Mission Congruence and Organization Design: An Empirical Analysis of Childcare Facilities

• Published date: 01 July 2017
• Date: 01 July 2017
• DOI: http://doi.org/10.1111/irel.12180
• Author: Avner Ben‐Ner,Marco A. Barrenechea‐Mendez

Mission Congruence and Organization Design:

An Empirical Analysis of Childcare Facilities

*

MARCO A. BARRENECHEA-MENDEZ and AVNER BEN-NER

The paper investigates the relationship between mission congruence and the reli-

ance on incentives and delegation of decision making, using a dataset on 206

childcare centers. We find that mission congruence between childcare teachers

and employers is negatively related to the likelihood of reliance on financial

incentives and positively related to teacher autonomy. These results support the

idea that worker preferences play an important role in the design of organizations.

Introduction

The concept of mission congruence refers to the extent to which the objec-

tives of workers are aligned with those of the organization. Scholars in differ-

ent disciplines have examined the role of mission congruence on organization

design (Aghion and Tirole 1997; Akerlof and Kranton 2005; Besley and Gha-

tak 2005; Bradach and Eccles 1989; Dessein 2002; Merchant and Van der

Stede 2012; Ouchi 1980; Prendergast 2008; Van den Steen 2010).

However, empirical evidence on this relationship is scant. The present paper

investigates the relationship between mission congruence and reliance on

incentives and delegation of decision making, using a unique dataset on child-

care centers.

The traditional economic analysis of organizations relies on the assumption

that workers’preferences are in conflict with those of the organization. While

firms prefer workers to work hard and select the activities or projects that max-

imize organizational objectives, workers prefer to work little and select the

activities that maximize their own utility; for example, CEOs may build

empires or teachers may teach topics that interest them.

*The authors’affiliations are, respectively, Universitat Aut

onoma de Barcelona, Barcelona, Spain. E-mail:

Marco.barrenechea@upf.edu; and University of Minnesota, Minneapolis, Minnesota. E-mail:

Benne001@umn.edu. Comments by Vicente Salas-Fumas, Matthew Ellman, Tor Erikson, Eduardo Rodes,

and Pere Ortin-Angel and by discussants and participants at the Annual Conference of the European

Association for Research in Industrial Economics (EARIE), 

Evora 2013 and the Annual Conference of the

International Society for New Institutional Economics (ISNIE) are gratefully acknowledged.

JEL: D23, J33, M52.

INDUSTRIAL RELATIONS, Vol. 56, No. 3 (July 2017). ©2017 Regents of the University of California

Published by Wiley Periodicals, Inc., 350 Main Street, Malden, MA 02148, USA, and 9600 Garsington

Road, Oxford, OX4 2DQ, UK.

411

Under this assumption, firms must offer incentives to workers to ensure that

they exert a high level of effort, and centralize decisions to preclude workers

from selecting unproductive activities. This is not always the case, however.

Workers’preferences may be aligned with those of the organization because

they agree with its objectives. For instance, a social worker may work hard or

select the best way of working simply because he or she believes in the mis-

sion of the organization. Acknowledgement of this fact will have important

consequences for organizational design (Akerlof and Kranton 2005; Ben-Ner

2013).

Recent theoretical literature in economics includes modeling the effects of

mission congruence on incentives and delegation of decision making. In this

literature, less dissonance between an organization’s objectives and its employ-

ees’objectives reduces the cost of exerting effort and permits organizations to

economize on monetary incentives (Akerlof and Kranton 2005; Besley and

Ghatak 2005; Prendergast 2008; Van den Steen 2010). Mission congruence

also allows principals to trust agents’decisions in selecting activities to be car-

ried out by granting workers autonomy (Aghion and Tirole 1997; Dessein

2002; Van den Steen 2010). Similar ideas have been discussed in the manage-

ment literature (Bradach and Eccles 1989; Merchant and Van der Stede 2012;

Ouchi 1980).

The negative association between incentives and mission congruence has

not been tested in the literature. While some papers (Heckman, Smith, and

Taber 1996) investigated the effect of workers’preferences on their reaction

to the introduction of pecuniary incentives, there are no studies that assess the

effects of preferences on the provision of incentives in organizations. Empiri-

cal evidence on the positive association between delegation of decision mak-

ing and mission congruence seems to have been provided only by Ren

(2010).

Using data on 206 childcare facilities in Minnesota, we provide empirical

evidence on both relationships. We find that the provision of incentives is neg-

atively associated with mission congruence. This result suggests that childcare

facilities economize on the provision of monetary incentives to teachers who

believe in the mission of their organization. We also find that delegation of

decision making is positively associated with mission congruence. Teachers

who do believe in the mission of the organization enjoy greater levels of trust

from supervisors and have more discretion to make decisions than teachers

who do not. In addition, we provide empirical evidence in support of a posi-

tive association between incentives and delegation of decision making, con-

firming findings in different empirical settings, which counter the simple

prediction of agency theory of a trade-off between incentives and risk (Pren-

dergast 2002).

412 / MARCO A. BARRENECHEA-MENDEZ AND AVNER BEN-NER