Preferences and Productivity in Organizational Matching: Theory and Empirics from Internal Labor Markets

66 Pages Posted: 19 Apr 2021 Last revised: 1 Oct 2021

See all articles by Bo Cowgill

Bo Cowgill

Columbia University - Columbia Business School

Jonathan Davis

University of Chicago - Harris School of Public Policy; University of Chicago - Harris School of Public Policy

B. Pablo Montagnes

Emory University - Department of Political Science

Patryk Perkowski

Columbia University - Columbia Business School

Date Written: April 5, 2021

Abstract

We study the design of managerial practices for matching workers to divisions. Our methods use both sides' preferences to match with each other, and on the employer's expectations about resulting productivities. Our model derives boundary conditions for when dictating assignments outperforms delegating matching preferences to worker/division preferences (and vice versa). Our model highlights the tradeoffs between the coordination benefits of dictating versus informational advantages of delegating. We then turn to a large organization's internal labor market for empirics. We find that optimal matching is highly productive. Using the organization's preferred metric, the optimal match is 36% more productive than randomly assigned matches within job categories. However, it achieves this through negative assortative matching, and by placing a majority of workers and managers with assignments they did not rank. By contrast, preference-based matches (using deferred acceptance) are much less productive (only 3% better than random), and feature positive assortative matching. Workers and managers are significantly more likely to be assigned to a preferred partner. We show how a novel method -- integrating both firm and employees/division preferences -- can improve firms' matchmaking.

Keywords: internal labor markets, assortative matching, market design

JEL Classification: M5, D47, J4

Suggested Citation

Cowgill, Bo and Davis, Jonathan and Montagnes, B. Pablo and Perkowski, Patryk, Preferences and Productivity in Organizational Matching: Theory and Empirics from Internal Labor Markets (April 5, 2021). Columbia Business School Research Paper Forthcoming, Available at SSRN: https://ssrn.com/abstract=3793899 or http://dx.doi.org/10.2139/ssrn.3793899

Bo Cowgill (Contact Author)

Columbia University - Columbia Business School ( email )

3022 Broadway
New York, NY 10027
United States

Jonathan Davis

University of Chicago - Harris School of Public Policy ( email )

1155 E 60th St
Chicago, IL 60637
United States

University of Chicago - Harris School of Public Policy ( email )

1155 E 60th St
Chicago, IL 60637
United States

B. Pablo Montagnes

Emory University - Department of Political Science ( email )

Atlanta, GA 30322
United States

Patryk Perkowski

Columbia University - Columbia Business School ( email )

3022 Broadway
New York, NY 10027
United States

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