Utilizing Incentives and Accountability: In Control in Control?

Marcel van Rinsum

ERIM Inaugural Address Series Research in Management from Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.

Abstract: 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 discuss the benefits and costs of discretion and of transparency. 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, apply the insights about performance measurement to the academic working environment, and promote the use of new research methods.

Keywords: prestatiebeoordeling; transparantie; objectivity; subjectivity; discretion; incentives; accountability; transparency; performance evaluation; measurement system; management control; management accounting (search for similar items in EconPapers)
JEL-codes: M41 (search for similar items in EconPapers)
Pages: 48
Date: 2019-09-20
New Economics Papers: this item is included in nep-acc
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