How Calibration Committees Can Mitigate Performance Evaluation Bias: An Analysis of Implicit Incentives

Isabella Grabner*, Judith Künneke, Frank Moers

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

While prior research on performance evaluation bias has mainly focused on the determinants and consequences of rating errors, we investigate how a firm can provide implicit incentives to supervisors to mitigate these errors via its calibration committee. We empirically examine the extent to which a calibration committee incorporates supervisors' evaluation behavior with respect to their subordinates in the performance evaluation outcomes, i.e., performance ratings and promotion decisions, for these supervisors. In our study, we distinguish between lack of skills and opportunism as two important facets of evaluation behavior, which we expect the calibration committee to address differently. Using panel data of a professional service firm, we show that supervisors' opportunistic behavior to strategically inflate subordinates' performance ratings is disciplined through a decrease in the supervisors' own performance rating, while the supervisors' skills to provide less compressed and, thus, more informative performance ratings is rewarded through a higher likelihood of promotion.

Original languageEnglish
Pages (from-to)213-233
Number of pages21
JournalAccounting Review
Volume95
Issue number6
Early online date30 Jan 2020
DOIs
Publication statusPublished - Nov 2020

Keywords

  • subjective performance evaluation
  • performance evaluation bias
  • calibration committees
  • promotions
  • supervisory skills
  • PROMOTION
  • IMPACT
  • COMPENSATION
  • DETERMINANTS
  • SUPERVISORS
  • CITIZENSHIP
  • INFORMATION
  • BEHAVIOR

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