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Performance, Promotion, and the Peter Principle

James Malcomson () and James A. Fairburn

No 26, Economics Series Working Papers from University of Oxford, Department of Economics

Abstract: This paper considers why organizations use promotions, rather than just monetary bonuses, to motivate employees even though this may conflict with efficient assignment of employees to jobs. When performance is unverifiable, use of promotion reduces the incentive for managers to be affected by influence activities that would blunt the effectiveness of monetary bonuses. When employees are risk neutral, use of promotion for incentives need not distort assignments. When they are risk averse, it may - sufficient conditions for this are given. The distortion may be either to promote more employees than is efficient (the Peter Principle effect) or fewer.

Keywords: work incentives; influence activities; job assignments; promotion; Peter Principle (search for similar items in EconPapers)
JEL-codes: J33 J41 D82 (search for similar items in EconPapers)
Date: 2000-10-01
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Related works:
Journal Article: Performance, Promotion, and the Peter Principle (2001) Downloads
Working Paper: Performance, Promotion, and the Peter Principle (2000)
Working Paper: Performance, Promotion, and the Peter Principle (1995)
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