No. 82: Transparency in hierarchies

Abstract

We examine how performance management practices that render employee accomplishments transparent in an organization depend on employees’ hierarchical level. We consider a principal-agent model of an organization where the principal contracts directly with a group of higher-level agent-workers and tasks an agent-manager to contract with a group of lower-level agent-workers. We portray performance transparency in terms of output precision and output observability by co-workers. We find that the optimal output precision for lower-level workers exceeds the optimal output precision for higher-level workers and we identify conditions where output observability is optimally restricted for lower-level workers. We also find that relative performance evaluation is less prevalent for lower-level workers. Collectively, our study contributes to the literature that documents the benefits and costs of transparency.

Beteiligte Institutionen

Die Hauptstandorte vom TRR 266 sind die Universität Paderborn (Sprecherhochschule), die HU Berlin und die Universität Mannheim. Alle drei Standorte sind seit vielen Jahren Zentren für Rechnungswesen- und Steuerforschung. Hinzu kommen Wissenschaftler der LMU München, der Frankfurt School of Finance and Management, der WHU – Otto Beisheim School of Management, der ESMT Berlin, der Goethe-Universität Frankfurt und der Carl von Ossietzky Universität Oldenburg, die die gleiche Forschungsagenda verfolgen.