UC Irvine

In this study, I examine how the use of subjectivity in performance evaluation and incentive design differs across job levels. Using a proprietary dataset from a major car dealership in Taiwan and focusing on lower-level employees, I find that the association between overall performance ratings and objective performance measures is lower when employees hold supervisory positions. Furthermore, for employees holding supervisory positions, promotions depend more on subjective evaluations and less on objective performance measures. Lastly, employees who are promoted tend to perform well and receive higher overall performance ratings in the future. Taken together, the evidence suggests that promotion decisions not only reward an employee’s past performance, but also reflect her supervisor’s expectation about future performance. This study contributes to the literature by investigating the use of subjectivity for lower-rank employees, and also complements our knowledge on the use of subjectivity across different job levels.