Motivating Employees through Career Paths

Firms have discretion over task allocations, which may dampen employees’ career prospects and, hence, their motivation. Task assignments and worker motivation interact through the extent of labor market competition—that is, the possibility of moving to another firm. More competition enhances motivation but decreases firms’ incentives to assign workers to informative tasks. One consequence is that competitive firms sometimes choose strategies that lead to intermediate competition. When the employee pool is heterogeneous, firms might choose different human resource practices that attract different kinds of workers and differentiate themselves through the career opportunities that they offer within and beyond the firm.