EconPapers    
Economics at your fingertips  
 

Supervisors and Performance Management Systems

Anders Frederiksen (), Lisa Kahn and Fabian Lange ()

No 23351, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study how heterogeneity in performance evaluations across supervisors affects employee and supervisor careers and firm outcomes using data on the performance system of a Scandinavian service sector firm. We show that supervisors vary widely in how they rate subordinates of similar quality. To understand the nature of this heterogeneity, we propose a principal-agent model according to which supervisors can differ in their ability to elicit output from subordinates or in their taste for leniency when rating subordinates. The model also allows for variation in how informed firms are about this heterogeneity. Within the context of this model, we can discern the nature of the heterogeneity across supervisors and how informed firms are about this heterogeneity by relating estimated supervisor heterogeneity in ratings to worker, supervisor, and firm outcomes. We find that subordinates matched to a high-rating supervisor are paid significantly more and their pay is more closely aligned with performance. We also find that higher raters themselves are paid more and that the teams managed by higher raters perform better on objective performance measures. This evidence suggests that supervisor heterogeneity stems, at least in part, from real differences in managerial ability and that firms are at least partially informed about these differences. We conclude by quantifying how important heterogeneity in supervisor type is for workers' careers. For a typical worker, matching to a high rater (90th percentile) relative to a low rater (10th percentile) for just one year results in an increase in the present discounted value of earnings equivalent to 6-12 percent of an annual salary.

JEL-codes: J24 M5 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec and nep-hrm
Date: 2017-04
Note: LS
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed

Downloads: (external link)
http://www.nber.org/papers/w23351.pdf (application/pdf)

Related works:
Working Paper: Supervisors and Performance Management Systems (2017) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:23351

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w23351

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().

 
Page updated 2020-01-02
Handle: RePEc:nbr:nberwo:23351