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Subjective Evaluation of Performance Through Individual Evaluation Interview: Empirical evidence from France

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  • Marc-Arthur Diaye
  • Nathalie Greenan
  • Michal Urdanivia

Abstract

Individual evaluation interviews have become a widespread practice. 52% of employees in French manufacturing firms over 50 employees declared an annual individual evaluation interview in 1997. However whereas the problem of constructing an optimal contract with subjective evaluation (which is defined simply as a signal in most papers) receives a large attention, firm-level evaluation interviews are strikingly left aside from economic analysis. This paper aims at identifying the underlying logics of individual evaluation interviews in the case of individual production and of team production. Especially, it aims at analyzing the relationships between effort, wage distribution within the firms and individual evaluation interviews. From a theoretical standpoint, three papers by Alchian and Demsetz (1972), by Che and Yoo (2001) and by MacLeod (2003) are closely related to our paper and from an empirical point of view, a paper by Engellandt and Riphahn (2004). Our theoretical analysis allows to derive testable predictions regarding the effect of individual evaluation interviews on productive and cognitive effort, on work overload and on wage setting. Using a matched employer / employee survey on computerisation and organisational change (COI), we are able to test part of these predictions and to corroborate them. First, evaluation interviews have a positive impact on productive and cognitive effort. Second, evaluation interviews increase effort through two effects: the classical incentive effect and also a selection effect. Third, the selection effect is stronger in the case of individual production compared with the case of team production. Fourth, evaluated employees earn more than employees in a classical incentive scheme and fifth, evaluated workers have a better knowledge of the rules driving wage setting.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12979.

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Date of creation: Mar 2007
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Handle: RePEc:nbr:nberwo:12979

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  1. John M. Abowd & Robert H. Creecy & Francis Kramarz, 2002. "Computing Person and Firm Effects Using Linked Longitudinal Employer-Employee Data," Longitudinal Employer-Household Dynamics Technical Papers, Center for Economic Studies, U.S. Census Bureau 2002-06, Center for Economic Studies, U.S. Census Bureau.
  2. Che,Y.K. & Yoo,S.W., 1998. "Optimal incentives for teams," Working papers, Wisconsin Madison - Social Systems 8, Wisconsin Madison - Social Systems.
  3. Armen A. Alchian & Harold Demsetz, 1971. "Production, Information Costs and Economic Organizations," UCLA Economics Working Papers, UCLA Department of Economics 10A, UCLA Department of Economics.
  4. Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March.
  5. Bentley W. MacLeod, 2003. "Optimal Contracting with Subjective Evaluation," American Economic Review, American Economic Association, American Economic Association, vol. 93(1), pages 216-240, March.
  6. Martin J. Osborne & Ariel Rubinstein, 1994. "A Course in Game Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262650401, December.
  7. Marc-Arthur Diaye & Nathalie Greenan & Michal W. Urdanivia, 2006. "Subjective evaluation of performance through individual evaluation interview : theory and empirical evidence from France," Cahiers de la Maison des Sciences Economiques, Université Panthéon-Sorbonne (Paris 1) b06061, Université Panthéon-Sorbonne (Paris 1).
  8. Kandel, Eugene & Lazear, Edward P, 1992. "Peer Pressure and Partnerships," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 100(4), pages 801-17, August.
  9. Heckman, James J & Ichimura, Hidehiko & Todd, Petra E, 1997. "Matching as an Econometric Evaluation Estimator: Evidence from Evaluating a Job Training Programme," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 64(4), pages 605-54, October.
  10. repec:eme:rlepps:v:18:y:1999:i:1999:p:177-242 is not listed on IDEAS
  11. Heckman, James J & Ichimura, Hidehiko & Todd, Petra, 1998. "Matching as an Econometric Evaluation Estimator," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 65(2), pages 261-94, April.
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Cited by:
  1. Marc-Arthur Diaye & Nathalie Greenan, 2012. "The Economics of Performance Appraisals," TEPP Working Paper, TEPP 2012-15, TEPP.

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