When standards are used, a common agency problem is the challenge of monitoring behavior to address the consequences associated with not meeting the standard. Assume a new staff member in a professional services firm is given a job to complete; and the new staff member is told that the standard time expected for the work based on previous years' experience is 15 hours. In this example, let’s say the new staff member spends a total of 21 hours to complete the work. Knowing the standard time is 15 hours, this staff member might decide to remain after hours in the workplace to work hours that the staff member does not intend to record when accounting for the time worked. In this example, assume the new staff member decided to work 6 six hours “off the clock” (i.e., six hours is the amount of personal “after-hours time” the employee spent doing the work, and the staff member recorded only 15 hours of work as part of their official time log).

1. What are the likely motivations for the new staff member to work 6 hours off-the-clock and not account for this time?

2. While in this case the standard has been attained, what are the important reasons why the firm should be concerned about tolerating this practice?

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Answers 1When the new staff member is given 15 hours to complete the job and he is not able to compl... View the full answer