Autonomy in Decision Making: the Right Balance is Required

The output of knowledge-intensive activities is intangible and therefore difficult to verify, especially in large firms with longer organizational distance between managers and researchers. Whenever human capital is a key factor in achieving results, motivating knowledge workers is an important task. In Stategic Incentives to Human Capital, Alfonso Gambardella, Claudio Panico and Giovanni Valentini design a model to address this managerial challenge.

"In literature, the offer of greater autonomy is among the incentives that a firm can use alongside salary, bonuses, career progression", Panico says. "Autonomy is a key factor in human capital management in knowledge-intensive activities - but it comes with a risk: knowledge workers can pursue projects far from the firm's core business".

The firm's assets are crucial in the search for a balance in the allocation of decision rights over a project. The more a firm gives core business-related complementary assets to a knowledge worker, the less his autonomy is important. In contrast, when the researcher's personal benefits decrease, the firm should allocate decision rights. "We provide a project-specific model based on the level of autonomy allocated in a given project and the complementary assets. Literature tells us that the more autonomy a firm gives to a knowledge worker, the more he will misalign with its interests. We reverse the causal relationship, stating that the fact the firm wants to implement projects far from its core business influences the granting of decision rights".

It is a promising line of research. The same working team is currently analyzing a detailed dataset on inventors to verify the formal implications of the model and the outcomes of the allocation of decision rights.

Read the other stories on the topic of Human Capital:

We Are Who We Hire
Gig Economy: What Rights for Workers?
The Chosen People who Invested on Themselves
Not only CEOs, the Importance of the Manager
Investing Time in Children Pays
Uncertain Victor, Better Candidates
The Importance of Incentives
The Consequences of Uncertainty on Families
The Geography of Human Capital
Not all Directors have the Same Value