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Bend Them but Don't Break Them: Passionate Workers, Skeptical Managers, and Decision Making in Organizations†

Bend Them but Don't Break Them: Passionate Workers, Skeptical Managers, and Decision Making in... AbstractThis paper explores the useful but delicate role of managerial skepticism in hierarchical knowledge-based organizations. In these settings, the decision-maker principal seeks advice from managers, who instruct expert frontline workers to acquire information. Given unverifiable information quality and private-valued agents, moral hazard and adverse selection arise with workers and managers, respectively. Pairing extremely passionate workers with moderately skeptical managers alleviates both problems; however, the degree of managerial skepticism must be finely tuned: too little skepticism fails to improve workers' incentives, while too much skepticism destroys workers' incentives altogether. Case studies from the high-tech industry support these insights. (JEL D23, D82, M12, M51) http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png American Economic Journal: Microeconomics American Economic Association

Bend Them but Don't Break Them: Passionate Workers, Skeptical Managers, and Decision Making in Organizations†

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Publisher
American Economic Association
Copyright
Copyright © 2017 © American Economic Association
ISSN
1945-7685
DOI
10.1257/mic.20150199
Publisher site
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Abstract

AbstractThis paper explores the useful but delicate role of managerial skepticism in hierarchical knowledge-based organizations. In these settings, the decision-maker principal seeks advice from managers, who instruct expert frontline workers to acquire information. Given unverifiable information quality and private-valued agents, moral hazard and adverse selection arise with workers and managers, respectively. Pairing extremely passionate workers with moderately skeptical managers alleviates both problems; however, the degree of managerial skepticism must be finely tuned: too little skepticism fails to improve workers' incentives, while too much skepticism destroys workers' incentives altogether. Case studies from the high-tech industry support these insights. (JEL D23, D82, M12, M51)

Journal

American Economic Journal: Microeconomics – American Economic Association

Published: Aug 1, 2017

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