Project Assignments When Budget Padding Taints Resource Allocation

Anil Arya () and Brian Mittendorf ()
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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

Management Science, 2006, vol. 52, issue 9, 1345-1358

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 (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (4)

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