Project Assignments When Budget Padding Taints Resource Allocation
Management Science · 2006 · Volume 52 · Issue 9
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.
Keywords
adverse selection, budget padding, job rotation
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