Measuring the Unobservable: Selecting Which Managers for Higher Hierarchical Levels

Abstract: Recruitment and selection of managers is to a large degree characterized by information uncertainty. Managers’ performance is difficult to evaluate, as their responsibility consists of so many different aspects, as they may not always be observed due to need for freedom of action and as their work is affected by factors in their environment, which are outside of their control. Also, selection decisions are intended to evaluate managers’ future potential, but are based on their past performance. Due to such difficulties in evaluating managers, organizations will try to reduce information uncertainty by using various sources of information. In order to increase the effectiveness of selection decisions, managers may be selected due to their proficiency at executing a strategy or for being experts in an area. Internal recruitment of managers tends to be preferred, due to the value of firm-specific knowledge as signalled by corporate control systems. However, external managers may also be selected into corporations for having a varied background, in that flexibility in thinking may be thus inferred. Such estimates of ability are, however, just that – proxies for ability. Although the unobservable may be approximated, other factors will also influence selection decisions, due to a need for further reduction of information uncertainty. Thus, although managers need to be able to reach higher hierarchical levels, they also need to signal that ability in order for them to be perceived as such and, therefore, be promoted. In large organizations, it is difficult for every employee to know one another. As managers’ work to a large extent depends on the work of others, they need another basis for trust than personal knowledge of each other. Such indications have been found in this study, as the selection process is guided by top management tending to reproduce itself. This can be perceived in top management’s social similarity, but findings also suggest that such reproduction starts early in managers’ careers, where persona non grata are identified and designated as losers in tournaments for higher hierarchical positions. Here, not only demographics play a part in the homosocial reproduction of the top management cadre, as other variables continuously interact to affect such an outcome.