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Subjective Performance Evaluations, Collusion, and Organizational Design

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  • Veikko Thiele

Abstract

Many scholars have emphasized the importance of subjective performance evaluations in employment relationships to provide employees with effort incentives. This article examines when delegating subjective appraisals to managers is optimal. Delegation facilitates more accurate performance evaluations but can also lead to collusion. To prevent collusive behavior, I show that firms need to reduce effort incentives for employees and leave managers with economic rents through higher compensations. Despite these costs of preventing collusion, I find that delegation can be optimal. The Author 2011. Published by Oxford University Press on behalf of Yale University. All rights reserved. For Permissions, please email: journals.permissions@oup.com, Oxford University Press.

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  • Veikko Thiele, 2013. "Subjective Performance Evaluations, Collusion, and Organizational Design," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 29(1), pages 35-59, February.
    • Handle: RePEc:oup:jleorg:v:29:y:2013:i:1:p:35-59
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    File URL: http://hdl.handle.net/10.1093/jleo/ewr021
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    Cited by:

    1. Matthias Kräkel, 2017. "Authority and Incentives in Organizations," Scandinavian Journal of Economics, Wiley Blackwell, vol. 119(2), pages 295-311, April.
    2. Valeria Maggian & Natalia Montinari & Antonio Nicol�, 2018. "Backscratching in Hierarchical Organizations," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 34(2), pages 133-161.
    3. Delfgaauw, Josse & Souverijn, Michiel, 2016. "Biased supervision," Journal of Economic Behavior & Organization, Elsevier, vol. 130(C), pages 107-125.
    4. Marchegiani, Lucia & Reggiani, Tommaso & Rizzolli, Matteo, 2016. "Loss averse agents and lenient supervisors in performance appraisal," Journal of Economic Behavior & Organization, Elsevier, vol. 131(PA), pages 183-197.
    5. Jan Tichem, 2013. "Leniency Bias in Long-Term Workplace Relationships," Tinbergen Institute Discussion Papers 13-196/VII, Tinbergen Institute.

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