Fishing for Excuses and Performance Evaluation

François Larmande and Jean-Pierre Ponssard

No 4569, CESifo Working Paper Series from CESifo

Abstract: We study a principal-agent model in which the agent can provide ex post additional relevant information regarding his performance. In particular, he can provide a legitimate excuse, that is, evidence that a poor result is only due to factors outside his control. However, building a convincing case requires time, time that is not spent on exerting productive effort, and thus generating information represents an opportunity cost. We obtain necessary and sufficient conditions for the principal to prefer a policy of adjusting ex post the performance measure for the information provided by the agent to a policy of conforming to a result-based system with no adjustments. The risk aversion and a possible limited liability of the agent play an important role in the analysis. This paper clarifies the issues associated with the so-called “excuse culture” prevailing in some organizations.

Keywords: performance measurement; manipulation; controllability principle; excuse culture; influence activity (search for similar items in EconPapers)
JEL-codes: D82 M41 M52 (search for similar items in EconPapers)
Date: 2014
New Economics Papers: this item is included in nep-cta, nep-hrm and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Fishing for excuses and performance evaluation (2014)
Working Paper: Fishing for excuses and performance evaluation (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_4569

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