Optimally reallocating human capital to tasks is key for an organization to successfully navigate a transition. We study how to design employment contracts to allocate employees to different valuable projects within an organization given two simultaneous challenges: The employees have private information about their cost of effort, and they exert unobservable effort. The optimal contract menu pairs a higher probability of assignment to a valuable project with a lower bonus in case of success. In limited cases, a fixed salary may be offered to employees with high effort cost. We link our results to job design features encountered in practice.
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