Management Accounting Section Midyear Meeting

Asking Doesn’t Always Hurt: The Effect of Past Performance on Target Adjustments in a Context of Peer Advice Seeking

• In Event: Helping and Advice Seeking

Abstract

This paper investigates how employees’ performance-to-target (missing versus exceeding a prior target) and managers’ discretion type (backward-looking versus forward-looking) impact managers’ target adjustment decisions in a setting in which managers are informed about employee advice seeking from peers. I predict that, in this setting, target adjustments are greater
after a prior target was missed than after it was exceeded. Additionally, I predict that this effect is stronger when managers have discretion over past targets than when they have discretion over future targets. These predictions were tested with an online experiment using participants with a vast amount of managerial experience. The results of the experiment show that target adjustments are greater after a prior target was missed than after it was exceeded, only when managers have discretion over past targets. Additionally, the results support the underlying theory that managers reward employee advice seeking from peers when a prior target was missed by adjusting past targets downwards.

Author

• Elien Voermans, KU Leuven