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Measuring and Managing Performance in Organizations by Robert D. Austin, Timothy Lister, Tom DeMarco

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Chapter Seven. Three Ways of Supervising the Agent

Construction of the model is now complete. What remains is to vary features of the model, to see what can be observed or concluded about an organization from this simplified picture. Of immediate interest is the observation that there are three distinct ways of managing the agent’s activities available to the principal: no supervision, full supervision, and partial supervision.

No Supervision

One way the principal can manage the agent is to leave him alone. The principal measures nothing and observes no dimensions of effort allocation. Payment to the agent cannot be made contingent on performance because performance is not observed. The agent is left to work on his own and is paid a flat rate ...

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