Compared to What? How Social and Historical Reference Points Affect Citizens’ Performance Evaluations

Abstract

The question of what is “good” or “poor” performance is difficult to answer without applying a reference point—a standard for comparison. Citizens’ evaluation of performance information will, therefore, tend to be guided by reference points. We test how reference points alter citizens’ evaluation of organizational performance. In this article, drawing on Herbert Simon, we test how citizens use historical (internal) and social (external) reference points when making relative comparisons: how important is current performance relative to past performance? And how important is current performance relative to the performance of other organizations? Two experiments are embedded within a large nationally representative sample of citizens (n = 3,443). The experiments assign historical and social reference points for performance data on education and unemployment to citizens. We find that citizens’ performance evaluation is fundamentally a relative process. Interestingly, we show that social reference points are almost twice as important in citizens’ evaluations as historical reference points. We find some evidence of a negativity bias in citizens’ relative evaluations. The strong social reference point effects have implications for studying citizens’ response to performance and how managers can frame and manipulate external performance data.

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