Managerial Interpretations of Performance Feedback

Abstract

Organizational performance feedback theory, derived from the Behavioral Theory of the Firm, is one of the most utilized theories to explain strategic behavior of organizations. This theory argues that when performance relative to aspiration levels decreases, problemistic search increases. However, empirical evidence is not as unequivocal. We propose that one way to resolve the contradicting empirical evidence is to identify and study in-depth factors that explain the coalescence between the process of performance-aspiration comparison and managers’ interpretations of performance feedback. In this conceptual paper, we extend the performance assessment component of performance feedback theory. We do so by arguing for a more refined and elaborated behavioral model of responses to performance feedback, based not only on whether performance surpasses the aspiration level or not, but also accounting for managers’ assessment of reliability and for their level of satisfaction. To facilitate future research on responsiveness to performance feedback we provide testable propositions.