Shaping Organizational Performance via Employee Participation and Vetting in Managerial Selection

This paper studies a practice that fosters a hybrid approach between decentralized decisions and centralized managerial hierarchy: employee participation in managerial selection. The main argument posits that while such participation enhances employee-level outcomes such as satisfaction and retention, it may not be sufficient to improve organizational performance due to employees' potential underemphasis on managerial competence when selecting managers. However, combining employee participation with vetting processes to screen candidates for managerial positions enables organizations to achieve both superior employee-level outcomes and organizational-level performance. This study leverages data from the Brazilian public school system to examine the different mandates for selecting school principals. The quantitative analyses use a combination of large-scale administrative unbalanced panel datasets covering over 35,149 public schools between 2007 and 2017, catering to an average of 17.7 million students annually. The results show that a combination of employee participation with vetting outperforms other forms of managerial selection, resulting in higher levels of satisfaction with managers, retention, and organizational performance. The findings underscore that employee participation and vetting strikes a balance between employee satisfaction and organizational performance.