Hiring the Right Person for Your Organization

Bart Dierynck / Victor van Pelt - October 11, 2021

Tips for practitioners

Even when a candidate possesses the skills for the job, recruiters and hiringcommittees may still wonder whether the candidate’s personality fits the company culture and the candidate’s goals align with those of the organization. Since the selection process is short, it is challenging to get to know the person behind the mask and answer these questions. However,  the research study “The Sorting Benefits of Discretionary Adjustment to Performance-based Pay“ suggests a simple, subtle way to attract the right person for the job. The study proposes a means of filtering for candidates who identify strongly with organizational goals and are willing to go the extra mile.

The study shows that when potential employees expect managerial discretion to be used to evaluate them, they are more likely to sort themselves into organizations with which they identify in regards to objectives. In other words: When an employee knows that their manager will discretionarily adjust their performance evaluation - and consequently their pay - they will think more carefully about how that discretion will be used in the future. Managers use discretion as a supplement to objective performance measures. In this way, they can adjust and correct the insights provided by objective performance indicators with difficult-to-measure information, such as their observations of the employee’s daily behavior, willingness to share knowledge with colleagues, and unsolicited suggestions to improve the organization’s performance.

The research study tested this prediction using an elaborate scenario-based experiment comprising of three steps. In the first step, the researchers gave participants a task to elicit their identification (or not) with an organizational objective; in this case, the objective was carbon emission reduction. In the second step, they assigned the role of an employee to a portion of the participants. Next, they gave employee-participants a choice between a fixed-wage contract and a performance-based wage contract, with or without the possibility of a discretionary adjustment by a manager. In the third step, they asked employees to indicate, on a scale of 1 to 10, how much extra effort beyond their regular job they were willing to put into meeting the organizational goal, that is, finding ways to reduce carbon emissions. This effort was factored directly into their wage calculations in the performance-based model, and all employee-participants had access to those calculations.

Results of the research study show that those employee-participants who identified strongly with the organizational goal were indeed willing to expend more effort towards finding ways to reduce carbon emissions. As expected, these employee-participants were more likely to choose performance-based pay when given the possibility of discretionary adjustment. Conversely, under the discretionary adjustment condition, those employee-participants who did not strongly identify with the organizational goal were more likely to choose the fixed-pay model.

The bottom line is that the discretionary adjustment component is designed to reward employees for going above and beyond their roles to help the organization meet its goals. However, if an employee does not care for these goals, a fixed-pay model offers a better prospect.

Working for an organization with objectives with which one identifies, has not just benefits for the organization as such but also for employee health and society overall. Hence, the idea put forward by the study provides a clever yet simple solution for attracting the ‘right’ person for the job and deterring those who would not fit the bill in the long run.

Literature references and methodology

The research study “The Sorting Benefits of Discretionary Adjustment to Performance-based Pay” discussed in this article was conducted by Prof. Dr. Bart Dierynck and Dr. Victor van Pelt. The study examines the employment contract decisions of 179 business economics students. The predictions were tested under highly controlled circumstances. Further  research potential lies with the examination of the effects of managerial discretion under various conditions of employment.

• Dierynck, B./van Pelt, V. (2021): The Sorting Benefits of Discretionary Adjustment to Performance-based Pay, in: Management Accounting Research,52: 100755. Available at:  https://doi.org/10.1016/j.mar.2021.100755