Supervisors and Performance Systems

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IZA Seminar

Place: Schaumburg-Lippe-Str. 9, 53113 Bonn

Date: 18.12.2014, 12:15 - 13:30


Presentation by 

Fabian Lange (McGill University)


Modern corporations have complex performance management systems and supervisors occupy a central functional role in such systems. In this paper, we use personnel records from a large Scandinavian service sector firm to investigate how supervisors and the performance evaluation system interact to influence workers’ careers inside the firm. Previous research such as Lazear, Shaw and Stanton (2012) and Owan et al. (2014) find a lot of heterogeneity associated with supervisors and that this heterogeneity influences firm performance. We establish that such heterogeneity is also found in performance ratings associated with supervisors. In turn, this allows us to establish the main fining of the paper: heterogeneity in supervisor evaluations is associated with real career outcomes for supervisors and subordinates. In fact, subordinates working for “high raters” receive higher pay, they rate their supervisors more highly, and their jobs tend to be more stable. Further, high rating supervisors earn more, are rated more highly (bottom-up and top-down), and are more likely to be promoted. We also find that supervisors and employees working in high performance branches receive higher ratings. These findings are largely consistent with a model of managerial heterogeneity where managers have real impacts on worker output through their ability to elicit effort, but inconsistent with optimal wage-setting in a standard principal-agent model.

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