“Go Easy on Me!” Supervisor Discretion in Target Setting after Managerial Turnover

Abstract

This paper examines supervisors’ target setting decisions following managerial turnover, an event largely overlooked in prior studies. Specifically, we test whether regional supervisors use discretion to assign different target levels to new managers compared to those who remain in their business unit. Moreover, we investigate whether the use of past performance and peer performance information in supervisors’ target revisions is sensitive to managerial turnover. Using field data from 113 nursing homes of a large elderly care provider over a three-year period, we provide evidence that supervisors assign relatively lower targets to new managers. Additionally, our results show that, overall, supervisors rely on past and peer performance information to a similar extent when revising targets for new managers, with a more lenient approach if new managers underperform. Our findings suggest that current knowledge about target setting may be incomplete, as supervisors may treat new managers differently.