Testing alternate predictions for the performance consequences of middle managers' discretion

Abstract Although discretion among employees at organizations' lower levels seems to be increasing, it is uncertain whether this is a desirable HRM policy. To understand this issue better, this study tests competing organization theory predictions about the performance consequences of middle managers' perceived discretion. Discretion is defined as the freedom of action or decision authority available in managing subordinates. Survey data from a multinational, European sample of research and development (R&D) units were used to assess the effect of managers' perceived discretion on unit performance. The results show that a combination of ecology theory and strategic choice theory best predicts the relationship between discretion and unit performance. Greater perceived managerial discretion was linked to increased unit performance in a relationship moderated by managerial experience and limited by unit size. These findings have implications for HRM theory and practice, particularly regarding policies related to empowerment and leadership development. © 2011 Wiley Periodicals, Inc.