How Historical and Social Comparisons Influence Interpretations of Performance Information

Abstract

The ways in which managers use performance information is among the most salient topics in the study of public management. Drawing inspiration from several recent studies on the use of performance information by citizens, we adopt a behavioral approach to understand the influence of reference dependence on the interpretation of performance information by managers. Specifically, we run two experiments in a sample of professional managers, which allows us to test whether social and historical comparisons influence how respondents interpret performance information. The results suggest that framing an objective performance metric as poor relative to peer or competitor organizations leads managers to rate overall organizational performance significantly lower than managers in a control group who received the same metric, but no comparative frame. The results support expectations about the importance of social comparisons, particularly in the case of negative deviations from the reference point. The fact that we find no impact of historical comparisons on the interpretation of performance information deviates from recent work on citizen evaluations and suggests differences in the ways in which elites process such information. We conclude with a discussion of the implications of our results for the study of performance management and the behavioral approach to public management more generally.