In tournament-based organizations, managerial discretion in hiring significantly impacts performance and stability. Managers may sabotage by hiring lower-ability candidates to avoid future competition, a practice known as “selection sabotage.”
Researchers Peiran Xiao and Hashim Zaman propose a “head start” mechanism to counteract this by giving managers an advantage in the tournament, encouraging them to hire higher-ability candidates. Additionally, the head start must be carefully calibrated to balance its motivating effects on managers and potential discouragement of new hires.
Incorporating succession planning adds complexity, as the head start also affects which employees are retained for future periods. The appropriate organizational strategy involves investing in high-quality managers, ensuring clear performance metrics, and setting an appropriate head start to foster high-ability hires without encouraging managerial complacency.
Key Insights
- Managerial Discretion: Insecure managers may sabotage the hiring process to prevent future competition for themselves.
- Head Start: Providing a head start can mitigate selection sabotage and encourage hiring high-ability candidates.
- Balancing Effects: The head start must be simultaneously balanced to motivate managers to invest effort, mitigate (if not eliminate) selection sabotage, without overly discouraging new hires from exerting effort.
- Succession Planning: Effective succession planning requires a careful head start to ensure that higher-ability new hires, rather than less competent managers, are retained in the long-term.
- Organizational Strategy: Invest in high-quality managers, ensure transparent performance metrics, and set an appropriate head start to enhance long-term organizational success.
Overall, a well-designed incentive structure can enhance employee selection and succession planning, driving long-term organizational success.