Dear boss, could you help me? : a model of "reverse delegation" in corporations and risk aversion

Abstract

Sometimes employees avoid taking actions or making decisions that their boss has previously delegated to them. Moreover, in some situa- tions, employees return the task to the boss, who ends up doing it - de- spite employees were capable of performing the task. Among management practitioners and scholars this pathology is known as Reverse Delegation - with employees delegating on bosses - arguing that it can limit corpo- rate e ciency and growth. This is the rst paper to formally model such a mechanism in an economic model of the organization. Technically, we augment the Garicano (2000) model of hierarchies with a game that al- lows for such a Reverse Delegation, in this case motivated by employee's risk aversion when they make mistakes. More risk averse employees tend to delegate back more tasks, being detrimental to rm's productivity. Re- sults point towards the relevance of task standardization and corporate con dence for productivity.