Dynamic delegation in promotion contests

TL;DR

This paper analyzes how organizations design dynamic promotion contests through task allocation and motivation, especially when only non-routine tasks inform about worker quality and are scarce.

Contribution

It introduces an index contest framework for optimal promotion systems, highlighting how task assignment influences promotion decisions and organizational incentives.

Findings

Optimal promotion contests are index-based when only non-routine tasks are informative.

Task allocation plays a crucial role in mediating competition and promotion outcomes.

Features of the optimal system explain practices like fast-track promotion and seniority effects.

Abstract

I study how organizations assign tasks to identify the best candidate to promote among a pool of workers. Task allocation and workers' motivation interact through the organization's promotion decisions. The organization designs the workers' careers to both screen and develop talent. When only non-routine tasks are informative about a worker's type and non-routine tasks are scarce, the organization's preferred promotion system is an index contest. Each worker is assigned a number that depends only on his own type. The principal delegates the non-routine task to the worker whose current index is the highest and promotes the first worker whose type exceeds a threshold. Each worker's threshold is independent of the other workers' types. Competition is mediated by the allocation of tasks: who gets the opportunity to prove themselves is a determinant factor in promotions. Finally, features of the optimal promotion contest rationalize the prevalence of fast-track promotion, the role of seniority, or when a group of workers is systemically advantaged.