Designing organizations for bottom-up task allocation: The role of incentives

TL;DR

This paper introduces an agent-based model to explore how incentives influence bottom-up task allocation in decentralized organizations, demonstrating that aligned short-term incentives enhance performance and reduce the need for mirroring.

Contribution

It presents a novel agent-based model incorporating incentive mechanisms for bottom-up task allocation, highlighting how incentive design impacts organizational effectiveness.

Findings

Short-term aligned incentives improve organizational performance.

Altruistic incentives reduce the need for mirroring in task allocation.

Bottom-up task allocation driven by incentives can outperform traditional organizational designs.

Abstract

In recent years, various decentralized organizational forms have emerged, posing a challenge for organizational design. Some design elements, such as task allocation, become emergent properties that cannot be fully controlled from the top down. The central question that arises in this context is: How can bottom-up task allocation be guided towards an effective organizational structure? To address this question, this paper presents a novel agent-based model of an organization that features bottom-up task allocation that can be motivated by either long-term or short-term orientation on the agents' side. The model also includes an incentive mechanism to guide the bottom-up task allocation process and create incentives that range from altruistic to individualistic. Our analysis shows that when bottom-up task allocation is driven by short-term orientation and aligned with the incentive mechanisms, it leads to improved organizational performance that surpasses that of traditionally designed organizations. Additionally, we find that the presence of altruistic incentive mechanisms within the organization reduces the importance of mirroring in task allocation.