Agency theory was independently developed by Stephen Ross in economics and Barry Mitnick in institutional management during the mid-1970s. The most cited work, however, is by Michael C. Jensen and William H. Meckling (1976), who formalized the theory by defining agency costs and creating a framework for reducing conflicts of interest between principals (like owners) and agents (like managers).

Agency theory explains the relationship between a principal, who delegates authority, and an agent, who acts on the principal’s behalf. In a corporate setting, the principal is typically the employer or shareholder, while the agent is the manager or executive responsible for running the organization. A manager plays a crucial role by acting as a link between the employees and top management. Their primary responsibility is to provide leadership and guidance to a team or department, ensuring organizational goals are met through efficient planning, organizing, staffing, leading, and controlling of work. Key responsibilities of the manager include:

Setting individual employee goals

Setting individual employee goals is a core responsibility of a manager, but it should be a collaborative process. Managers work with employees to align individual goals with the company’s strategy, provide ongoing feedback, and involve them in goal setting to foster engagement and development. This approach ensures that individual targets not only support team and organizational success but also contribute to the employee’s personal and professional growth. By translating company strategy into clear, relevant, and achievable objectives, managers help employees understand their role in the broader mission and drive meaningful performance.

Delegating tasks effectively

Effectively delegating tasks is a core responsibility of a manager, crucial for optimizing time management, fostering employee development, and enhancing overall team efficiency and productivity. Good delegation goes beyond merely assigning work; it involves strategically selecting tasks, aligning them with the strengths and capabilities of the right team members, providing clear instructions and the necessary resources, and fostering an environment of trust. Additionally, it requires holding individuals accountable for their results while maintaining open lines of communication and providing ongoing support to ensure successful outcomes.

Monitoring and evaluating employee performance

Effectively monitoring and evaluating employees is a core responsibility of a manager, essential for setting clear expectations, identifying areas for improvement, and fostering continuous development and engagement within the team. This process involves setting clear goals, defining specific, measurable, achievable, relevant, and time-bound (SMART) objectives that align individual performance with organizational priorities. Continuously observing employees’ work to assess progress, behavior, and adherence to standards in real time. Maintaining accurate records of performance metrics, achievements, challenges, and behaviors to support objective evaluations. Providing continuous feedback and coaching.

Motivating and inspiring the workforce

Effectively motivating and inspiring employees is a key responsibility of a manager, as their ability to foster a positive work environment, provide clear guidance, and recognize achievements directly influences productivity, engagement, and overall organizational success. Managers can accomplish this by understanding individual employee needs, communicating a compelling vision, setting achievable goals, offering meaningful incentives and development opportunities, delivering constructive feedback, and cultivating a culture of trust and collaboration.

Making critical decisions

Making critical decisions is a central role of a manager, as managers are responsible for choosing the best courses of action to resolve issues, achieve organizational goals, and guide teams. This involves a process of identifying problems, gathering information, analysing options, selecting the best solution, implementing it, and reflecting on the outcome to ensure company growth, effective operations, and overall success. Managers make countless daily decisions, from assigning tasks to managing budgets, all of which impact the organization. Decisions on new strategies, partners, and resource allocation directly influence the company’s growth and competitiveness.

Acting as a communication bridge between employees and top management

A manager acts as a crucial communication bridge between top-level management and their team of employees, ensuring that strategies from above are translated into actionable plans for the team, and that employee feedback, concerns, and performance data are communicated back up to senior leadership. This role involves clarifying expectations, fostering transparency, advocating for team needs, and ensuring smooth communication flow to maintain understanding and alignment within the organization. Managers interpret higher-level business goals and strategies from senior management, transforming them into clear, achievable operating plans and tasks for their employees.  They communicate company policies, objectives, and changes to their team, making sure that employees understand the bigger picture and their role within it.

The principal-agent problem

In agency theory, the principal delegates authority to the agent, focusing on the potential conflicts of interest that may arise when the agent pursues their own self-interest instead of the principal’s. This situation is termed the principal-Agent Problem and is especially relevant in corporate governance, where shareholders (principals) rely on company managers (agents) to run the organization. A major issue in this relationship is passing on few wrong points which is called information asymmetry where the agent has more information about daily operations or specialized knowledge than the principal. This imbalance allows the agent to make decisions that the principal may not fully understand or control, sometimes to the detriment of the principal’s goals.

the agent holds more information than the principal, creating an imbalance of power and understanding. The outcome of such conflicts is known as Agency Loss: the reduction in the principal’s welfare due to the agent’s self-serving actions.

Key Concepts of Agency Theory:

Principal: The party that delegates authority and expects certain tasks to be performed on their behalf. Commonly, this is the shareholder or owner of the business.

Agent: The party entrusted to act on behalf of the principal, typically a company manager, whose duty is to make decisions that serve the principal’s best interests.

Principal-Agent Problem: The core conflict where the agent’s personal incentives do not align with the principal’s objectives, leading to potentially harmful decisions.

Information Asymmetry: A situation where the agent holds more information than the principal, creating an imbalance of power and understanding.

Agency Loss: The welfare reduction suffered by the principal when the agent’s decisions diverge from the principal’s best interest.

Teaching-Learning is a combined process where an educator assesses learning needs, establishes specific learning objectives, develops teaching and learning strategies, implements plan of work and evaluates the outcomes of the instruction. Though teaching – learning process is the base of education, it is not often understood.

