Working Papers, Bar-Ilan University, Department of Economics 2011-23
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.
employee evaluation equity theory influence costs management relations multiple agent model monitoring Nash equilibrium privilege-seeking activities rent rent-seeking