Heterogeneity in Organizations


  • Suraj Prasad School of Economics, University of Sydney
  • Marcus Tomaino Macquarie Bank


We explain why some organizations cohere around a mission, with members having similar mission preferences, whereas other organizations allow their mission to be contested by members whose preferences differ. Like in earlier work, coherence aligns interests over missions. But in contrast to previous work, this alignment comes at the cost of lower motivation: when resources are scarce and when members care about similar missions there is a free riding problem. This tradeoff between mission alignment and free riding determines the optimal mission structure. We draw on several case studies of government agencies to support our theory.