Essays in Organization Theory and Personnel Economics

This thesis contains three separate papers that deal with various aspects of organization theory and personnel economics. In the first paper, co-written with Frank Rosar, we consider situations where a principal and an agent favor different projects, whose success depends on both parties' efforts. While their conflict of interest is known, it is unclear to what extent they are willing to compromise on the project choice. We investigate the optimal allocation of two kinds of authority: the authority to initiate and the authority to approve a project. We find that delegation may negatively affect the agent's motivation. Furthermore, we show that the principal will delegate less authority the higher his willingness to compromise. The second paper, which is joint work with Emmanuelle Auriol, analyzes the impact of negative intrinsic motivation on the optimal labor contracts in profit- and mission-oriented organizations. Intrinsic motivation of workers may arise from different individual motives. While some workers care about the mission of an organization and derive an intrinsic benefit from advancing this mission (“good” workers), others derive pleasure from some form of destructive or anti-social behavior (“bad” workers). We show that mission-oriented organizations can take advantage of the intrinsic motivation of good workers such that lower bonus payments and lower monitoring are necessary in order to achieve a high output. However, mission-oriented organizations may also be more vulnerable to anti-social behavior than profit-oriented organizations if there are bad workers. We analyze the optimal wage contracts and monitoring levels for both types of organization and discuss appropriate measures of ex ante candidate screening to overcome the problems caused by bad workers. The third paper asks the question how workers should be assigned to jobs if they possess multidimensional skills that are of varying importance in different jobs. The paper derives optimal assignment rules and shows that under certain circumstances workers may get promoted although in their new job they are expected to be less productive than in their old job. This can be interpreted as a variant of the Peter Principle which states that workers get promoted up to their level of incompetence