It can pay to look for a good supervisor if you want to boost your career. The personality and abilities of a supervisor can have a long-term impact on an employee's career in terms of better salary, higher bonuses and better promotion opportunities. This is the insight provided by new research from Aarhus BSS, Aarhus University in Herning.
19.02.2021 | MICHAEL SCHRØDER
We all know it. There are differences between bosses.
There are good bosses, less good bosses, and there are really bad bosses. Some supervisors are supportive, attentive and motivating, and can make us perform better and put more effort into a job, while other supervisors are critical, self-interested and demotivating. We all know them, and we all know how they can affect us on a daily basis.
However, what we have not known to date is how big an effect these good and less good bosses can have on our working life and careers in a longer perspective.
For example, did you know that a manager who generally gives higher ratings in annual performance reviews than his management colleagues, can boost an employee's rating by 30 per cent and thus move the employee from 3 ("meets expectations") to 4 ("exceeds expectations") on a typical five-point scale. This may indeed have a very large influence on the employee's salary.
In fact, the new research shows that employees with a “high-rating” manager for just one year can increase their life income at the company by the equivalent of 6-12 per cent of annual income.
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Extensive data material
In a large-scale research project, Professor Anders Frederiksen, Aarhus BSS and head of department at the Department of Business Development and Technology at Aarhus University in Herning, and his colleagues Lisa B. Kahn, University of Rochester, USA and Fabian Lange, McGill University, Canada, collected and analysed extensive data covering a ten-year period from a large Scandinavian service company with a total of 13,000 employees distributed across a main office and several hundred branches.
In addition to a number of economic key figures, the data material includes individual salaries, bonuses, seniority, mobility between departments and not least the ratings that managers at different levels give to employees in the annual performance reviews as part of the company's performance management system.
"We've had access to really unique data. Both in terms of type and extent," says Anders Frederiksen, who is particularly interested in what leads to high productivity in companies.
Together with his colleagues, he has published the study in a scientific article in one of the world's leading economic journals, Journal of Political Economy.
"The good managers influence the performance of employees, and if things go well, there is a reward for both managers and their employees."
Anders Frederiksen, Professor, Head of Department, Department of Business Development and Technology, Aarhus BSS
Performance management systems
The project was based on a study of how performance management systems – systems in which companies measure and use employee performance to achieve strategic goals – are applied in practice, and how much the managers' subjective ratings of employee performance impact the results compared with more objective data that can be measured directly, for example in financial key figures.
"This area has been studied very little in the scientific literature. If middle managers give different ratings for the same underlying performance, this will undermine the performance management system in a company," says Anders Frederiksen and he points out that this may have a number of unfortunate consequences.
"There is a risk that employees will be demotivated, and that the value of performance evaluations will be reduced so that they do not help provide incentives to perform better," says Anders Frederiksen.
Therefore, performance management systems have been criticised by many, saying that the systems are basically unusable because they build on the middle managers' subjective opinions.
There is a difference in ratings behaviour across supervisors, the researchers behind the project conclude. Actually, the difference is rather big: Up to 30 per cent according to the study. And, Anders Frederiksen adds, this is really important, and the performance management systems generally make sense.
The explanation will come later.
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Differences between bosses
In order to analyse the reasons for the high and low ratings by managers, the researchers set up two possible explanations for why a manager generally tends to give employees higher ratings: Managers who are able to inspire and motivate employees, and therefore generally have more productive employees, and managers who are lenient, rating employees high, even at low levels of performance.
An assessment of the differences in managers' ratings behaviour was made possible because of the enormous amount of data available. This made it possible to track both managers and employees over a number of years, where many employees had many different managers during the period, just as the managers often had many and different employees. This made it possible to see how a supervisor rates different employees who have also been rated by other supervisors, and how an employee is assessed by different supervisors. Together, this paints a detailed picture of where the differences are, and the size of these differences.
"Clearly, measuring differences does not say much about the reason for the differences. Therefore, we had to dig deeper to understand whether the performance management system was working as intended," says Anders Frederiksen.
Good managers give high ratings
The study shows that managers who generally give high ratings are also managers who, through motivation and good management, run the branches that perform well in terms of KPIs (Key Performance Indicators).
Where there are high ratings, there is also typically high productivity, satisfied employees, good KPIs and good management.
"This means that the performance management system makes sense and works more or less as intended. The good managers influence the performance of employees, and if things go well, there is a reward for both managers and their employees," says Anders Frederiksen.
But even though the system generally seems to be working as it should, there is scope for improvement, the researchers point out.
Company awareness
For example, they suggest that companies are not sufficiently aware of differences in the ratings behaviour of managers or the reasons for these differences. And that's a mistake.
"Because it's incredibly expensive to set up and operate a performance management system, and if the system isn't operated optimally, it will become even more expensive," says Anders Frederiksen, and explains:
"If managers' ratings of employees are not accurate and interpreted correctly, things will become hazy when ratings are used as a management tool, and this will cause uncertainty among the employees, and cost money."
The researchers therefore suggest that if companies were better informed about the differences in how supervisors rate their employees, companies would be able to take potential biases into account when they decide to promote, dismiss, pay bonuses or give raises to employees and supervisors.
Companies might learn about the differences between supervisors during their management careers, but this far from eliminates the differences, according to the researchers.
This can result in companies introducing forced distributions or target scales, but the researchers warn against this.
"This would be inappropriate because it deprives managers of their opportunities to motivate their employees through ratings, and because the differences in ratings actually reflect real differences in productivity," says Anders Frederiksen.
Train managers in how to rate employees
Instead, the company should allocate resources to training its managers in how to rate employees, suggest the researchers.
"Using formats that reflect both objective performance and behaviour, companies can work towards a better understanding of how supervisors rate their employees, which may lead to a more uniform way to rate employees. In this way, companies can calibrate ratings across supervisors while maintaining the managers' flexibility," says Anders Frederiksen, who also points out that companies should analyse their ratings processes to a greater extent, and he stresses three points:
"A company often fails to see whether performance or subjective elements apply when a specific manager gives a high rating to an employee, and they should have a better feeling for this, so that they can build up an improved understanding of who the good managers are, and why they are good."
"Supervisors should be aware of how important management is, how they rate, and if they rate high, this should reflect high performance and good employee behaviour - otherwise the system loses its effectiveness."
"And employees should of course just look for the high rating managers. But it's probably more rewarding to achieve your high rating because you've performed well, and not just because you've had a lenient manager. "
Main findings of the study:
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Source: Frederiksen, A., Kahn, L.B., Lange, F.: Supervisors and Performance Mangament Systems. (2020). Journal of Political Economy
Professor Anders Frederiksen profile