Abuse of Authority and Hierarchical Communication

Abstract:     
If managers and their subordinates have the same basic qualifications, organizations can benefit from replacing unproductive superiors with more productive subordinates. This threat may induce superiors to deliberately recruit unproductive subordinates, or abuse their personnel authority in other ways, to protect themselves. We show that requiring intra-firm communication to pass through a chain of command can be an effective way to provide superiors with an incentive to recruit the best possible subordinates. We discuss alternative ways to prevent the abuse of authority and general implications of our analysis for organizational design. We also present supporting evidence from the literature on human resource management and organizational behavior.

Keywords: Hierarchies, strategic recruiting, internal labor markets, abuse of authority, chain of command

JEL Classification: D82, J41, M12

Accepted Paper Series