Principal-Agent Model


Pre-Post

For this post, I feel like you want us to discuss a time where an organization where I was in a triangle arrangement and the two principals I encountered had different views on what they wanted me to do. Their disagreement could take my work in two ways that could either benefit how I looked in front of corporate or how they looked in front of corporate. I would have to analyze the risks of analyzing taking one path versus the other and taking into account my benefits as well as the plant’s overall benefits when taken either path. I will also consider seniority in the process as well as the consequences of which path I chose. Then I will ask myself if there where other ways to complete the job and meet a compromise that would make both principals content. Then I will discuss if I as the agent favored one master over the other and if there was any tension with the path I chose. Then I will discuss the overall outcome of the situation and how it turned out.

Post:

At my internship at Louis Dreyfus Company (LDC) over this past summer, I had to complete an end of internship presentation at the corporate office, discussing the main project I was working on during my time there. For my presentation my mentor who was the head engineer of the plant though it would be a good idea for me to add a RACI at the end of the presentation. A RACI is a project management tool the list the following tasks left in the project that need to get done and assigns responsibility, accountability, who was consulted, and who was informed. This motive for my mentor who wanted me to add this part into my presentation was to ensure that people would be accountable for the project after I left. His project had high importance because if the problem was not solved and got worse safety issues in the plant could have occurred. These safety issues could have cost the plant millions in rebuild and well and legal cost if they were to occur. My mentor wanted this project to get approved by corporate because of the safety issues and he knows that having people accountable would ensure him not being liable as the plant engineer since Indiana is an at-fault state, meaning someone would go to jail if the problem were to occur. The plant manager and my boss did not want me to do the RACI because as the plant manager I would have to put his name down for many items holding him accountable. By doing this I put him having most of the liability meaning he would be responsible in case an accident occurred from a potential explosion of health injury if the project was not finished.
I was debating whether I should include the RACI in my presentation and go against my boss who might find out and potentially give me a bad review to corporate which would prevent me from not getting hired. I saw that both made parties wanted to prevent them from being liable in case of an accident. Either way, if the RACI where to be made or not as the plant manager my boos would still have some liability whether it be on a document or not. However, if the document was not made it would be harder to allocate that liability in court and others might be held liable as well as my boss. The benefit to my mentor in doing the RACI would ensure that he would not be misallocated liability if it had to come down to that. The benefit for me to create the RACI and present it would be to show my project management skills to corporate as well and ensure them that I care about the safety of the plant. It would also show them that I really care about the people at the plant and want to work their full time, potentially increasing my chances of getting a fulltime offer. The disadvantage is that my boss could find out and be angry at me creating tension if I was hired their fulltime or potentially write me a bad review to corporate that would decrease my chances of getting hired. The advantage of not doing the RACI is the relationship between my boss and I are strengthened. The disadvantage is that if liability were to be allocated in the case of an accident I could be partially liable as well as others who should not be held liable.

I contemplated was of going about the problem and found that I could create a RACI and leave his name off but then I jeopardize the liability of others and the document would look empty when presenting, indicating to corporate that I did not have the initiative to access liability. I could also have added a corporate manager instead of the plant manager but could be pushing the envelope when I was presenting to that manger. I as the agent decided to include the RACI in my presentation holding my plant manager accountable for many of the tasks, meaning I satisfied one master and ignored the other. I did this because in my mind the benefits to me outweighed the costs and even if I didn’t get hired I would still have documents that indicated that I was responsible but not accountable. Overall, the project got approved by corporate and they were impressed with my presentation they gave me a return offer. I did not tell my boss that I included the RACI and I am not sure if he found out. If he did find out and if I were to accept that offer to work at the company at his plant I feel like he might have some “bad blood” towards me and my job harder. Luckily I turned down the offer but also I feel like I made the right decision because I can rest at night that the project will be completed and that there is no liability on me or others that should not be held liable.

Comments

  1. Professor ArvanNovember 22, 2019 at 1:17 PM

    So, let me comment a bit about procedure before otherwise getting at what you said. That this RACI should be discretionary as opposed to standard part of each project (or a standard part of projects within a certain category) seemed strange to me. Safety is precisely where you want to follow the rules and not allow discretion this way. Then, it seemed quite strange to me that such a task would be left to an intern. I would have expected a permanent employee to do this. Finally, from my time in campus IT, where purchasing had to go through several rounds of approval, with different offices giving their okay, I'd expect that for your document. As you told the story, however, it seemed your document was the final word as is. I found that strange.

    Now as to not wanting to bear liability and that causing a triangle problem, I think that happens a lot in organizations. But I wonder if the company had its own legal department. (The U of I has campus legal. I interacted with them a fair amount when I was an administrator.) The safety play, in the case there is a legal department, is to run the document by them, perhaps different versions are submitted so they can express their opinion. But I find it strange that the liability would be imposed from outside the organization rather than from within. In other words, if something goes wrong the company would be sued or heavily fined, the person(s) responsible would lose their job. You mentioned criminal penalties for certain individuals. I can't understand that, if the top of the company is not punished.

    A related part of this is how the permanent employees at the company learned to develop their own attitudes about the RACI, which at one level seemed the same - put the liability on somebody else - without their being some normative way to think about this (what would be best for public safety).

    Finally, given this reaction to the law, it sounds to me as if the law is actually counterproductive and might actually increase safety risk. That would be odd, but from the story your told, that seems a possibility.

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    Replies
    1. John Maynard KeynesDecember 5, 2019 at 11:27 AM

      Thanks for your reply. To clarify the RACI was just meant to be used as a tool for the next project manger to use and was not at all the final word. There were other steps of approval that had to be done in order to get a approved. The reason I did the RACI was mainly show my project management skills and also ensure who should be accountable.

      To answer the liability concern there would be penalties like law suits and fines. But Indiana is also an at fault state meaning that someone where to die in the case of a safety issue it would not be considered a mistake and they look for the responsible person to penalize, usually with a jail sentence. I am not sure if the law is fully counter productive but I would say is more strict than other states.

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