Competition for attention in organizations leads to increased social exchange
The article explores how formal incentives and social interactions affect employee effort in organizations with multiple managers. The researchers use a model to show that granting autonomy to employees, along with incentive pay for managers and employees, can lead to optimal outcomes. When attention and effort are not easily measurable, a competition for employee attention among managers can actually improve performance by reducing moral hazard issues. The study also suggests that organizational structure can be used to motivate managers and employees even without formal incentives.