Target Setting in Hierarchies: The Role of Middle Managers

• 成果类型: Article
• 署名作者: Bouwens, Jan; Hofmann, Christian; Schwaiger, Nina
• 署名单位: University of Amsterdam; University of Munich
• 刊物名称: JOURNAL OF ACCOUNTING RESEARCH
• ISSN/ISSBN: 0021-8456
• DOI: 10.1111/1475-679X.12508
• 发表日期: 2024
• 页码: 375-410
• 关键词: performance; INFORMATION; incentives; FIRMS

摘要

We explore how a supervisor's hierarchical rank affects the extent to which employees' targets reflect their past performance. Literature documents that supervisors do not fully ratchet targets for past performance, arguably because the commitment not to penalize successful employees with more difficult targets alleviates the severity of the ratchet effect. We argue that commitment is less credible in organizational hierarchies where a middle manager sets employees' targets. Using data from an organization comprised of three hierarchical layers, we consistently find that a middle manager's exposure to performance pressure is positively associated with the ratcheting of the employees' targets. Moreover, we show that management at headquarters reduces a middle manager's performance pressure when most of her employees missed their targets in the previous period. Overall, the results imply that the hierarchical rank is an important determinant of the credibility of a supervisor's commitment to deemphasize past performance in target setting.