’, to be better able to communicate its benefits. Moreover, I illustrate the benefits of discretion and of transparency, as well as the costs. I surmise that a balance between objectivity and discretion is required, and that transparency is definitely not always desirable. Furthermore, I discuss how discretion relates to the way in which managers are held accountable. Holding managers accountable for outcomes is not always optimal, yet pervasive. Finally, I outline future research opportunities on discretion and accountability, I apply the insights about performance measurement to the academic working environment, and I promote the use of new research methods.