The Benefits of Aggregate Performance Metrics in the Presence of Career Concerns
AbstractThis paper considers the desirability of aggregate performance measures in light of the fact that many individuals' performance incentives are driven by a desire to shape external perceptions (and thus future pay). In contrast to the case of explicit incentive contracts, we find that when individuals' actions are driven by career incentives, an aggregate measure (e.g., group or team output) can sometimes alleviate moral hazard concerns and improve efficiency. Aggregation intermingles performance measures that may be differentially affected by skill and effort of many agents. When such entanglement increases the prospect that the external market will attribute an employee's effort-driven contribution to transferable skills, the employee exerts higher effort as a means of posturing to the market. The incentive benefit of aggregation is weighed against the incentive cost because of information loss. Information loss from aggregation can reduce the market's reliance on the measure and thus diminish agents' desire to undertake effort to influence the measure. This paper was accepted by Stefan Reichelstein, accounting.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by INFORMS in its journal Management Science.
Volume (Year): 57 (2011)
Issue (Month): 8 (August)
aggregation; career concerns; group performance measures;
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mirko Janc).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.