The Benefits of Limited Feedback in Organizations
AbstractIn most ﬁrms, managers periodically assess workers performance. Evidence suggests that managers with hold information during these reviews, and some observers argue that this necessarily reduces surplus. This paper assesses the validity of this argument when workers have career concerns. Disclosure has two eﬀects: it exposes the worker to uncertainty about future eﬀort levels, but allows him to use current effort to inﬂuence his employers beliefs about future eﬀort. The surplus-maximizing disclosure policy reveals output realizations in the center of the distribution, but not in the tails. Thus, it is eﬃcient for ﬁrms to reveal some but not all performance information.
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Bibliographic InfoPaper provided by Barcelona Graduate School of Economics in its series Working Papers with number 490.
Date of creation: Jul 2010
Date of revision:
Performance Appraisal; Career Concerns; Incentives; Risk;
Find related papers by JEL classification:
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law
- L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
- M12 - Business Administration and Business Economics; Marketing; Accounting - - Business Administration - - - Personnel Management; Executives; Executive Compensation
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