The promotion club

We theoretically and empirically explore club-based promotions in hierarchical organizations. A game-theoretic model shows that strategic ambiguity in promotions—more specifically, an incentive scheme in which only top performers who pass a relative-performance threshold are eligible for promotions—may outperform single-prize tournaments in terms of both effort and leaders’ flexibility over personnel. Selection among threshold passers is independent of their performance and the discretionary choice of the leaders. Analysis of local officials’ career records in hierarchical governments in China over a 16-year period validates the existence of club-based patterns in governmental promotions. Thresholds are more lenient for higher-ranked positions and when relative performance is harder to measure.