ABSTRACT

Subjective performance evaluation systems often prescribe for evaluators to use multiple measures to assess overall subordinate performance. Firms can choose to explicitly provide suggested weights to “balance” the relative weight evaluators place on each measure. However, we theorize that doing so may also affect evaluators' perceptions regarding the extent to which the firm intends for them to exercise subjectivity in their evaluations. We conducted an experiment in which evaluators use four measures to subjectively evaluate a subordinate's overall performance. Evaluators were also provided with relevant non-contractible information, although evaluators were not explicitly required to consider this information. We find that the provision of weights reduces the extent to which evaluators employ subjectivity to incorporate non-contractible information, which is manifested in larger outcome effects. Our results suggest firms should carefully consider what the structure and characteristics of their performance evaluation systems communicate to evaluators regarding the role of subjectivity.

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