Reporting frequency and employee exploration

Using three experiments, I investigate whether increasing reporting frequency affects supervisor evaluation decisions and employee exploration in a discretionary evaluation setting. Employees learn by either exploring new knowledge or exploiting existing knowledge. Supervisors may be unable to distinguish exploration from shirking as the cause of low results because exploration frequently produces low outcomes. Anticipating this, employees can explore below optimal levels because they are uncertain whether supervisors will reward unsuccessful exploration. Increasing reporting frequency, defined as providing supervisors with more timely and detailed information, improves supervisors’ ability to distinguish exploration from shirking. Thus, consistent with my prediction, I find that supervisors award bonuses that provide stronger incentives for employees to explore when reporting frequency increases. Contrary to my prediction, employees do not appear to anticipate this and do not explore more when reporting frequency increases. My results suggest employees can fail to anticipate which actions supervisors will reward, making supervisors less effective at directing employee effort toward desirable actions.