Project assignments when budget padding taints resource allocation

Project assignments when budget padding taints resource allocation

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Article ID: iaor20081180
Country: United States
Volume: 52
Issue: 9
Start Page Number: 1345
End Page Number: 1358
Publication Date: Sep 2006
Journal: Management Science
Authors: ,
Keywords: personnel & manpower planning, project management
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.

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