Perceived Controllability and Fairness in Performance Evaluation

ABSTRACT

We investigated the effects of environmental uncertainty, decentralization of decisions rights, and the use of subjective performance measures on managers’ perceptions of outcome controllability and performance evaluation fairness. Based on a survey of 339 middle- and upper- level managers, our results suggest that environmental uncertainty adversely affects perceptions of outcome controllability and that this effect is not moderated by the decentralization of decision rights. Our results also show a positive association between perceived controllability and performance evaluation fairness. Although we found no direct effect of the use of subjective performance measures on perceived performance evaluation fairness, it appears to moderate the positive effect of perceived controllability on fairness. We also show that the positive effect of the use of subjective measures may depend on contextual and job-related factors. The overall results underscore the need to consider the organizational context (environmental uncertainty and decentralization of decision rights) to investigate how performance measures affect perceived controllability and fairness. Because perceived controllability and fairness affect individual attitudes and behaviors within an organization, our results have important implications for the design and use of performance evaluation systems.

Keywords:
Controllability; Performance Evaluation Fairness; Subjective Measures; Environmental Uncertainty; Decentralization

RESUMO

Este estudo investiga os efeitos da incerteza ambiental, da descentralização da tomada de decisões e da utilização de medidas subjetivas de desempenho na percepção de controlabilidade do resultado (controllability) e de equidade no processo de avaliação de desempenho dos gestores. Com base em dados coletados por meio da aplicação de um questionário em uma amostra de 339 gestores de nível médio e superior, os resultados sugerem que a incerteza ambiental afeta negativamente a percepção de controlabilidade e que este efeito não é moderado pelo nível de descentralização da tomada de decisões. Os resultados sugerem também uma associação positiva entre a percepção de controlabilidade e de equidade no processo de avaliação de desempenho gerencial. Embora o uso de medidas subjetivas de desempenho não exerça efeito direto sobre a percepção de equidade, os resultados sugerem que seu uso exerce efeito moderador na relação entre controlabilidade e percepção de equidade. Demonstra-se ainda que o efeito positivo do uso de medidas subjetivas depende de fatores contextuais. Este estudo demonstra a necessidade de se considerar o contexto organizacional (incerteza ambiental e descentralização dos direitos decisórios) para investigar como medidas de desempenho não financeiras e subjetivas afetam a percepção de controlabilidade e de equidade processual. Na medida em que a percepção de controlabilidade e de equidade afeta as atitudes e os comportamentos dos indivíduos dentro de uma organização, os resultados têm implicações importantes para a concepção e utilização de sistemas de avaliação de desempenho.

Palavras-chave:
Controlabilidade; Equidade processual; Avaliação de desempenho; Medidas subjetivas; Incerteza ambiental; Descentralização

RESUMEN

El estudio investiga los efectos de la incertidumbre medioambiental, de la descentralización de la toma de decisión, la utilidad de las medidas de desempeño subjetivas de la percepción de controlabilidad de los resultados (controllability) y la justicia de proceso en la evaluación del desempeño gerencial. Partiendo de los datos obtenidos con la aplicación de una encuesta, con una muestra de 339 directivos de nivel medio y superior, los resultados indican que la incertidumbre medioambiental afecta negativamente a la percepción de la controlabilidad, y que este efecto no es moderado por el nivel de descentralización de la toma de decisiones. Los resultados también sugieren una asociación positiva entre la percepción de la controlabilidad y la justicia de proceso de evaluación de desempeño gerencial. Aunque el uso de medidas subjetivas de desempeño no tenga efecto directo sobre la percepción de la justicia, los resultados indican que su uso tiene un efecto moderado en la relación entre la controlabilidad y la percepción de la justicia. Además, muestra que los efectos positivos del uso de las medidas subjetivas dependen de factores contextuales. Este estudio muestra la necesidad de considerar el contexto organizativo (incertidumbre medioambiental y descentralización de los derechos de decisión) para investigar cómo las medidas de desempeño no financieras y subjetivas afectan a la percepción de la controlabilidad y de la justicia procesal. Conforme la percepción de controlabilidad y de justicia afecta las actitudes y los comportamientos de los individuos dentro de una organización, los resultados tienen implicaciones importantes para la concepción y utilidad del sistema de evaluación de desempeño.

Palabras clave:
Controlabilidad; Justicia procesal; Evaluación de desempeño; Medidas subjetivas; Incertidumbre medioambiental; Descentralización

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• 12
  Evaluation process: Double Blind Review

• 1
  We validated the survey instrument with several steps. First we conducted in-depth interviews with two human resource consultants to validate the measurement scales. We then asked four management accounting faculty and four practitioners to pre-test the survey and confirm their understanding of all measurement instruments.
• 2
  Professional experience combined with the required two-year internship for CMA certification ensured a sample of managers who held decision-making positions. The autonomous mail survey enabled us to gather confidential information. Support by the Quebec CMA Order’s CEO greatly helped draw attention to the study, and we believe it also contributed to the quality and rate of responses.
• 3
  Overall, late responders had about six years of experience in their current position. More than 31% (42) were from 40 to 49 (30-39) years old and 75% worked for a firm that had more than 500 employees.
• 4
  Thirty-six respondents wrote in 14 new performance measures within the five categories. We take this as evidence that respondents made an effort to correctly report on the diversity of measures used to evaluate their performance. They were classified as follows: financial (cash flow, tax savings, EVA), nonfinancial customer-oriented (new product development, new market development, risk management), nonfinancial employee-oriented (outreach, fostering workgroups, career development), and nonfinancial internal operating (sustainability, new alliance/partnership).
• 5
  This five-category approach has two main purposes. First, it allows taking into account other dimensions of performance measurement diversity. Second, as some of the objective nonfinancial measures (customer-oriented, employee-oriented, and internal operating) are leading indicators of some financial outcomes (e.g., productivity versus return on assets), the categorical approach better reflects the use of subjective criteria combined with objective measures (financial and nonfinancial).
• 6
  This measure is our own, and to our knowledge, no other study has directly measured the weights allocated to subjective performance measures in a large cross-sectional sample.
• 7
  Lau and Lim (2002) and Berger et al. (2009) used similar scales to assess performance evaluation, allowing comparability of construct reliability. However, they report lower sample average scores. This could be explained by their sample size and its industry-specific nature. It is important to note that Hartmann and Slapnicar (2009) used a different scale to measure performance evaluation justice.
• 8
  In general, RMSEA scores below 0.08 and GFI and CFI scores above 0.90 (HAIR et al., 2006) indicate good model fit. As suggested by Shook et al. (2004), the Chi-square statistic should be reported for samples between 100 and 200. As this is the most commonly used fit index in managerial accounting (SMITH; LANGFIELD-SMITH, 2004; SHOOK et al., 2004; HAIR et al. 2006), we have reported it even though it may not be appropriate for our sample size.

Publication Dates

• Publication in this collection
  Jul-Sep 2014

History

• Received
  21 Jan 2014
• Accepted
  23 Oct 2014