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Optimal job design in the presence of implicit contracts
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We characterize the optimal job design in a multitasking environment when
the firms rely on implicit incentive contracts (i.e., bonus payments). Two natural forms of
job design are compared: (i) individual accountability, where each agent is assigned to a
particular job and assumes full responsibility for its outcome; and (ii) team accountability,
where a group of agents share responsibility for a job and are jointly accountable for its
outcome. The key trade-off is that team accountability mitigates the multitasking problem
but may weaken the implicit contracts. The optimal job design follows a cut-off rule: firms
with high reputation concerns opt for team accountability, whereas firms with low reputation
concerns opt for individual accountability. Team accountability is more likely the more acute
the multitasking problem is. However, the cut-off rule need not hold if the firm combines
implicit incentives with explicit pay-per-performance contracts.