Management of People at Work: Designing Jobs and Reward Systems
- Important to separate design flaws vs implementation flaws (which are, at least, in theory, easier to fix). IMHO, socialism in Russia, for example, had inherent design flaws, especially in the area of work motivation
- Research shows that fear is a good short-term motivator, but does not work well long-term. This is obviously even more pronounced in jobs requiring creativity, when the output is more difficult to count.
- Equity theory: person will feel a psychological strain when inequity is perceived and try to establish equity by adjusting either behavior or perceptions. Experiments show that we tend to rationalize away unexpectedly good outcomes, while being much more unhappy about unexpectedly bad ones (cognitive dissonance). Interestingly, we have discussed this very idea the week before I left for school, with 2 differences: 1) we couldn't come up with a good name for it (the Russian справедливость didn't sound quite right), and 2) we thought that unexpectedly good outcomes actually make people happy - well, apparently, we were wrong here.
- Motivation theory: strong expectation that 1) effort will lead to performance; 2) performance will lead to outcomes; and 3) outcomes are highly valued. If you remove any of the 3 links, you've shut down motivation, which we are probably all familiar with.
Case Study: Hausser Food Products Company
Hausser sells baby food and pays its sales force commission on products sold over the annual plan. One division consistently makes 10% above the plan, making nice commissions, while the others are struggling. It turns out that the division has found out that they can sell the baby food to old-folks homes, which is how they manage to always beat their targets. However, they don't want to tell upper management about it, since that would only increase everyone's plan, making it harder for them to exceed it.
Questions: if the team's manager reports to you and you somehow find out about this scheme, what do you do with the team's manager? Fire, scold, praise, promote? How do you change the system to make the team's goals more in line with the company's?
Economics: Elasticity of Supply and Demand; Government-regulated Pricing
Another reminder to forget about work while at Wharton - many people try to call in during breaks and lunches: "Call your spouse, call your lover. Hell, call both of 'em, but do not call the office!"
Good microeconomics explanation of why fixing income problems (poverty) with price policies screws things up. There are/were quite a few of these in the US, it turns out (price ceilings - gasoline ceilings in the seventies, rent control; price floors - minimum wage, dairy subsidies, daily trading limits on the stock exchanges). None of them were effective at fixing the problems they were intended to fix; instead, they usually help in creating black markets, which, due to their illegality, are inefficient, and, therefore, even worse for the target population.