76 Pages Posted: 17 Apr 2014 Last revised: 27 Apr 2014
Date Written: April 18, 2014
According to conventional wisdom, a middle manager is useless to a principal that has enough time, attention, and technical expertise to oversee all organizational activities. This paper argues that such a principal can benefit from a manager's services, and that her optimal choice of manager may be one whose vision differs from hers. The reason is that a principal can strengthen a worker's incentives to acquire information for a decision by delegating control to a "biased" manager. Since cursory observation erroneously suggests that the manager is useless, the analysis helps to reconcile middle management's prevalence with its widespread lamentation.
Keywords: delegation, middle management, information acquisition, organizations
JEL Classification: D23, D83, M12, M51
Suggested Citation: Suggested Citation