Too Big to Succeed? Overstaffing in Firms
57 Pages Posted: 9 Jul 2016 Last revised: 4 May 2021
Date Written: May 10, 2019
Overstaffng, i.e., firms employing individuals that do not contribute to productivity in a static sense, appears to be a source of signicant 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 firms. 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: Suggested Citation