Delegation of job design and imperfect performance measures

Contemporary business practices are increasingly shifting from top-down job design towards bottom-up job crafting, empowering employees to take an active role in designing their jobs. This new type of delegation has been particularly accelerated by the COVID-19 pandemic, however, has not yet been studied from an organizational economics perspective which would allow to shed light on optimal delegation strategies for firms. We develop a multitask agency model featuring private information, moral hazard, and imperfect performance measurement to explore under which conditions the delegation of job design to an informed agent can be beneficial for the firm. Our findings suggest that delegation is preferable to a centralized job design when the performance measure used for contracting purposes is incongruent. Notably, under certain conditions, the principal can attain the same outcome through delegation as if the agent’s private information was observable ex ante.