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Job rotation inside an organization creates two conflicting effects. It disciplines agents by creating the fear that their successors may discover and report their hidden information. Thus, the agent takes actions that align with the principal’s objective. However, job rotation can create a moral hazard problem. If information is soft and therefore, nonverifiable, the principal cannot attribute blame to the agent or the successor. Agents shirk, thereby hurting performance. Thus, the importance of disciplining versus moral hazard effects depends on the availability of hard information. Using unique loan-level data, we show that job rotation hinders performance when the information is soft. This paper was accepted by Giesecke Kay, finance.

This paper shows that rotation programs can be an effective response to concerns of employee budget padding. Rotation programs naturally create a “portfolio” of assignments for each manager, and the resulting diversification can reduce the downside of resource rationing. In particular, the production versus rents trade-off linked with adverse selection problems can be more efficiently carried out when the firm faces two managers with average information advantages, rather than one with a large advantage and one with a small advantage. Roughly stated, rotation of project assignments is a way of smoothing information across managers. On the other hand, if a firm places a premium on treating different types of projects in distinct ways, specialized assignments can be preferred due to the ability to confine project types to individual managers.

This article analyzes the costs and benefits of job rotation as a mechanism with which the firm can learn about the employees' productivities and the profitability of different jobs or activities. I compare job rotation to an assignment policy where employees specialize in one job along their career. The gains from adopting a job rotation policy are larger when there is more prior uncertainty about employees and activities. I argue that this firm learning theory fits the existing evidence on rotation better than alternative explanations based on employee motivation and employee learning.

Organizations vary greatly in their approaches and success in the introduction of new products and services. In this study, it was proposed that much of this variance can be captured by understanding the extend to which product design and process design are integrated in new program launches. A mailed survey of 43 domestic firms was used to test four propositions concerning product-process development practices. Significantly, it was found that firms using the more rare design-manufacturing personnel integrating mechanisms (engineering job rotation and mobility) have higher sales per employee. Results of a discriminant analysis show that firms benchmarking on product development practices, as contrasted with performance benchmarks, were significantly more likely to use both the rare and the more common forms of design-manufacturing integration (i.e., train personnel in new design, methods, have manufacturing sign-off on design reviews, and restructure, e.g., use teams). Significantly, these firms also report a greater proportion of degreed manufacturing engineers. Not surprisingly, larger firms and business units were found to take longer to develop new products.