| This thesis develops principal-agent models to investigate how imperfect performance measurement in organizations influences the simultaneous decisions about the assignment of tasks and the provision of incentives to managers. Chapter 1 provides a performance-measurement-based explanation for job rotation. When performance is measured in part with a time lag, then job rotation can be an efficient means of incentive alignment if and only if (i) the lag measurement is sufficiently strong to exceed a specific threshold, and (ii) the principal can sign long-term contracts with the agents. Given these conditions, the benefit of job rotation---a more congruent inter-temporal effort allocation---outweighs its cost---a lowered pre-rotation effort and a higher wage payment that follow because the lag measurement cannot be used in the incentive provision to the agents. Chapter 2 studies congruity with multiple tasks and performance metrics when the principal assigns the tasks to either one or two agents. I develop a measure of congruity that generalizes and combines the measures of Datar, Kulp and Lambert (2001) and Baker (2002) and that highlights how the intensity and the allocation of hidden efforts determine congruity. Consistent with prior literature. I find that for a given task assignment, congruity increases with a greater intensity and a less distorted allocation. However, when the principal maximizes congruity between two task assignments, then she may need to trade off greater intensity against a less distorted allocation, or vice versa. |
