If I owned a business the principal-agent situation ( http://en.wikipedia.org/wiki/Principal-agent_problem) would be one of my biggest concerns. As I have bounced around from job to job it definitely can be recognized who understands this phenomenon and who doesn't. My first job out of high school I was a salesclerk in a sunglass store. I was paid hourly with no bonus or compensation for selling. Hustling on the job didn’t get me very far and I had no motivation to learn the product or to push sales. On the other hand at my current job success is nicely rewarded; not only with bonus cash, but promotions within the organization. With every promotion the rewards grow increasingly better. Money motivates like nothing else. That is the first step in handling the issue.
1 comment:
Principal agent theory is a bit broader than laid out here (but I'm glad that you already found the idea useful).
More correctly it applies to situations in which the principal has someone else (the agent) do some work for them. Most commonly in business this involves owner/manager situations, but it exceptionally common in the real world (for example, when you write something on a shopping list, but someone else does the shopping).
Linking pay to performance is just one way to address this problem. So is simply paying attention to what your workers are doing and correcting them if they do it wrong.
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