When the Boss Becomes the Referee : The Effect of Relative Performance Evaluations on Employee Perceptions of and Responses to Managerial Monitoring

Managers frequently monitor employees to ensure they act in accordance with organizational goals. However, prior research has widely documented employees respond negatively to managerial monitoring – the hidden cost of control. To help reconcile these empirical facts, I examine whether and how relative performance evaluations (RPE) affect employee perceptions and responses to managers’ monitoring decisions. The results of three experiments largely support my theory that employees are less reactive to monitoring under RPE. The first experiment shows that employees perceive monitoring to be fairer than no monitoring, however this is exacerbated in the presence of RPE, and only in the presence of RPE do fairness perceptions drive employee reciprocity. Additional experiments demonstrate that RPE attenuates the hidden cost of control because employees prefer monitoring more so in the presence of RPE. Collectively, this study aids our understanding of how and under what circumstances managerial monitoring may be more acceptable to employees