%0 Journal Article %T Aligning Ambition and Incentives %+ Groupement de Recherche et d'Etudes en Gestion à HEC (GREGH) %+ Aarhus school of business %A Peyrache, Eloïc %A Koch, Alexander K. %< avec comité de lecture %@ 8756-6222 %J Journal of Law, Economics, and Organization %I Oxford University Press (OUP) %V 27 %N 3 %P 655-688 %8 2011-10 %D 2011 %R 10.1093/jleo/ewp034 %K labor turnover %K job satisfaction %K personnel management %K employers %Z Humanities and Social Sciences/Business administration/domain_shs.gestion.finJournal articles %X Labor turnover creates longer term career concerns incentives that motivate employees in addition to the short-term monetary incentives provided by the current employer. We analyze how these incentives interact and derive implications for the design of incentive contracts and organizational choice. The main insights stem from a trade-off between "good monetary incentives" and "good reputational incentives." We show that the principal optimally designs contracts to create ambiguity about agents' abilities. This may make it optimal to contract on relative performance measures, even though the extant rationales for such schemes are absent. Linking the structure of contracts to organizational design, we show that it can be optimal for the principal to adopt an opaque organization where performance is not verifiable, despite the constraints that this imposes on contracts. %G English %L hal-00641638 %U https://hec.hal.science/hal-00641638 %~ SHS %~ HEC %~ CNRS