Overwhelmed by routine tasks: A multitasking principal agent perspective

Abstract

Employees often report being overloaded with routine tasks, which distracts them from more demanding and rewarding work. We analyze this in a multitasking model involving a verifiable routine task and a skill-dependent task characterized by moral hazard. Multitasking is costly so that high- and low-skilled employees specialize, and only employees with intermediate productivity handle both tasks. In the Nash bargaining solution of contract negotiations, work overload in the routine task is used to lower the informational rent from the non-verifiable task. Compared to the first-best solution, more employees perform both tasks and effort in the routine task is inefficiently large. Moreover, the payment structure is such that the employee would prefer to allocate more effort to the demanding task, which we interpret as a loss of control over work autonomy. Reducing employees' bargaining power exacerbates the problem, while the effects of improved monitoring are mixed.