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53 Cards in this Set
- Front
- Back
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The efficacy of Contingent Rewards is influenced by what four (4) factors?
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(1) Observability, (2) Measurability, (3) Controllability, (4) Reliability
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What other two considerations determine the efficacy of Contingent Rewards?
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(1) Other Intrinsic Motivation factors, and (2) Risk Preferences for employees
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What is meant by Controllability?
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The ability to control the factors being measured to determine compensation
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What is meant by Measurability?
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The ability to measure the factors being reviewed the determine compensation.
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What is meant by Reliability?
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The ability to rely on the compensation formula to determine the compensation.
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What is meant by Observability?
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The ability for the employer to observe the employees effort? If the employees effort is easily observed, then you don't need Contingent Rewards to motivate the employee as much.
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What is the formula for compensation in a two part contract?
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Compensation = a + bx
a = fixed salary b = rate of Contingent Reward x = performance [x = f(effort)] |
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Contingent Reward is a fundamental trade-off between what two things?
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Motivation vs. Risk
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Compensation level affects what two things?
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(1) Selection - The quality of the applicant pool
(2) Retention - Reduces Rate of Turnover |
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What three things predict the success of internationalizing Pay For Performance?
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(1) Formal Institutions
(2) Informal Practices (3) Culture |
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What are the three problems with Threshold Pay
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(1) Timing Manipulations, (2) Risk Taking, (3) Gaming how the target is set
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What is meant by Inflated Perceptions of Contribution?
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Individuals believe they contributed more to the project (or team) success than they really did.
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What are the two determinants of Fairness Perceptions?
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Distributive Fairness & Procedural Fairness
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What is meant by Distributive Fairness?
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Outcomes are allocated fairly
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What is meant by Procedural Fairness?
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The allocation process was fair.
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What are the three rules to Distributive Fairness?
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Outcomes are distributed:
(1) In proportion to CONTRIBUTION (2) In proportion to NEED (3) EQUALLY |
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What are the three characteristics of a fair process (procedural fairness)?
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(1) Participation of those affected by the distribution decision
(2) Impartiality of the decision maker (3) Transparency of decision process |
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Why are fair distribution procedures important?
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Fair procedures make unfavorable outcomes more acceptable.
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What are the alternatives to Contingent Rewards?
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(1) Intrinsic Motivation (Meaningfulness, Responsibility, Knowledge of Results)
(2) Social Motivation (Respect/Status, Group Acceptance) |
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How can Extrinsic Motivation hurt Intrinsic Motivation?
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(1) Signals that the task is "work", not just "interesting"
(2) Signals that the employer doesn't trust the employee to do the work without incentive (3) Shift thinking to a narrow "cost/benefit" analysis |
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Why does Intrinsic Motivation matter?
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(1) In the absence of Extrinsic Motivation, organizations must rely on Intrinsic Motivation
(2) Creates enthusiasm, excitement for work and the organization (3) Provides "extra role" behavior - employees go above and beyond. |
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Pay for Performance shifts the risk to who?
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The employees - Because employees are typically risk-averse, the extra incentive doesn't come for free and the organization needs to over-pay.
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The effectiveness of PFP is decreased if imperfect links exist between what?
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Effort, Measurement, and Compensation.
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What are the different organizational structures?
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(1) Functional - Every function (e.g., Marketing, Sales, Engineering) is segregated
(2) Divisional (by Product or Geography) - All functions report up through a common denominator (division or location) (3) Matrix - Combination of the other two. |
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What are the issues with a Functional Structure?
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- Local knowledge is passed up and decisions are passed down
- Efficiencies are gained from specialization (*this is a positive) - Reliance on supervision from above - Functional short-sightedness (each division has narrow interests and incentives |
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What are the issues with a Divisional Structure (either by product or geography)?
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- Improves coordination within divisions, but reduces coordination between divisions
- Fewer economies of scale (less specialization) - More autonomy (profit interests are pushed to the division heads) |
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What are the issues with a Matrix structure?
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(1) Often mistaken as a panacea
(2) Many problems such as (A) increased coordination costs (meetings), (B) competing priorities, and (C) rivalry between two or more bosses (3) Not a very stable equilibrium |
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What three things determine the appropriate location of decision making?
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(1) Information - Who holds it?
(2) Coordination - How will separate groups work together? (3) Motivation - Who has the good incentives? |
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What is meant by Centralization?
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Decisions are made high up in the organization
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What is meant by Decentralization?
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Decisions are made at lower levels in the organization.
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What are Coordination Devices?
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Ways to increase coordination in an organization - can be formal (e.g., incentives, technology) or informal (e.g., culture, negotiation, proximity)
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What are some benefits of centralization?
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Increased economies of scale, deeper specialization, capture of ideas
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What are some benefits of decentralization?
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High responsiveness to a changing market, more variation of ideas, more autonomy
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How does your organizations structure match the organizations strategy?
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Execution favors centralization and Exploration favors decentralization
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What is meant by organizational culture?
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Shared set of beliefs, values, and norms.
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Why are Norms the most important piece of a culture?
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It is "the way things are done around here" and it determines how people behave when they are not being watched.
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What are the five objectives of a company culture?
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(1) Identity - Common Fate
(2) Pride - Elitism (3) Enjoyment - Happy or Fun (4) Selection* - Facilitate good matches (5) Coordination* - Substitutes for formal controls * Under-appreciated objectives |
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How is culture a selection mechanism?
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People self-select based on personal preferences and job/organizational attributes (type of work, risk-tolerance, culture)
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Culture is most effective when what happens?
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It is costly to join - people have to give something up to join the culture (e.g., SWA pays their flight attendants less).
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What are the two basic tools for instilling culture?
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(1) Social Influence - look to see how others behave
(2) Commitment & Consistancy - "Hazing" |
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Greatest internalization is achieved by commitments that are what three things?
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(1) Effortful/Active
(2) Public (3) Voluntary |
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What is meant by a strong culture (need two things)?
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(1) Widely-held
(2) Deeply-held |
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When is it easy to shape a culture?
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In the beginning - culture is inertial, it is tough to change in large or mature firms
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What is the cost/benefit of processes that create internalization of culture?
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More expensive initially but reduce ongoing monitoring and measurement costs
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What is the Availability Heuristic?
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In forming a judgment we tend to rely on readily available (recent, salient, vivid) information.
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What is meant by needing to look at all four cells?
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Making sure you have all of the information - Beware of an incomplete search!
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Correlation does or does not imply causality?
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DOES NOT
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What is a potential trap with the Availability Heuristic?
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We fail to ask about the quality of information, or consider whether the information is complete
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What are the six steps of a good decision process?
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(1) Define the problem
(2) Identify the relevant objectives (3) Identify a broad set of alternatives (4) Identify the costs/benefits of the alternatives (5) Assess uncertainties in estimates (6) Make trade-offs across alternatives |
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What are the six traps to making good decisions?
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(1) Define the problem to narrowly
(2) Incomplete set of objectives (3) We judge the goodness or badness of "X" to what it is compared to. (4) We find trade-offs as difficult, so we use simple rules to decide. (5) We systematically underestimate uncertainty. (6) We are overconfident |
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What are the three remedies to the six traps?
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(1) Make a habit of asking critical questions
(2) Use models to decide (3) Use teams to generate multiple perspectives |
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What is meant by cognitive diversity?
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Knowledge is distributed across people.
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What are the two requirements for a great team?
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(1) Diversity of perspectives
(2) Team cohesion |
