Allocating Weights to Subjective Measures Relative to Objective Measures

[Purpose] This paper examines how the weights assigned to subjective measures relative to objective measures are determined. Subjective measures are incorporated into performance evaluations to complement objective measures. Thus, the relative weights assigned to subjective measures may be greater when objective measures fail to adequately capture agents’ contributions to an organization. [Methodology] I use the performance evaluation results of 63 Korean SOEs from 2011 to 2013 and conduct an empirical analysis at the task－year level. [Findings] The empirical findings show that the relative weights assigned to subjective measures are greater in long－term－oriented tasks than in short－term－oriented tasks. Long－term－oriented tasks require agents to exhibit comprehensive and adaptive behavior that objective measures cannot fully capture. Therefore, the weights assigned to subjective measures relative to objective measures increase with a task’s long－term orientation. In addition, this paper finds that the relative weights assigned to subjective measures increase as the number of objective measures decreases. A greater number of objective measures provides more information about the multidimensional actions of agents. Thus, this finding implies that greater relative weights are placed on subjective measures when the use of objective measures cannot provide sufficient information about an agent’s true contribution. [Implications] Overall, this paper provides evidence that the relative weights assigned to subjective measures are determined in a manner that enhances the effectiveness of the performance evaluation system.