Professional Documents
Culture Documents
Summary
Summary
On the Job Training – the skill-weight approach (Geel, Mure and Backes-Gellner – 2011)
Occupational specificity: the more specific the skill requirements compared to the labor market in general,
the bigger share of training costs covered by the firm → although all single skills are general, the
combination of these skills is occupation-specific. Apprenticeship training should not be considered to be
general: dependent on the degree of specificity it can rather general or specific
Occupational mobility: he more specific the skill requirements compared to the labor market in general,
the smaller likelihood that workers change occupation after completing the training. – in the short and long
run, occupational mobility seems to be restricted; the employee is bound to the original occupational if its
skill combination is specific
Layoffs, quits and wage negotiation (Gielen and van Pours – 2010)
Which worker firm matches are most likely to dissolve?
Quit: separation initiated by the worker
Layoff: separation initiated by the firm
Quit may be inefficient if it could be prevented through wage renegotiation → if higher wage outside, give
the same salary as still profitable since match surplus of a newly hired worker is even lower
Layoff inefficient if a wage reduction would have prevented the dismissal and if the outside wage is lower
than the reduced wage → worker better off when staying for a reduced wage
Efficient separations when: 1) match surplus became negative, 2) match surplus too small for
compensation → depends on size of match surplus, size of shocks and possibility of renegotiation of the
wage
Conclusion:
→ separation are not a linear function of the match surplus
→ workers with low match surplus are most likely to quit or to be laid off
→ workers with very high match surplus are likely to quit: firms complete to get those workers
→ inefficient quit are rare, inefficient layoffs occur frequently
Quantitative evaluation
Common distortions in quantitative performance measures: 1) measuring quantity but ignoring quality, 2)
intangibles, 3) opportunity costs (cost of foregoing other alternatives), 4) group size (individual worker,
team, firm), 5) time horizon (backward looking – long term consequence)
Distortion: different aspects of the job are given inappropriate weights, causing employees to emphasize
some thongs too much and others too little (quantity vs quality)
Manipulation: occurs because of workers’ strategic use of asymmetric information (specific knowledge).
They use their knowledge to improve their performance measures (even when the actions do not improve
firm values (increasing orders, canceling, reordering)
Consequence of manipulation: quality of a performance metric may systematically degrade over time once
it is used for incentive purposes → vicious circle
Subjective evaluation
Important point of subjective evaluations: define responsibility → employee should be responsible for
events that are controllable by the employee.
adverse event: should aim at preventing damage
positive event: should aim at taking the opportunity
Benefits of subjective evaluation: 1) improve on quantitative performance measures → a) by filtering out
uncontrollable factors, the risk to the employee can be reduced, b) by giving an adequate weight to
dimensions of the job that are hard to quantify but important, distortions in incentives might be avoided, c)
by providing the possibility to act ex post on manipulation, the incentive for the worker to manipulate may
be reduced, 2) improvement in terms of incentives for risk taking (good results are rewards but mistakes
are not punished), 3) improvement in term of decision making (employees are motivated to use their
specific knowledge), 4) increases in flexibility of incentive system (changes in incentives), 5) positive effects
of expanded communication (regular conversions between supervisors and employees might improve
employees’ effectiveness), 6) a form of training if the evaluation involved managers in passing their
experience to their employees
Limitations of subjective evaluations: 1) reluctance to give negative ratings, because it will affect workers’
attitude and motivation in the future, 2) intrinsically subjective (personal opinions), 3) usually take time
and effort to prepare and do it, especially if compared to readily available quantitative performance
measures, 4) subjective performance measures can also be manipulated
Conclusion
performance evaluation is difficult, but nevertheless very important
ideal performance evaluation → evaluation that takes account of all the employee’s actions on firm value
however for most jobs this is virtually impossible
both types of performance evaluations have some advantages but also limitations, which then have to be
balances against each other