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The Role of Target Setting and Justification Pressure in Performance Evaluation: Evidence from Promotion Decisions

Fri, October 14, 1:45 to 3:15pm, TBA

Abstract

We experimentally investigate the effect of target setting in performance evaluation at various levels of justification pressure. When justification pressure is low, we find that managers who set targets when concurrently considering a promotion decision set lower targets in the current job and are more likely to select additional performance areas focused on the higher-level job than managers who set targets subsequent to a promotion decision. This pattern of results, coupled with the supplemental finding that managers who set targets with a promotion in mind are more likely to favor for promotion the employee who excels at the current job but lacks skills for the higher-level job, is consistent with our argument that target setting is used as a development tool for high-performing employees at the current job. When justification pressure is high, we see evidence that managers who set targets with a promotion decision in mind are more likely to use targets to motivate current performance, while managers who set targets after making the promotion decision are more likely to use targets to justify their promotion decision. This research contributes to our understanding of how target setting can be used to meet various objectives in performance evaluation and promotion.

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