IDEAS home Printed from https://ideas.repec.org/p/crm/wpaper/2531.html
   My bibliography  Save this paper

Talent Management: the Role of Bosses

Author

Listed:
  • Guido Friebel

    (University of Frankfurt)

  • Michael Raith

    (Rochester University)

Abstract

Managers (“bosses†) are central to the development and allocation of human capital in firms because they train employees and learn about their abilities. While a multi-divisional firm wants to allocate workers to wherever they are most productive, bosses who are rewarded for their units’ performance prefer to hold on to good employees, and the prospect of losing good people weakens the incentives to train them. We derive the optimal incentive contract for bosses that enables a firm to change from “silos†with only upward mobility to a “lattice†with cross-divisional mobility. Compared to silos, a lattice achieves a more efficient allocation of people to positions, but also entails agency costs that may exceed the benefits. We suggest empirical predictions about when silos or a lattice are optimal, and relate our model and its results to examples and evidence.

Suggested Citation

  • Guido Friebel & Michael Raith, 2025. "Talent Management: the Role of Bosses," RFBerlin Discussion Paper Series 2531, Rockwool Foundation Berlin (RF Berlin).
    • Handle: RePEc:crm:wpaper:2531
    as

    Download full text from publisher

    File URL: https://www.rfberlin.com/wp-content/uploads/2025/07/25031.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Anders Frederiksen & Lisa B. Kahn & Fabian Lange, 2020. "Supervisors and Performance Management Systems," Journal of Political Economy, University of Chicago Press, vol. 128(6), pages 2123-2187.
    2. Guido Friebel & Matthias Heinz & Nikolay Zubanov, 2022. "Middle Managers, Personnel Turnover, and Performance: A Long‐Term Field Experiment in a Retail Chain," Management Science, INFORMS, vol. 68(1), pages 211-229, January.
    3. Daron Acemoglu & Jörn-Steffen Pischke, 1998. "Why Do Firms Train? Theory and Evidence," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(1), pages 79-119.
    4. Mellahi, Kamel & Collings, David G., 2010. "The barriers to effective global talent management: The example of corporate élites in MNEs," Journal of World Business, Elsevier, vol. 45(2), pages 143-149, April.
    5. Virginia Minni, 2023. "Making the invisible hand visible: Managers and the allocation of workers to jobs," STICERD - Economic Organisation and Public Policy Discussion Papers Series 72, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    6. Wouter Dessein & Luis Garicano & Robert Gertner, 2010. "Organizing for Synergies," American Economic Journal: Microeconomics, American Economic Association, vol. 2(4), pages 77-114, November.
    7. Robert Gibbons & Michael Waldman, 1999. "A Theory of Wage and Promotion Dynamics Inside Firms," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 114(4), pages 1321-1358.
    8. Guido Friebel & Michael Raith, 2004. "Abuse of Authority and Hierarchical Communication," RAND Journal of Economics, The RAND Corporation, vol. 35(2), pages 224-244, Summer.
    9. Lisa B. Kahn & Fabian Lange, 2014. "Employer Learning, Productivity, and the Earnings Distribution: Evidence from Performance Measures," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 81(4), pages 1575-1613.
    10. Rongzhu Ke & Jin Li & Michael Powell, 2018. "Managing Careers in Organizations," Journal of Labor Economics, University of Chicago Press, vol. 36(1), pages 197-252.
    11. Edward P. Lazear & Kathryn L. Shaw & Christopher T. Stanton, 2015. "The Value of Bosses," Journal of Labor Economics, University of Chicago Press, vol. 33(4), pages 823-861.
    12. Alan D. Morrison & William J. Wilhelm Jr, 2004. "Partnership Firms, Reputation, and Human Capital," American Economic Review, American Economic Association, vol. 94(5), pages 1682-1692, December.
    13. Gibbons, Robert, 2005. "Four forma(lizable) theories of the firm?," Journal of Economic Behavior & Organization, Elsevier, vol. 58(2), pages 200-245, October.
    14. Demougin, Dominique & Siow, Aloysius, 1994. "Careers in Ongoing Hierarchies," American Economic Review, American Economic Association, vol. 84(5), pages 1261-1277, December.
