Sunday, December 30, 2012

Chris Dillow — The Costs Of Hierarchy

Experimental evidence shows that hierarchical organization is more inefficient than generally realized.
Ernst Fehr and colleagues got subjects to play an authority-delegation game, in which subjects were divided into principals and agents, and then asked to work on selecting projects with varying payoffs. They made two important discoveries.
First, subordinates put in less effort than you'd expect rational income maximizers to; depending on the treatment, up to half put in no effort at all, even though this was almost never the income-maximizing option....

Secondly, Fehr and colleagues say:
We find a strong behavioral bias among principals to retain authority against their pecuniary interests and often to the disadvantage of both the principal and the agent.
Stumbling and Mumbling
The Costs Of Hierarchy
Chris Dillow | Investors Chronicle

These findings are actually surprising to some "experts"?

1 comment:

Dan Kervick said...

Everyday life in a badly managed corporation.