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Project Assignments When Budget Padding Taints Resource Allocation

Author

Listed:
  • Anil Arya

    (The Ohio State University, 2100 Neil Avenue, Columbus, Ohio 43210)

  • Brian Mittendorf

    (Yale School of Management, 135 Prospect Street, New Haven, Connecticut 06520)

Abstract

This paper shows that rotation programs can be an effective response to concerns of employee budget padding. Rotation programs naturally create a "portfolio" of assignments for each manager, and the resulting diversification can reduce the downside of resource rationing. In particular, the production versus rents trade-off linked with adverse selection problems can be more efficiently carried out when the firm faces two managers with average information advantages, rather than one with a large advantage and one with a small advantage. Roughly stated, rotation of project assignments is a way of smoothing information across managers. On the other hand, if a firm places a premium on treating different types of projects in distinct ways, specialized assignments can be preferred due to the ability to confine project types to individual managers.

Suggested Citation

  • Anil Arya & Brian Mittendorf, 2006. "Project Assignments When Budget Padding Taints Resource Allocation," Management Science, INFORMS, vol. 52(9), pages 1345-1358, September.
    • Handle: RePEc:inm:ormnsc:v:52:y:2006:i:9:p:1345-1358
    DOI: 10.1287/mnsc.1060.0532
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    References listed on IDEAS

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    Cited by:

    1. Hakenes, Hendrik & Katolnik, Svetlana, 2017. "On the incentive effects of job rotation," European Economic Review, Elsevier, vol. 98(C), pages 424-441.
    2. Diego Battiston & Miguel Espinosa & Shuo Liu, 2021. "Talent Poaching and Job Rotation," Working Papers 1237, Barcelona School of Economics.
    3. Singham, Dashi I. & Cai, Wenbo & Fügenschuh, Armin, 2021. "Flexible contracting with heterogeneous agents and stochastic demand," International Journal of Production Economics, Elsevier, vol. 231(C).

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