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Why is a relationship between any manager and any worker always potentially unstable?

Essay 2010 6 Seiten

BWL - Unternehmensforschung, Operations Research


1 Introduction

Like every other relationship, the relationship between any manager and any worker has ever since been complex and not easy. It is, amongst other things, affected by jealousy and resentment in terms of salary, responsibility or knowledge and is based on the so-called “psychological contract” which “deals with implicit reciprocal promises and obligations” (Cullinane et al.: 2006, p. 115). As soon as people sign a labour contract, they also “sign” a psychological, an unwritten contract which mainly contains assumptions and beliefs of the two parties (employer and employee) (Rousseau: 1995). “This mental model provides a stable understanding of what to expect in the future and guides efficient action without much need for practice.” (Rousseau: 2004, p. 121)

Additional to the differing assumptions and beliefs, goals, commitment, satisfaction and objectives of the two parties vary incredibly. But what are the main reasons that make this relationship so unstable? This work deals with the evaluation of the cause of the inconsistent relation between managers and workers; and concludes with a short review.

2 The Manager-Worker Relationship as an unstable Entity

The already mentioned potentially unstable relationship between managers and workers is getting caused by different reasons. One theory that deals with this relationship is the so-called “Principal-Agent-Theory”. The main focus of this theory lies on the different amount of information each party has; which may lead to a constantly unstable relationship. Nevertheless, there are more approaches and cause studies which try to identify the reasons for the instability of that kind of relationship.

The principal-agent-theory, which has been introduced formally in the 1970s, deals with the contract type of instruction, more precisely it covers the division of labour within the manager (principal) – worker (agent) – relationship and points out characteristics appearing between any principal and any agent. The problem, which will be explain in the following, inevitably appears when any kind of principal hires an agent (Wang et al.: 2010). The relationship between a manager and worker is partly governed by each other’s behaviour and starts as soon as the psychological contract has been signed (Riley: 1996). Assuming that every manager and every worker has got different assumptions and ideas about the work content, the individual’s aims and company’s aims make it hard to build up a stable relationship.

It is no secret that there is an asymmetric distribution of information between the two players. The agent has got bigger scopes and information advantages in comparison to the principal. The following graph visualises the relationship considering the asymmetric information between the two sides and the self interest each party has in itself.

illustration not visible in this excerpt

Figure 1 : Asymmetric distribution of information (Oesterreich: 2009)

This asymmetric information can originate out of three main reasons: hidden characteristics, hidden action and hidden intention; and can be threatened by adverse selection, moral hazard and hold up (Roiger: 2007).


406 KB
Institution / Hochschule
The University of Surrey – Faculty of Arts and Human Sciences
Distinction Principal Agent Psychological Contract Manager Worker Theory Relationship Rousseau asymmetric moral hazard hidden action hidden intention pay-for-performance behaviour behavior organisational organizational



Titel: Why is a relationship between any manager and any worker always potentially unstable?