Principal agent problems: how to make work assignments work
Clean handover of work packages is key to make a business work – and yet I regularly see work assignments fail. How is that possible? The process of handing over a task seems simple enough. The principal agent theory describes the underlying dilemma: It states that when principals hire agents for work assignments there are two sources of trouble: a) diverging interests and b) asymmetrical information (read here about Apple’s attempt to solve the problem).
So far that is text-book material you are probably aware of. It is however much more difficult to come up with a practical solution than to theoretically describe the problem. Here is a procedure for work assignments that I found useful over the years
Step 1: Principal phrases assignment
Usually the principal starts the process by phrasing the assignment. The catch: she most often has less detailed information than the agent (who usually was chosen for exactly for that reason). To the agent the principal’s task description often sound similar to “make it work!”. That is what the principal agent theory means by information asymmetry.
Step 2: Agent clarifies the assignment
Exactly because the agent usually has more detailed knowledge of the field it is his job to clarify the order. There is another reason: the agent can only accept the responsibility when she has sufficiently clarified the expectations. A typical phrase of the agent in this situation could start: “Would you be satisfied, if I delivered…”
An amazing number of work assignments is already derailed at his point: the agent fails to clarify the assignment and later uses the “nebulous order” as an excuse. Therefore let me repeat: it is the agent’s job to clarify the assignment.
How much detail is required? Well, that depends on the risk behavior of the agent: because a failure due to lacking clarity will become his problem it is his choice.
Step 3: Agent decides to take over the assignment
Once the task is clear (enough) it is time for the agent to decide whether she can take on the assignment. There is a catch here, however: In case the agent is unable to take over the task, he can not simply say “no!”. Instead she has to suggest the circumstances under which she could. A typical phrase here would be: “I can not take over this assignment. But I could, if…” Following the “if” could be a request for resources, more time or a clarification of priorities with the line manager.
Again, I see loads of assignments failing here. It’s only natural: especially if the request comes from one of your managers you are inclined to think: I do not have a choice. Speak after me: “I always have a choice!” Again! Good! Make no mistake: if you take on the assignment your manager will hold you responsible for its results (if he is worth his salt). So better object early than be sorry later. To rephrase: as an agent after you understand the assignment pause for a second and ask yourself: can I take the responsibility?
Step 4: Agent commits
The word is a bit worn out. What it means here is that the agent promises himself to do everything in his power to make the assignment succesful.
Let’s be honest: we are all guilty of having accepted tasks half-heartedly in the past. But let’s try not to do it. It is wasteful to ourselves and unfair to others depending on us.
Step 5: Agent executes (undisturbed)
As the next step the agent executes the task with little intervention from the principal.
While the agent had most opportunities to mess things up until here, this is the phase were the principal can really get it wrong by micro-managing the agent. What’s so wrong with interventions in this phase? Every intervention takes a bit of responsibility from the agent. Eventually, she will no longer be committed (see above). My recommendation: if you find it difficult to muster the trust to leave your agent alone as a principal, make periodic reporting part of the assignment.
Of course the agent can also make mistakes in this phase. The worst (and probably most common one) is: not escalating early. As the agent I have to get back to my principal as soon as a significant risk arises to fulfil our mutual agreement. Why? Because my principal is depending on me!
A note here to all managers: as the news is usually bad we often make a mistake by (only) chiding the reporter. Try to remember thanking him for coming to you early! Otherwise you will motivate your colleagues to hide bad news from you. This is obvious, but done wrong more often than not.
Step 6: Agent lets himself be relieved
The agent reports the results and asks the principal to be relieved from the assignment.
Are you surprised by the last half sentence? You too have most likely encountered situations where a task was never completed to the principal’s satisfaction. Quite often that happens because the agent thinks she is done prematurely. Therefore my recommendation: make it a habit when finishing an assignment to ask if you completed it to the principal’s satisfaction. It gives you certainty, is a powerful gesture of co-operation and an invitation for complements. What more can you want?
As a principal, explicitly relieving the agent is the perfect moment for feedback. And feedback is crucial for management success (expect my thoughts on that in one of my next posts).
Summary
Uff. This was a long post. But if you think about it the six step scheme is quite simple really. Give it try! Or if you don’t dare to do that yet I invite you to an experiment: think about a work assignment gone wrong lately. It does not matter whether you were the principal, the agent or a bystander. Now think about which of the six steps was executed correctly. Can you see now where the assignment derailed?
Photo by Mike Miley 
Leave a Reply