DP2429 Strategic Recruiting And The Chain Of Command

Author(s): Guido Friebel, Michael Raith
Publication Date: April 2000
Keyword(s): Abuse Of Authority, Chain Of Command, Hierarchies, Internal Labour Markets, Strategic Recruiting
JEL(s): D82, J41, M12
Programme Areas: Labour Economics, Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=2429

If managers and their subordinates had the same basic qualifications, organizations could benefit from replacing unproductive superiors with more productive subordinates. This threat of being replaced, however, could give rise to strategic recruiting: Unproductive superiors might deliberately recruit unproductive subordinates in order to protect themselves, or engage in other forms of abuse of authority which could be harmful to the organization. We show that the common practice of requiring intra-firm communication to pass through a chain of command can be an effective way to secure the incentives for superiors to recruit the best possible subordinates. We discuss some alternative instruments and general implications of our analysis for organizational design.