Employee Selection as a Control System

Dennis Campbell ()
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Dennis Campbell: Harvard Business School, Accounting and Management Unit

No 11-021, Harvard Business School Working Papers from Harvard Business School

Abstract: Theories from the economics, management control, and organizational behavior literatures predict that when it is difficult to align incentives by contracting on output, aligning preferences via employee selection may provide a useful alternative. This study investigates this idea empirically using personnel and lending data from a financial services organization that implemented a highly decentralized business model. I exploit variation in this organization in whether or not employees are selected via channels that are likely to sort on the alignment of their preferences with organizational objectives. I find that employees selected through such channels are more likely to use decision-making authority in the granting and structuring of consumer loans than those who are not. Conditional on using decision-making authority, their decisions are also less risky ex post. These findings demonstrate employee selection as an important, but understudied, element of organizational control systems

Pages: 55 pages
Date: 2010-08, Revised 2010-09
New Economics Papers: this item is included in nep-bec
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Persistent link: https://EconPapers.repec.org/RePEc:hbs:wpaper:11-021

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