How Control System Design Affects Performance Evaluation Compression: The Role of Information Accuracy and Outcome Transparency

35 Pages Posted: 21 Aug 2013 Last revised: 29 Jan 2016

See all articles by Jasmijn C. Bol

Jasmijn C. Bol

Tulane University - A.B. Freeman School of Business

Stephan Kramer

Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM)

Victor S. Maas

University of Amsterdam - Amsterdam Business School

Date Written: January 25, 2016

Abstract

Prior research has shown that managers tend to compress ratings when subjectively evaluating employees and that such compression can have negative organizational consequences. We reason that organizations can use the design of their control system to influence the personal costs and benefits associated with managers’ rating decisions and thus shape managers’ rating behavior. Based on findings from prior literature, we focus on the effects of two control system design elements: the accuracy of the information on which managers need to base their evaluations and the transparency about performance evaluation outcomes. We hypothesize that increasing information accuracy will increase the extent to which managers differentiate between stronger and weaker employees, but only when there is transparency about evaluation outcomes. Our experimental data support this hypothesis, and we discuss the implications of our findings for management accounting theory and practice.

Keywords: subjective performance evaluation, performance measurement, information accuracy, transparency, compression

JEL Classification: J33, M12, M40, M52

Suggested Citation

Bol, Jasmijn C. and Kramer, Stephan and Maas, Victor S., How Control System Design Affects Performance Evaluation Compression: The Role of Information Accuracy and Outcome Transparency (January 25, 2016). Accounting, Organizations and Society, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2312411 or http://dx.doi.org/10.2139/ssrn.2312411

Jasmijn C. Bol

Tulane University - A.B. Freeman School of Business ( email )

7 McAlister Drive
New Orleans, LA 70118
United States

Stephan Kramer

Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM) ( email )

P.O. Box 1738
Room T08-21
3000 DR Rotterdam, 3000 DR
Netherlands

HOME PAGE: http://www.stephankramer.com

Victor S. Maas (Contact Author)

University of Amsterdam - Amsterdam Business School ( email )

Spui 21
Amsterdam, 1018 WB
Netherlands

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
256
Abstract Views
1,915
Rank
217,303
PlumX Metrics