Midterm Review

Doruk Cetemen, Yonggyun Kim, Fei Li and Curtis R. Taylor

Papers from arXiv.org

Abstract: We study why organizations conduct interim performance reviews when monetary rewards are limited. An interim review creates incentive capacity by allowing future work and career opportunities to serve as rewards for past performance. Optimal review policies map a continuum of performance outcomes into a simple incentive ladder: termination, tough or easy continuation, and, for exceptional performance, an early maximal reward with no further work. Review can even sustain high effort when terminal compensation alone cannot. Its timing balances two forces: waiting improves the information revealed by performance, but leaves less future work available to motivate the agent.

Date: 2026-09
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