Relationships Between Performance Evaluation Elements

ABSTRACT: This study explores the details of establishing objective and subjective performance ratings and the relationships between the two types of ratings in a company setting where both were intended to be weighted equally in importance for the purpose of allocating bonuses. We analyze archival data reflecting the annual performances of over 700 high- and mid-level managers and professionals over a two-year period in one large conglomerate service organization and supplement these analyses with an extensive field study. The study is primarily exploratory because of the dearth of theory and evidence in the areas of the study. We find that the correlation between the objective and subjective performance ratings is positive but small, which suggests no performance evaluation halo effect. We find a tendency toward leniency in both rating elements, but the leniency is greater in the objective portion of the plan because the mean subjective rating is constrained by a prescribed maximum. The objective rating leniency is significantly greater in the year with difficult economic conditions. We find evidence of significant average rating differences across employee groups, which might suggest rating biases.