A Theory of Front-Line Management

Mid- and low-level managers play a significant role within the organizational hierarchy, far beyond monitoring. It is often their responsibility to respond to opportunities and threats within their units by adjusting their subordinates’ assignments. Most such managers, however, lack the authority to adapt their subordinates’ wages. Instead, they rely on other, more restrictive incentive schemes. We study the interaction between a front-line manager and worker and characterize the “managerial style” as a function of the players’ relative patience and information.

This paper was accepted by Maria Guadalupe, business strategy.

Funding: D. Bird acknowledges financial support from the Sapir Center for Economic Development. A. Frug acknowledges financial support from the Agencia Estatal de Investigación (Spain) [Grants RYC2021-033938-I and PID2021-125538NB-I00].