Promotion Decisions and the Adoption of Explicit Potential Assessment - presented by Prof. Frank Moers

Promotion Decisions and the Adoption of Explicit Potential Assessment

Prof. Frank Moers

Prof. Frank Moers
Slide at 09:33
Theoretical background Informativeness principle Any costless performance measure that provides incremental information about an employee's effort should be incorporated in the provision of incentives (Holmstrom 1979) However, in a promotion context, information about effort is not necessarily relevant An important role of promotions is sorting informativeness relates to employee's ability to perform well in the next job, higher up the job ladder (Grabner and Moers 2013) Predictive validity and promotions The informativeness of a performance measure for sorting purposes is reflected by the measure's predictive validity regarding future performance in the next job Move to similar task environment current job performance is informative Move to different task environment requires a subjective assessment of expected ability (potential) for the next job Maastricht University
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References
  • 1.
    B. Holmstrom (1979) Moral Hazard and Observability. The Bell Journal of Economics
  • 2.
    I. Grabner and F. Moers (2013) Management control as a system or a package? Conceptual and empirical issues. Accounting, Organizations and Society
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Summary (AI generated)

Promotions are not solely based on how fast someone works, but rather on whether they have the necessary skills for the next position. This is known as sorting. Promotions can either reward someone for their current performance or ensure the right person is placed in the right role. It is not just about effort, but about the ability and skill set of individuals.

Predictive validity is crucial in determining if a measure accurately predicts how someone will perform in the next position. For example, if someone is being promoted to a similar role with more decision-making responsibilities, their current performance is likely predictive of their future success. However, when moving into a role with different tasks, such as managerial responsibilities, other skills like leadership and communication become important.

While current performance can be somewhat indicative, subjective assessments are often necessary to determine how well someone will perform in a new position. This is why potential assessments are used in the promotion process.