Principle-Agent Problem and Incentives in an Organization

Principle-Agent Problems and Incentives
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Principle-Agent Problems and Incentives
Part I
Principle-Agent Problem and Incentives
I have experienced problem-agent problems in the organizational setting. The sales personnel of the organization are only focused on achieving the minimum targets set by the leadership. Many sales people spend on unproductive tasks, and the organizational interests are not on their priority list. The organization's sales employees can be considered as sales agents as they focus not on fulfilling shareholders and organizations' strategic goals. It has resulted in the formation of the principal-agent problem in which the agents have different priorities and objectives and are not driven by principals. Multiple approaches can be applied for resolving this situation (Huang, 2018). The first approach can be to provide high incentives to the employees when the sales targets are achieved. It will motivate the employees to put more effort into achieving the targets and earn more money. The adoption of such an approach will help in resolving the principal agent’s problem. There are some risks associated with this technique. The primary risk is th...