“How to mitigate bias in performance evaluations: An analysis of the consequences of supervisors’ evaluation behavior” by Dr. Isabella GRABNER
Dr. Isabella GRABNER
Associate Professor of Accounting and Information Management
School of Business and Economics
While prior research on performance evaluation bias has mainly focused on the determinants and consequences of rating errors, we investigate whether firms provide implicit incentives to supervisors to mitigate these errors. In particular, we empirically examine the extent to which a firm’s calibration committee incorporates supervisors’ evaluation behavior with respect to their subordinates in their own performance evaluation outcomes, i.e., performance ratings and promotion decisions. We argue that supervisors’ opportunistic behavior to strategically inflate subordinates’ performance ratings is punished through a decrease in the supervisor’s performance rating, while the supervisor’s ability to provide more differentiated, thus less compressed performance ratings will be rewarded through a higher likelihood of promotion. Using panel data of a professional service firm, we find evidence consistent with our predictions.