Strategic Manipulation in Peer Performance Evaluation: Evidence from the Field*

This study examines strategic behavior in “360-degree” performance appraisal systems, in which an employee is evaluated by her supervisor as well as her colleagues. Using proprietary data from a mid-sized Chinese public accounting firm, we find that employees manipulate their ratings of peers (i.e., colleagues within the same hierarchical rank of the company). Specifically, they downgrade ratings of their more qualified peers while granting higher ratings to their less qualified peers, compared with evaluations from employees who are not peers. Moreover, this manipulation is mostly done by employees who themselves are less qualified. Altogether, this implies that more-qualified employees “lose” from the 360-degree evaluation scheme, and simulations show that their promotion chances would be (slightly) higher under the traditional “top-down” scheme in which their performance ratings are based only on the their supervisor’s appraisal.