Delegating performance evaluation

We study optimal incentive contracts with multiple agents when performance is evaluated by a reviewer. The reviewer may be biased in favor of the agents, but the degree of bias is unknown to the principal. We show that a contest, which is a contract in which the principal fixes a set of prizes to be allocated to the agents, is optimal. By using a contest, the principal can commit to sustaining incentives despite the reviewer's potential leniency bias. The optimal effort profile can be uniquely implemented by an all‐pay auction with a cap. Our analysis has implications for various applications, such as the design of worker compensation or the allocation of research grants.

Faktor Penentu Dan Efek Bias Evaluasi Kinerja Di Perusahaan Indonesia

This study examines the determinants and effects of performance evaluation bias on manufacturing companies in Indonesia. The purpose of this study was to determine whether the information gathering costs and the relationship between manager and employee affect the emergence of centrality bias and leniency bias, and also to determine the effect of centrality bias and leniency bias on employee performance incentives. The samples are all managers who work in large scale manufacturing companies located in Semarang. Sampling method by purposive sampling. Hypothesis testing is done by multiple regression. This study proves that : (1) The information gathering costs has positive influence on the centrality bias and leniency bias, (2) the relationship between manager and employee has positive influence on the centrality bias and leniency bias, (3) centrality bias does not affect the employee’s performance incentives above average or below average, (4) leniency bias affects employee performance incentives. Abstrak Penelitian ini meneliti tentang faktor penentu dan efek dari bias evaluasi kinerja pada perusahaan manufaktur yang ada di Indonesia. Tujuan dari penelitian ini adalah untuk mengetahui apakah biaya pengumpulan informasi dan hubungan antara manajer dengan karyawan mempengaruhi munculnya centrality bias dan leniency bias, dan juga untuk mengetahui pengaruh centrality bias dan leniency bias terhadap performance incentives karyawan. Sampel penelitian ini adalah semua manajer yang bekerja di perusahaan manufaktur skala menengah besar yang terdapat di Semarang. Metode pengambilan sampel secara purposive sampling. Pengujian hipotesis dilakukan dengan regresi berganda. Penelitian ini membuktikan bahwa : (1) Biaya pengumpulan informasi berpengaruh positif terhadap centrality bias dan leniency bias, (2) hubungan antara manajer dengan karyawan berpengaruh positif terhadap centrality bias dan leniency bias, (3) centrality bias tidak berpengaruh terhadap performance incentives karyawan yang di atas rata-rata maupun yang di bawah rata-rata, (4) Leniency bias mempengaruhi performance incentives karyawan.

Comparison of Student Performance on Internally Prepared Clerkship Examinations and NBME Subject Examinations

Background: This pilot study compared performance of University of Calgary students on internal clerkship examinations with corresponding National Board of Medical Examiners (NBME) subject examinations.Methods: Between April and October 2007, students completed internal and NBME subject examinations following six mandatory rotations. Local faculty within each discipline set the minimum performance level (MPL) for internal examinations. Two methods of standard setting were considered for NBME exams and a sensitivity analysis was performed. Corresponding internal and NBME examination scores were compared using McNemar’s discordant pair analysis.Results: A significant and unexpected difference in failure rate between internal and external examinations was found in all clerkships. 1.4% of students were below the MPL for internal examinations and 27.3% (modified Angoff) or 25.9% (mean Hofstee compromise) (p<0.0001 for both) for the NBME. The proportion of students below MPL for internal examinations was also below the lower limit of the Hofstee compromise (14.4%).Conclusion: Possible explanations include leniency bias in internal standard setting, discrepant content validity between local curriculum and NBME examinations, difference in student perception of examinations, and performance bias due to unfamiliar units.

The Determinants and Performance Effects of Managers' Performance Evaluation Biases

ABSTRACT This study examines the determinants and performance effects of centrality bias and leniency bias. The results show that managers respond to their own incentives and preferences when subjectively evaluating performance. Specifically, information-gathering costs and strong employee-manager relationships positively affect centrality bias and leniency bias. The findings also indicate that performance evaluation biases affect not only current performance ratings, but also future employee incentives. Inconsistent with predictions based on the agency perspective, the results show that managers' performance evaluation biases are not necessarily detrimental to compensation contracting. Although centrality bias negatively affects performance improvement, the evidence does not reveal a significant negative relation between leniency bias and performance. Rather, leniency bias is positively associated with future performance, which is consistent with the behavioral argument that bias can improve perceived fairness and, in turn, employee motivation. Data Availability: Data used in this study cannot be made public due to a confidentiality agreement with the participating firm.