Superiors' Discretionary Allocations when Agents Face Disparate Performance Risk

Abstract

ABSTRACTOur study examines superiors' allocation decisions for otherwise homogeneous agents facing disparate performance risk (i.e., unequal likelihoods a given amount of effort will translate to an anticipated level of performance). We predict and find that superiors sympathize, through their bonus allocation decisions, with those agents confronted with greater performance risk. However, this behavior changes when superiors are responsible for allocating initial resources between the agents and have task-irrelevant reputational information concerning the agents, such that superiors favor the advantaged agent and give less sympathy to the disadvantaged agent. We provide additional evidence that such favoritism toward the advantaged agent leads to disparity in agents' fairness and satisfaction perceptions. Our results have implications for organizations, given the pervasiveness of discretion in allocation decisions and concerns for fairness, job satisfaction, and their effects on performance.