Usually in most university programs, we find it difficult to relate inputs to outcomes. Inputs, such as syllabus, textbook, notes, PPT slides, assessment pattern are put into the hands of a teacher. And, a lot of time, energy, and thinking are invested while designing an educational program. But, it is treated ambiguously because of the lack of scientific assessment of the program output. The output is rarely been measured properly. Both the teacher and student cannot predict the learning outcomes because of the lack of precisely drafted course output.

It is worth to note that teaching-learning process becomes easier for both the instructor and the students when learning objectives are clearly mentioned and accordingly a subject is taught. They make the learning process more inspiring for the students. Learning objectives communicate exclusively what students should be able to do after learning a subject. For example, the subject of business communications in MBA program has the learning objectives as follows:

• The student will understand effective business report writing skills
• Will develop useful listening skills
• Adapt research approach for information collection
• Develop and delivering effective presentation skills
• Will develop positive interpersonal communications
• Analyze the importance of time management.

Learning objectives should be used to guide students as they work through the course, and to assess their learning progress. Vividly drafted learning objectives provide as a guide for students when reviewing materials and during assessments. Learning objectives are the most powerful if they are actionable and measurable.

Bloom’s Taxonomy was created by Benjamin Bloom in 1956, published as a kind of classification of learning outcomes and objectives that has been used in the more than half-century. It is a framework for everything from framing digital tasks and evaluating apps to writing questions and assessments. The original sequence of cognitive skills was knowledge, comprehension, application, analysis, synthesis, and evaluation. The framework was revised in 2001 by Lorin Anderson and David Krathwohl, by replacing ‘Synthesis’ with ‘Creation’ as the highest-level of Bloom’s Taxonomy. And being at the highest level, the implication is that it’s the most complex and demanding cognitive skill; it represents a kind of pinnacle for cognitive tasks.

How Bloom’s Taxonomy Is Useful for Teachers? Educators are keen to use Bloom’s because, among other qualities, it gives them a way to think about their teaching and the ensuing learning of their students. The framework can be used to create assessments, evaluate the complexity of assignments, increase the rigor of a lesson, and simplify an activity to help personalize learning, design a cumulative assessment, plan project-based learning, it helps to frame a group discussion, a quiz, a role-play and much more. Because it simply provides an order for cognitive behaviors, it can be applied to almost anything. There are six levels in Bloom’s Taxonomy. There are six levels of Bloom’s Taxonomy; remembering at the base and creating at the top of the hierarchy.

 The Six Levels are:

1. 1. The first level of Bloom’s Taxonomy is to Remember: We need to remember in order to move forward, we also need to look back which is again remembering. The historical approaches help in analyzing why changes took place. Activities such as memorizing, taking notes, memory spots, writing diary, creating mental memory tree helps to remember what we have studied.

2. The second level of Bloom’s Taxonomy is to Understand: When something is meaningful, it is understood and retained for longer time. Understanding can be built upon, and helps in acquiring further understanding. A learner becomes versatile in the situations because he uses his understanding. For example, the law of demand in Economics gives us an understanding that if all other factors remain equal, the higher the price of a good, the less people will demand that good. In other words, the higher the price, the lower the quantity demanded. Similarly, once you understand what an atom is, you are not likely to forget it; it is essential for understanding the chemical behavior of matter (atomic theory); it is a broadly useful concept in chemistry; and it greatly facilitates a chemist’s ability to develop creative ideas and products.
3. The third level of Bloom’s Taxonomy is Apply: Teaching students to apply knowledge and skills is important part of teaching learning process. Applying knowledge benefits in accomplishing public and organizational goals; application also fosters understanding of a concept deeper. Knowing is like winning half battle; applying what you know is great. Knowledge is power about applying knowledge is more powerful.
4. The fourth level of Bloom’s Taxonomy is to Analyze: Analysis is essential in every aspect of life. We need to look at our goals, we need to analyze what we have accomplished and accordingly analyze future plans. We need to analyze available opportunities, weaknesses, threats and remedies. Individuals and organizations can move forward and make progress only when they analyze.
5. The fifth level of Bloom’s Taxonomy is to Evaluate: Evaluation is a process that critically examines a program. It involves collecting and analyzing information about a program’s activities, characteristics, and outcomes. Good management is based on good decision making. Good decision making depends on good information. Good information requires good data and careful analysis of the data. These are all critical elements of evaluation.
6. The sixth and final level of Bloom’s taxonomy is to Create: As mentioned above, the framework was revised in 2001 by Lorin Anderson and David Krathwohl, by replacing ‘Synthesis’ with ‘Creation’ as the highest-level of Bloom’s Taxonomy. Creating is the most complex or demanding cognitive skill, it is at highest of all the cognitive tasks. Creativity is one of the greatest qualities of an individual and the outcome of education; it helps in solving problems, it helps in articulating a process.

Summary:  A teacher/instructor must plan learning objectives in the centre of the teaching plan which should be both specific and measurable. The teacher must define objectives in simple, clear language, and avoid jargon or references and avoid going beyond scope of study of a subject. A syllabus must be revised after two-three years to accommodate gaps between business world, society and academics. A torpid syllabus is useless for students, changing it requires measurable guidance. Education cannot afford to be cocooned in mundane policies and politics. The objectives of education must be broad; it should be to increase creativity in society and world at large. Vague objectives mar the purpose of education. Bloom’s Taxonomy allows being articulate and specific in educational endeavor.