DMCA
Optimal Team Size and Monitoring in Organizations (2008)
| Venue: | The Accounting Review |
| Citations: | 6 - 3 self |
BibTeX
@ARTICLE{Liang08optimalteam,
author = {Pierre Jinghong Liang and Madhav V. Rajan and Korok Ray},
title = {Optimal Team Size and Monitoring in Organizations},
journal = {The Accounting Review},
year = {2008},
pages = {789--822}
}
Share
 |
 |
 |
 |
||
OpenURL
Abstract
ABSTRACT: We formulate and analyze a model of team structure and monitoring within a Linear-Exponential-Normal (LEN) agency framework. We incorporate three key in-struments in the internal design of an organization involving team production: team size, monitoring activities, and incentive contracts. We show that the complex trade-offs among these instruments lead to surprisingly simple implications. One such result is that the equilibrium level of pay-for-performance for workers is attenuated and is, at times, invariant to most environmental variables of interest. As such, our model helps explain the empirical puzzle of the lack of a trade-off for risk / incentives shown in standard agency models. Our work also demonstrates the presence of complemen-tarities between team size and monitoring, and between worker talent and managerial monitoring ability. Finally, we derive predictions about the impact of environmental var-iables on the choice of optimal team size, incentives, and employee quality, even in the presence of an external marketplace for talent.
Keyphrases
optimal team size team size empirical puzzle incentive contract team production external marketplace managerial monitoring ability worker talent agency framework complex trade-off monitoring activity team structure standard agency model internal design simple implication risk incentive environmental variable employee quality environmental var-iables key in-struments equilibrium level
