Analytical approach to the influence of motivation on the dynamics of heterogeneous employees and expected average costs of efficient work

Abstract Motivating employees with different characteristics has a significant effect on company performance. This paper models the relationship between employer and heterogeneous employees working in pairs as a principal-agent problem. Every worker can encounter moral hazard with regard to the stimulation of the employer and the efficient work of co-workers. Employee behavior describes a reaction function based on which the equilibrium of appropriate pairs of employees and their overall effective performance is described. The employer determines the optimal stimulation that minimizes the expected average cost of effective work for each individual group of employees. The total expected average cost of efficient work of the entire company in the short run depends on the distribution of employees with different characteristics. How the attitude of employees towards work in the long run changes is described by replicative dynamics and shows that the stability of the employee population is achieved in two cases where the long-run total expected average cost of efficient work is differentiated by approximately eight percent. This paper describes a new conceptual framework for quantitative analysis of the effects of motivation on the short and long run financial results of an enterprise.