Is There Such a Thing as Too Much Transparency?

ROCHESTER, N.Y., Sept. 28, 2016 /PRNewswire/ -- New employees on a steep learning curve, like those in consulting or law, know that communication and coaching are critical to their success. Yet, while sharing positive feedback can help employees grow in their role, how should a supervisor minimize the impact of negative feedback to the employee and the firm?

Experts from the Simon Business School at the University of Rochester tackle this question with the research to examine the design of an information environment for employees when their supervisor can commit to truthful reporting.

"While it may seem like sharing all feedback with employees is ideal, the optimal design of well-managed communication is only partially transparent," says Dmitry Orlov, author of the study and assistant professor at Simon Business School. "If information indicating a negative performance is disclosed, the worker knows he has done poorly and offering incentives for hitting certain performance measurements can be interpreted as punishment."

The research titled "Optimal Design of Internal Disclosure" explores the design of performance evaluations and internal communication within organizations. The research determined that messages related to good performance are shared more frequently with employees than messages associated with bad performances. Within organizations that utilize pay for performance incentives, disclosing positive performances leads to higher productivity and a better allocation of resources and effort. However, bad performance messaging causes less information sharing in later evaluation periods, making it difficult to motivate employees in the future. This can leave employees discouraged and on the hunt for a new job, all while paying less attention to their current job.

The research builds on the principal-agent model, where performance pay is needed to motivate employees.  The findings help employers understand rational biases in performance evaluations, and how information impacts decision making.

To learn more about the cutting-edge research being conducted at Simon Business School, please visit www.simon.rochester.edu.

About Simon Business School
The Simon Business School is currently ranked among the leading graduate business schools in the world in rankings published by the popular press, including Bloomberg Businessweek, U.S. News & World Report, and the Financial Times. The Financial Times recently rated the School No. 9 in the world for finance. More information about Simon Business School is available at www.simon.rochester.edu.

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SOURCE Simon Business School

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