Multitasking and incentive contracts

Employees are generally charged with performing a collection of various tasks that contribute to firm value differently. The accountability for multiple tasks implies that employees can not only decide on their effort intensity, but also on how to allocate their effort across these tasks. To motivate employees, firms often utilize incentive contracts on the basis of objective performance measures. However, if individual performance evaluations do not accurately reflect employees’ contributions to firm value, the application of such incongruent performance measures induces employees to place more emphasis on less valuable tasks relative to those with greater contributions to firm value. The author, Veikko Thiele, investigates and explicates the optimal design of incentive contracts in situations where employees are charged with multiple tasks (multitasking). He identifies and explores potential mechanisms aimed at motivating employees to implement more efficient effort allocations from a firm’s perspective. This book specifically targets economists, executives, consultants, and companies.