Too Big to Succeed? Overstaffing in Firms

57 Pages Posted: 9 Jul 2016 Last revised: 4 May 2021

See all articles by Hans K. Hvide

Hans K. Hvide

University of Bergen - Department of Economics; University of Aberdeen - Business School; Centre for Economic Policy Research (CEPR); Institute for the Study of Labor (IZA)

Yanren Zhang

China Center for Economic Studies (CCES), Fudan University

Date Written: May 10, 2019

Abstract

Overstaffng, i.e., fi rms employing individuals that do not contribute to productivity in a static sense, appears to be a source of signi cant inefficiencies in organizations. We extend the canonical Lazear-Rosen tournament model to a dynamic setting that yields efficient overstaffing at the managerial level: overstaffing provides incentives to young workers without overpaying middle-aged workers. This theoretical result is used to illuminate puzzling features of the organizational chart in Tesco and other fi rms. The model may offer independent interest by integrating a generational structure into a tournament model.

Keywords: Bureaucracy, Overstaffing, Personnel economics, Productive efficiency, Promotions, Tournament

JEL Classification: D86, J31, M51

Suggested Citation

Hvide, Hans and Zhang, Yanren, Too Big to Succeed? Overstaffing in Firms (May 10, 2019). Available at SSRN: https://ssrn.com/abstract=2806289 or http://dx.doi.org/10.2139/ssrn.2806289

Hans Hvide (Contact Author)

University of Bergen - Department of Economics ( email )

Fosswinckelsgt. 6
N-5007 Bergen, 5007
Norway

University of Aberdeen - Business School ( email )

Edward Wright Building
Dunbar Street
Aberdeen, Scotland AB24 3QY
United Kingdom

HOME PAGE: http://hans.hvide.googlepages.com/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Institute for the Study of Labor (IZA) ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Yanren Zhang

China Center for Economic Studies (CCES), Fudan University ( email )

600 Guoquan Road
Shanghai, 200433
China

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
142
Abstract Views
1,098
rank
247,842
PlumX Metrics