Behavioral Economics for Leaders

CHAPTER 32A Little Accountability Goes a Long Way: Trust Works Best When Monitoring Is Possible but Not Used

Many activities in a company are subject to broad contractual arrangements. It would be difficult and expensive to regulate and monitor every step of employees in their work. Thus, it’s necessary to have trust that employees will perform their duties in the interest of the company. But monitoring has great significance, yet in a surprising way.

Over the course of my research career, I was lucky that my employers—for example, Innsbruck and Cologne University and the Max Planck Society—always gave me a big advance in trust. Employment contracts didn’t govern exactly how much research output was expected of me. Only the extent of my teaching obligation was clearly specified—but only the extent, not the quality of the teaching or how much time I invested in preparation or how quickly I should respond to student inquiries. This means that my employment contract created a great deal of freedom for me to decide on my own how to perform the activities that were required. Of course, this freedom wasn’t granted without a certain measure of monitoring by the employer. Various evaluations of my research and teaching activities demanded that I account for past periods. However, I never perceived that as supervision but rather as a legitimate concern on the part of my employer that I use the freedom granted me in a meaningful way (so that, ideally, the reputation of the research institution ...