Fishing for Excuses and Performance Evaluation

32 Pages Posted: 28 Jan 2014

See all articles by Francois Larmande

Francois Larmande

HEC Paris - Accounting and Management Control Department

Jean-Pierre Ponssard

Ecole Polytechnique; University of Angers - French National Center for Scientific Research (CNRS); CESifo (Center for Economic Studies and Ifo Institute)

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Date Written: January 27, 2014

Abstract

We study a principal-agent model in which the agent can provide ex-post additional relevant information regarding his performance. In particular, he can provide a legitimate excuse, that is, evidence that a poor result is only due to factors outside his control. However, building a convincing case requires time, time that is not spent on exerting productive effort, and thus generating information represents an opportunity cost. We obtain necessary and sufficient conditions for the principal to prefer a policy of adjusting ex post the performance measure for the information provided by the agent to a policy of conforming to a result-based system with no adjustments. The risk aversion and a possible limited liability of the agent play an important role in the analysis. This paper clarifies the issues associated with the so-called “excuse culture” prevailing in some organizations.

Keywords: performance measurement, manipulation, controllability principle, excuse culture, influence activity

JEL Classification: D820, M410, M520

Suggested Citation

Larmande, Francois and Ponssard, Jean-Pierre, Fishing for Excuses and Performance Evaluation (January 27, 2014). CESifo Working Paper Series No. 4569, Available at SSRN: https://ssrn.com/abstract=2385919 or http://dx.doi.org/10.2139/ssrn.2385919

Francois Larmande (Contact Author)

HEC Paris - Accounting and Management Control Department ( email )

Jouy-en-Josas
France

Jean-Pierre Ponssard

Ecole Polytechnique ( email )

1 rue Descartes
Paris, 75005
France

University of Angers - French National Center for Scientific Research (CNRS)

3, rue Michel-Ange
Paris cedex 16, 75794
France

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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