Discretion and bias in performance evaluation: the impact of diversity and subjectivity

Abstract

This paper examines the impact of performance measure diversity and the use of subjective performance measures on performance evaluation bias. The empirical results indicate that both performance measure diversity and subjectivity are positively related to performance evaluation bias. More specifically, I find that the use of multiple objective performance measures and the use of subjective performance measures are related to more compressed performance ratings and more lenient performance ratings, which could result in problems in personnel decisions and future incentives.