Hiring Managers and Their Incentives

Hiring is important for an organization, and so are hiring managers. Yet it is difficult to design incentive schemes to induce their effort on screening and selecting candidates. It is also challenging to measure their performance in hiring partly due to the difficulties in attributing the performance of the hires to hiring managers. We develop a simple model of principal-hiring manager-candidate to capture information asymmetry and private incentives at the hiring stage. Our model follows that a hiring manager’s private incentives induce him to spend more effort on screening, which not only benefits himself but also generates the least distorted outcome for the organization. To examine this theoretical prediction, we use a historical dataset of 12,752 people who passed 46 civil service examinations (CSEs) between 1400 and 1580. In our setting, the principal was emperor, a hiring manager was a high-level bureaucrat who served as an ad hoc examiner, and a candidate aimed to join the bureaucracy through passing the CSEs. Empirical results show that a hiring manager/examiner tended to pass/hire a candidate from his home province who had marginal ability (i.e., at a borderline state between pass and fail). This home province favoritism, however, increased the examiner’s screening effort in terms of better post-hiring performance of the entire cohort of the candidates who passed the CSE, regardless of their provinces of origin.
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