Friday, November 1, 2013

Principal-Agent


I thought hard but I am not sure if any of my experience can be considered as a  triangle principal-agent situation. I think the most similar case would be the consulting project I am working on. In this case, the agent is project manager, and two principles are the consulting organization (or say project manager's supervisor) and the client.

In my consulting team, there are one senior manager, one project manager and five consultants including me. We work for a Chicago based company.  Our contact of the company is the director of a division at the firm. In order to keep pour in high quality effort toward the project and meet client's need, client is obligated to have at least a call with us each week.

But after the first client call in the beginning week, there was a family emergency in our clients family. Senior managers try to contact our client by emails and phone calls, but the clients were not responding. And at the same time, the senior manager also want the project keep going, which means that both the project manager and us need to produce same amount of research as normal. But it got harder and harder for us to do since we need more information from our client as our research went deeper. Project manager in this case, was upset because he was not able to get hold of the client for 5 weeks. With the overwhelming pressure of having a satisfying mid point presentation for our client without the feedback, PM really did everything he could to contact our client. So the PM was stuck in the middle of the pressure zone. In one side, the organization or SM need PM and us produce a high-quality midpoint presentation, but in the other side, PM also face the pressure of not able to communicate with our client and find out its need.

So the entire tension that PM had was ended by receiving client's response this week. Luckily, the client was really interested after we briefed him what we've been doing. So it did not ends in bad way. I know that this case was not really the perfect case to discuss the principle-agent model. But it is the closest one I got.

2 comments:

  1. In the story above, the other principal, the senior manager, doesn't really figure in. Could you elaborate on what that person's role was? The tension you describe because the client wasn't accessible would have happened even if there were no senior manager, correct? If so, this is not really a triangle problem.

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  2. I agree with what you are saying being I was also involved in a consulting/financial planning company and I had to be a very good communicator to make sure that both of the principals knew what was going on. In addition, I felt that it was so hard to manage both sides of the relationship.

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