econ miscellenous deck m2
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- internal labor market ben and cost
- benefit-increase incentive to invest in specific human capital -better align employees' interest with interest of owneers of the firm -over time more information of emploees' skill, capability, attitude, intelligenece are revealed to employers. -reduce turnover costs -establish career paths and the prospect of promotions of employees -provide job stability to employees through lob-term relationships costs-may not get the best person for the job -pay job assignment and promotions are dtermined by administrative decisions -increase rent-seeking cost in influencing decisions. Edit Card Card Frontstate and explain an internal labor market. Card Backexists in a firm when outside hiring focuses primarily on filling entry level jobs and most other jobs in the firm are filled from within the firm. firms can have multiple internal labor markets eg white collar-and blue collar workers. firms are more likely to use internal labor markets where specific training of employees is important, eg steel, petroleum, chemical industries. benefits of an internal labor market benefit-increase incentive to invest in specific human capital -better align employees' interest with interest of owneers of the firm -over time more information of emploees' skill, capability, attitude, intelligenece are revealed to employers. -reduce turnover costs -establish career paths and the prospect of promotions of employees -provide job stability to employees through lob-term relationships costs-may not get the best person for the job -pay job assignment and promotions are dtermined by administrative decisions -increase rent-seeking cost in influencing decisions.
- incentitive conflicts
- are not a problem when efforts of employees are observable and verifable i.e efforts are contractible In some cases, incentive conflicts can be resolved even when efforts are not observable. One way is to sell the out put to the employees so tha tboth benefits and costs are internalized by employees and thus employees will choose the optimal efforts. Edit Card Card Frontincentitive conflicts Card Backare not a problem when efforts of employees are observable and verifable i.e efforts are contractible In some cases, incentive conflicts can be resolved even when efforts are not observable. One way is to sell the out put to the employees so tha tboth benefits and costs are internalized by employees and thus employees will choose the optimal efforts.
- Incentive compensation contracts
- works best when - marginal productivity of employees are high -the lower is rsk aversion of employees -uncontrollable random events are minimal -the lower is the marginal cost of effort -the lower is the cost of observing and verifying the output of employees EX market place employee meal discount Edit Card Card FrontIncentive compensation contracts Card Backworks best when - marginal productivity of employees are high -the lower is rsk aversion of employees -uncontrollable random events are minimal -the lower is the marginal cost of effort -the lower is the cost of observing and verifying the output of employees EX market place employee meal discount
- name and expalin the benefits and costs of M form organization.
- multidivisional form is a to group jobs into a collection of business units based on product or geographical area. Benefits of M- in a dynamic environment, it is best to have decentralized decision making. -it frees up managerial time for higher level decision making. -it encourages system (supply chain) thinking in a business unit. -in a dynamic environment, different business units can experiment alternative organizational architectural or product changes. costs- if there are interdependence of business units, there may be decision conflicts across business units to the extent lowering overall value of the firm. -business unit managers need cross functional training. Edit Card Card Frontname and expalin the benefits and costs of M form organization. Card Backmultidivisional form is a to group jobs into a collection of business units based on product or geographical area. Benefits of M- in a dynamic environment, it is best to have decentralized decision making. -it frees up managerial time for higher level decision making. -it encourages system (supply chain) thinking in a business unit. -in a dynamic environment, different business units can experiment alternative organizational architectural or product changes. costs- if there are interdependence of business units, there may be decision conflicts across business units to the extent lowering overall value of the firm. -business unit managers need cross functional training.
- Name and explain the 6 costs of contest and tournament among workers.
- Promotions can be viewed as contest or tournaments among employees who exert efforts if they perceive close chances of promotion. -undermine workers cooperation -less flexible compared to bonus pay, pay raise or profit sharing -peter principal, employees keep getting promotioin until tey reach a job that they cannot handle. This is a serious conflict between matching people for jobs and providing incentives. -employees value more than just promotion and higher pay eg job security -intensify rent seeking costs -if workers dont perceive a chance of winning the maximize shirking. job seniority and pay are ususally positively correlated because of learning by doing. Edit Card Card FrontName and explain the 6 costs of contest and tournament among workers. Card BackPromotions can be viewed as contest or tournaments among employees who exert efforts if they perceive close chances of promotion. -undermine workers cooperation -less flexible compared to bonus pay, pay raise or profit sharing -peter principal, employees keep getting promotioin until tey reach a job that they cannot handle. This is a serious conflict between matching people for jobs and providing incentives. -employees value more than just promotion and higher pay eg job security -intensify rent seeking costs -if workers dont perceive a chance of winning the maximize shirking. job seniority and pay are ususally positively correlated because of learning by doing.
- name and explain the benefits and costs of specialized task assignment.
- is to have each employee specialize in one function. benefits- enjoy comparative adavantage and specialization. -achieve learning curve effect: increasing cumulative output reduces cost -lower training cost -remove monitor costs of how employees allocate effort to which task costs-forgo complementarities of tasks and economies of scope -higher coordination costs and hold up costs -boredom, functional myopia and losing sight of total system delivery. -reduce flexibility for relief and temporary replacement due to sickness or vacation. -higher cost of performance evaluation when output depends on multiple tasks success and yet it is hard to observe individual task success. Corporations are moving towards broad task assignment and away from specialized task assignment. Edit Card Card Frontname and explain the benefits and costs of specialized task assignment. Card Backis to have each employee specialize in one function. benefits- enjoy comparative adavantage and specialization. -achieve learning curve effect: increasing cumulative output reduces cost -lower training cost -remove monitor costs of how employees allocate effort to which task costs-forgo complementarities of tasks and economies of scope -higher coordination costs and hold up costs -boredom, functional myopia and losing sight of total system delivery. -reduce flexibility for relief and temporary replacement due to sickness or vacation. -higher cost of performance evaluation when output depends on multiple tasks success and yet it is hard to observe individual task success. Corporations are moving towards broad task assignment and away from specialized task assignment.