Luck and Managers
(with Alan Benson)
We examine how raters weigh luck when evaluating their subordinates’ performance. Using longitudinal data on 8,796 department store managers at a large national retailer, we establish a connection between mild weather on Black Friday weekend, greater store performance, and higher annual evaluations. We find that, on average, (1) raters do not fully “control” for luck when assessing a worker’s performance; (2) managers’ asymmetrically reward workers for good luck more than they penalize for bad luck; and (3) the relationship between luck and evaluations is unique when women rate women, in which case good luck is met with lower evaluations. Behavioral factors or constraints appear to cloud the signals organizations receive from evaluators.
Do adverse effect of layoff decrease with worsening of labor market conditions?
(with Joseph Ritter)
Gibbons and Katz's asymmetric information model of labor market predicts that wage loss following layoff should be larger than wage loss following plant closing. In this paper, I test how adverse effect of layoffs change with labor market conditions at the time of displacement. According to my hypothesis, employers see layoff during bad labor market condition as a poor signal of worker's ability. Hence the wage loss following layoff during such times should be lower than the wage loss under good labor market conditions. I find my hypothesis to be true for laid off workers with short predisplacement tenure but not for those with long predisplacement tenure. This suggests that layoffs may be seen as a stronger signal of under-productivity for workers with long predisplacement tenure than for those with short predisplacement tenure.