Managerial Evaluation Accuracy Gate
Subjective performance incentives rely entirely on managerial observation quality; when employees perceive managers as inaccurate assessors of effort, subjective incentive power collapses.
Picture this
Think of a driver using a GPS navigation system; if the satellite signal is accurate, the driver follows the turns with confidence, but if the GPS is glitchy and places the car in the middle of an ocean, the driver ignores the navigation prompts entirely. Similarly, if teachers believe their principal cannot accurately evaluate classroom effort, they ignore the subjective raise system and do not increase their effort.
What the evidence says
For managers in the most inaccurate quintile (rating error > 2 steps out of 5), subjective performance pay had no statistically significant effect on student test scores (interaction coefficient = -0.211 SD, p < 0.05).
- Who
- N = 440,595 student-subject-level observations across 255 school clusters in Pakistan.
- How
- Instrumental variable RCT interacting subjective contract treatment with teacher-reported manager rating inaccuracy (measured on a 5-step appraisal scale).
What to do
Assess evaluator accuracy using peer-appraisal cross-checks before deploying discretionary subjective incentive schemes, ensuring managerial evaluation error remains low.
From the source
"We find there is no effect of subjective performance pay on student test scores for managers who are in the top quintile of this inaccuracy measure."
Subjective versus Objective Incentives and Employee Productivity