Skip to Main Content
HBS Home
  • About
  • Academic Programs
  • Alumni
  • Faculty & Research
  • Baker Library
  • Giving
  • Harvard Business Review
  • Initiatives
  • News
  • Recruit
  • Map / Directions
Faculty & Research
  • Faculty
  • Research
  • Featured Topics
  • Academic Units
  • …→
  • Harvard Business School→
  • Faculty & Research→
Publications
Publications
  • 2006
  • Working Paper

Too Motivated?

By: Eric J. Van den Steen
  • Format:Print
  • | Language:English
ShareBar

Abstract

I show that an agent's motivation to do well (objectively) may be unambiguously bad in a world with differing priors, i.e., when people openly disagree on the optimal course of action. The reason is that an agent who is strongly motivated is more likely to follow his own view of what should be done. As a result, the agent is more willing to disobey his principal's orders when the two of them disagree on the right course of action.

This effect has a number of implications. First of all, agents who are subject to authority will have low-powered incentive pay. Second, intrinsically motivated agents will be more likely to disobey and less likely to be subject to authority. Firms with intrinsically motivated agents will need to rely on other methods than authority for coordination. Moreover, an increase in intrinsic motivation may decrease all players' expected utility, so that it may be optimal for a firm to look for employees with low intrinsic motivation. Finally, subjective performance pay may be optimal, even when the true outcome of the project is perfectly measurable and contractible.

Through this analysis, the paper identifies an important difference between differing priors and private benefits (or private information): with differing priors, pay-for-performance can create agency problems rather than solving them.

Keywords

Governance Controls; Employees; Wages; Measurement and Metrics; Outcome or Result; Performance; Agency Theory; Motivation and Incentives

Citation

Van den Steen, Eric J. "Too Motivated?" Sloan School of Management Working Paper, No. 4547-05, April 2006. (Available at SSRN.)
  • SSRN

About The Author

Eric J. Van den Steen

Strategy
→More Publications

More from the Author

    • September 2021
    • Faculty Research

    Tesla Motors in 2021: Competition Revs Up

    By: Eric J. Van den Steen, Ramon Casadesus-Masanell and Karen Elterman
    • Strategy Science

    Birds of a Feather...Enforce Social Norms? Interactions Among Culture, Norms, and Strategy

    By: Hongyi Li and Eric J. Van den Steen
    • January 2021 (Revised March 2021)
    • Faculty Research

    Strategy and Strategic Thinking

    By: Eric Van den Steen
More from the Author
  • Tesla Motors in 2021: Competition Revs Up By: Eric J. Van den Steen, Ramon Casadesus-Masanell and Karen Elterman
  • Birds of a Feather...Enforce Social Norms? Interactions Among Culture, Norms, and Strategy By: Hongyi Li and Eric J. Van den Steen
  • Strategy and Strategic Thinking By: Eric Van den Steen
ǁ
Campus Map
Harvard Business School
Soldiers Field
Boston, MA 02163
→Map & Directions
→More Contact Information
  • Make a Gift
  • Site Map
  • Jobs
  • Harvard University
  • Trademarks
  • Policies
  • Accessibility
  • Digital Accessibility
Copyright © President & Fellows of Harvard College