Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/96004
Authors: 
Epstein, Gil S.
Herniter, Bruce C.
Year of Publication: 
2011
Series/Report no.: 
Working Papers, Bar-Ilan University, Department of Economics 2011-23
Abstract: 
The ability to accurately evaluate an employee would seem to be a key activity in managing Information Technology (IT). Yet, workers may engage in dishonest and misleading behavior, which distort the evaluation, a variation of organizational politics. Why would they do so? One hypothesis is that privilege-seeking, that is, managing one's managers (also called rentseeking, management relations, or organizational politics), can be used by a worker to misrepresent his actual contribution. These activities lead to a reduction in productivity and consequently to a loss of profits. Management may decrease the firm's losses by engaging in costly monitoring activities. It is paradoxical that a behavior with such negative consequences is tolerated. A model is developed to show that an organization should be composed of employees with different levels of productivity; moreover, it may be optimal for the organization to have some employees who are good at privilege-seeking activities, forcing the remaining workers to invest in productive activities. This contradicts existing theory that unequal compensation should be less motivating and the remaining workers less productive.
Subjects: 
employee evaluation
equity theory
influence costs
management relations
multiple agent model
monitoring
Nash equilibrium
privilege-seeking activities
rent
rent-seeking
Document Type: 
Working Paper

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