    15. Steven D. Levitt & Christopher M. Snyder, 1997. "Is No. News Bad News? Information Transmission and the Role of "Early Warning" in the Principal-Agent Model," RAND Journal of Economics, The RAND Corporation, vol. 28(4), pages 641-661, Winter.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Mitchell Hoffman & Christopher T. Stanton, 2024. "People, Practices, and Productivity: A Review of New Advances in Personnel Economics," NBER Working Papers 32849, National Bureau of Economic Research, Inc.
    2. Alexia Delfino & Miguel Espinosa, 2025. "Value Dissonance at Work," CESifo Working Paper Series 11690, CESifo.
    3. Friebel, Guido & Raith, Michael, 2016. "Managers, Training, and Internal Labor Markets," VfS Annual Conference 2016 (Augsburg): Demographic Change 145666, Verein für Socialpolitik / German Economic Association.
    4. Jin, Xin, 2014. "The Signaling Role of Note Being Promoted: Theory and Evidence," MPRA Paper 58484, University Library of Munich, Germany.
    5. M. Antonella Mancino & Leonardo Fabio Morales & Diego F. Salazar, 2023. "Signaling Worker Quality in a Developing Country: Lessons from a Certification Program," Borradores de Economia 1259, Banco de la Republica de Colombia.
    6. repec:eee:labchp:v:3:y:1999:i:pb:p:2373-2437 is not listed on IDEAS
    7. Wouter DESSEIN & Desmond (Ho-Fu) LO & Ruo SHANGGUAN & Hideo OWAN, 2024. "The Management of Knowledge Work," Discussion papers 24044, Research Institute of Economy, Trade and Industry (RIETI).
    8. Braga, Breno, 2018. "Earnings dynamics: The role of education throughout a worker’s career," Labour Economics, Elsevier, vol. 52(C), pages 83-97.
    9. Lisa B. Kahn, 2013. "Asymmetric Information between Employers," American Economic Journal: Applied Economics, American Economic Association, vol. 5(4), pages 165-205, October.
    10. Xin Jin, 2014. "The Signaling Role of Not Being Promoted: Theory and Evidence," Working Papers 0314, University of South Florida, Department of Economics.
    11. Caliendo, Marco & Cobb-Clark, Deborah A. & Pfeifer, Harald & Uhlendorff, Arne & Wehner, Caroline, 2024. "Managers’ risk preferences and firm training investments," European Economic Review, Elsevier, vol. 161(C).
    12. Ingrid Haegele, 2022. "Talent Hoarding in Organizations," Papers 2206.15098, arXiv.org, revised Jul 2025.
    13. Suman Ghosh & Michael Waldman, 2010. "Standard promotion practices versus up‐or‐out contracts," RAND Journal of Economics, RAND Corporation, vol. 41(2), pages 301-325, June.
    14. Frederik Almar & Benjamin Friedrich & Ana Reynoso & Bastian Schulz & Rune M. Vejlin, 2025. "Families’ Career Investments and Firms’ Promotion Decisions," NBER Working Papers 33438, National Bureau of Economic Research, Inc.
    15. Brilon, Stefanie, 2015. "Job assignment with multivariate skills and the Peter Principle," Labour Economics, Elsevier, vol. 32(C), pages 112-121.
    16. Achyuta Adhvaryu & Anant Nyshadham & Jorge A. Tamayo, 2019. "Managerial Quality and Productivity Dynamics," NBER Working Papers 25852, National Bureau of Economic Research, Inc.
    17. Lindbeck, Assar & Weibull, Jörgen, 2020. "Delegation of investment decisions, and optimal remuneration of agents," European Economic Review, Elsevier, vol. 129(C).
    18. Jed DeVaro & Oliver Gürtler, 2020. "Strategic shirking in competitive labor markets: A general model of multi‐task promotion tournaments with employer learning," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 29(2), pages 335-376, April.
    19. Catherine Haeck & Frank Verboven, 2012. "The Internal Economics of a University: Evidence from Personnel Data," Journal of Labor Economics, University of Chicago Press, vol. 30(3), pages 591-626.
    20. Hideo Owan & Shingo Takahashi & Tsuyoshi Tsuru & Katsuhito Uehara, 2014. "Finding good managers: an econometric case study of a large Japanese auto dealership," Working Papers EMS_2014_08, Research Institute, International University of Japan.
    21. Jed DeVaro & Michael Waldman, 2012. "The Signaling Role of Promotions: Further Theory and Empirical Evidence," Journal of Labor Economics, University of Chicago Press, vol. 30(1), pages 91-147.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • D2 - Microeconomics - - Production and Organizations
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • M5 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:crm:wpaper:2531. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Moritz Lubczyk or Matthew Nibloe (email available below). General contact details of provider: https://edirc.repec.org/data/cmucluk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.