lecture 4 – econ.s-1620 prof. charles moran 1 motivation: contracts & information lecture 4...
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Lecture 4 – ECON.S-1620Prof. Charles Moran
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Motivation: Contracts & Information
Lecture 4 (continued)
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Lecture 4 – ECON.S-1620Prof. Charles Moran
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Attention to Introducing Great by Choice
into our Discussions
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Lecture 4 – ECON.S-1620Prof. Charles Moran
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Drucker – Management and the Worlds Work (1988) – Group 1
“Fundamental task of management remains…:…make people capable of joint performance by giving them common goals, common values, the right structure [later clarified no “one” is right]… ongoing training and development they need to perform and respond to change”
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Lecture 4 – ECON.S-1620Prof. Charles Moran
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Drucker – Management and the Worlds Work (1988) (continued)
Is this a sustainable perspective?Can a command model be effective for knowledge
work? Where communication is effective? Where information has transparency?
What does “working smarter – not harder” mean?What is biological model for organizations?
– Independent – Knowledge intensive– Organized by flow of information– Adapting
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Lecture 4 – ECON.S-1620Prof. Charles Moran
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Drucker’s Pension Fund Socialism
Employees become true owners of the country’s means of production – Is identity of interest of (enterprise and employee) required
But assets (hard) have decreasing value (Murphy’s Law) – Power and independence of knowledge worker
Issues – Will they become more independent –or- join in groups?
Implication for organizations
- employee model
- independent contractor model
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Lecture 4 – ECON.S-1620Prof. Charles Moran
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Who Sets the Rules – The Standards?
Manager
Organization
Education/Training
Continuity
Loyalty to Firm
Production
Self-Management
Common Goals/Values
Learning
Opportunistic
Individual Responsibility
Customer Satisfaction
Future:
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Lecture 4 – ECON.S-1620Prof. Charles Moran
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Role of Motivation• Closing off routes for retreat before committing an
army to battle• Isolating the organization responsible for a new
product• Splitting a corporation into good/bad (i.e. a bank
packaging non-performing loan portfolios) Repeated potential solution
• Reaction to deBeers selling unexamined lots of diamondsSavings – Costs Lack of “Information”
Can this concept be generalized?
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Lecture 4 – ECON.S-1620Prof. Charles Moran
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Role of Motivation (continued)Do bonus plans and stock options consistently produce efficient
behavior (as determined by organizational objectives)?If Child A hits Child B and you punish A (physically or verbally) what
does A learn about attracting attention?What alternatives are available to get intended message across!Apply this to:
TerroristsUnmotivated employeesEncouraging employees to take risk – innovate
Can we apply this thinking to – Adverse selection – signaling – screeningSelf-selection (customers determining price, employees determine comp.)
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Lecture 4 – ECON.S-1620Prof. Charles Moran
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Risk Sharing and Incentive Contracts
Huck Finn: “…What’s the use…learning to do right when it’s troublesome to do right and aint no trouble to do wrong and the wages is just the same.”
Can we address moral hazards with incentive?
Contracts? (uncertain future)
Compensation? (quick, specific, trust)
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Lecture 4 – ECON.S-1620Prof. Charles Moran
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Risk Sharing and Incentive Contracts (continued
Can we link action of individual to the result being incented in a complex organization? Incent input and reward output?
Results influenced + or – by external (uncontrollable) factors that may over-reward or penalize the individual.
Does incenting individuals result in inefficient organizations?
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Lecture 4 – ECON.S-1620Prof. Charles Moran
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Dot.Coms v. Not.Coms – Group 2Midland Bank CEO – Wolfe: Lack of imagination?
Entrepreneur (Customer Needs)
Our-Lives.com(young prof. women) -Anderson
Avocado Nat’l Bank (Service Provider-to our lives)
Second Mover (well funded)
concierge2235.com – aggressive
Comment on: “With the internet you have to work from the future backward.”
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Lecture 4 – ECON.S-1620Prof. Charles Moran
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What is the model for a successful/sustainable business?
• Customer Oriented
• The Business Model
• Value Creation Driven?
• What are you delivering to the customer – differentiation (Revlon) – Charlie Revson
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Lecture 4 – ECON.S-1620Prof. Charles Moran
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Implications for Organizations and Management Behaviors?
Consider (pg 25-Dot.Coms) “Companies are going to have learn to bring…vibrant market for ideas…talent…capital inside their organization”
Consider “The Bottom Line” from GartnerGroup (pg. 25)
- What about Coase?
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