Managerial Intervention, Employee Motivation, and Collaboration

The economic literature on delegation focuses on the subordinate’s improved motivation when liberated from managerial intervention in decision making. However, many managers motivate employees while proactively intervening in the decision-making process. We build a principal-agent model to analyze when managerial intervention is, and is not, motivational to the agent. Although managerial intervention may demotivate the agent when leading to actions that waste employee effort, managerial intervention can also motivate the agent by incentivizing principal effort that complements the agent’s effort. In fact, delegation may demotivate the agent when the principal and agent work collaboratively. Our results speak to understanding the role of strategic complementarity in determining when various managerial practices do, and do not, motivate employees. This paper was accepted by Maria Guadalupe, business strategy.