The Effects of Relative Ability and Target Difficulty on Delegation Decisions

Abstract

Managers often need to choose between handling a task themselves and delegating it to a
subordinate. We examine how the relative ability of the manager and the subordinate and the
difficulty of the performance target set for the task affect such tradeoffs. We theorize that
managers’ tendency to delegate increases in the relative ability of the subordinate and the difficulty
of the target. We furthermore predict an interaction effect of relative ability and target difficulty
such that the effect of relative ability on delegation will be stronger when targets are easier. We
test our hypotheses using an experiment and find support for our main effect predictions but not
for the interaction. Our findings also suggest that managers’ private non-monetary interests may
sometimes lead to ‘overdelegation’ and ‘underdelegation’ of tasks, potentially destroying firm
value. The results of our study have several implications for theory and practice.

Keywords: Ability, Delegation, Incentives, Target difficulty, Target setting