A Theory of Front-Line Management

• Authors: Daniel Bird and Alexander Frug.
• BSE Working Paper: 1537 | November 25
• Keywords: front-line management , perishable incentives , asymmetric discounting
• JEL codes: D21, D82, D86

Mid- and low-level managers play a significant role within the organizational hierarchy, far beyond monitoring. It is often their responsibility to respond to opportunities and threats within their units by adjusting their subordinates’ assignments. Most such managers, however, lack the authority to adapt their subordinates’ wages. In- stead, they rely on other, more restrictive incentive schemes. We study the interaction between a front-line manager and worker, and characterize the “managerial style” as
a function of the players’ relative patience and information.