Management Accounting Section Midyear Meeting

“Go Easy On Me!” Supervisor Discretion in Target Setting after Managerial Turnover

• In Event: Performance Targets

Abstract

The purpose of this paper is to examine how supervisors’ target setting decisions are affected by managerial turnover, an important event commonly overlooked in previous studies. Specifically, in a setting where supervisors have some flexibility in allocating target levels to individual managers within their district, we examine whether supervisors will use their discretion to award different target levels to managers that are new in the organization. Moreover, we investigate how the use of this discretion is sensitive to past performance information of the business unit where new managers arrive. Using field data from 114 nursing homes of a large elderly care service provider during a three-year period, we provide evidence that new managers have lower target levels than mangers who remained in their nursing home, but that nursing homes’ past performance reduces this effect. Together, our findings suggest that what we currently know about target setting might only provide partial insights for new managers.

Authors

• Mathilde Verschaeve, KU Leuven

• Eddy Cardinaels, Tilburg University

• Dieter Smeulders, KU Leuven

• Alexandra Van den Abbeele, KU Leuven