EC335 Lecture Notes - Lecture 10: Dollarama, Moral Hazard, Regression Analysis
Document Summary
1. a) describe what subjective performance measurement is. Subjective performance measurement used when employee in position where objective measures do not apply ex. Still expect to be rewarded for their productive effects. Include 360 degree peer reviews: evaluation by co-workers, supervisors and subordinates. Influenced by observers personal judgment: include interpretation and option on value employee brings to business. However still managed by objective systems: managers and employees work together to set goals for employee. Examples include customer service and teamwork: measured by merit rating (employee given numerical score) b) discuss difficulties of effectively implementing an incentive based scheme based on subjective performance measurements. Subjective measures hard to verify lead to problem of moral hazard their performance. Employees don"t trust superiors to accurately evaluate. Many times low performing employee by metric are the ones getting raises due to subjective measures. Ability for there to be human bias. Deficiency in measurement of subjective measures, such as manager having low opportunity to observe.
