You Promoted Who? Managers’ Strategic Promotion Decisions and the Effects of Group Incentives and Transparency

• In Event: 2.03 Management Behavior

Abstract

We investigate managers’ tendency to strategically influence performance evaluations that affect promotion decisions. One important distinction between performance evaluations that inform promotion decisions and evaluations that are only used to allocate tangible rewards is that employees who earn a promotion will leave the manager’s unit, such that their effort and skill will no longer benefit the manager. Strategic promotion decisions occur when managers provide biased recommendations, resulting in an increased probability that low performing employees are promoted up and out of their unit, and a decreased probability that excellent employees are promoted. We develop theory about how two crucial design variables of the organization’s control system, compensation system design (group versus individual incentives) and transparency about individual performance levels, affect managers’ tendency to strategically influence promotion decisions. Our experimental data confirm that the extent to which managers engage in such behavior depends on the presence or absence of a group incentive scheme and on transparency about individual performance levels.

Authors

• Gary W Hecht, University of Illinois-Urbana-Champaign

• Victor Maas, University of Amsterdam

• Marcel Van Rinsum, RSM Erasmus University