Managment Take Home Exam

Managerial Economics

Organizational structure contributes to the determination of organizational culture in the way that reporting requirements and hierarchy are defined. For example, companies with a flatter structure will have decentralized decision-making. Such a culture would encourage greater levels of creativity and innovation, as well as risk-taking, among the employees. At a company like WL Gore, where the organizational structure is gossamer at best, the organizational culture ends up being highly oriented towards teamwork and innovation. Companies in fast-paced industries prefer to have pared-down organizational structures because those have been shown to correlate with a culture of flexibility (Bock et al., 2012). In contrast, companies with a highly bureaucratic structure have cultures that are more conservative in nature, where employees do not feel empowered to take initiative or to take risks, and those companies tend to be less flexible in nature, which is a strategic hindrance when the environment changes rapidly -- Eastman Kodak after the invention of digital photography was a good example of having the wrong structure/culture.

2. Billy Riggan's problem is that he has not delegated any responsibility. From a structural point-of-view, this has created a situation where he is overworked and the rest of the employees are playing tennis. Simply put, they have nothing to do, because he is not delegating them any tasks. This may create resentment in Billy, but it seems to be Billy's problem. The way that responsibility is delegated within the organization will affect its function. This organization is dysfunctional because it has inappropriate delegation of responsibilities. Research has shown that there are personality traits that are predictive of an inability to delegate, so Riggan probably is unaware that he has a tendency towards this pattern (Johnston, 2000). What Riggan needs to do here is to delegate some tasks to his co-workers, as this will relieve the burden he feels and provide an opportunity for the other workers to actually get some work done.

3. Seniority-based promotions do not work because they do not reflect the actual competencies required for the level to which a person is being promoted. It is recommended that each job has a set description along with an outline of the skills, knowledge and attributes that are required to excel in that position (Barney & Wright, 1997). The person being hired for the position needs to possess these attributes, as well as the appropriate experience. The reality is that senior management positions are different than shop floor positions. The skills that are required of senior managers are quite different, and you cannot simply pull the oldest worker off the floor and expect that person to succeed at a senior management position.

4. The free rider problem is a situation where someone consumes more than his/her fair share of resources (Investopedia, 2015). With respect to teamwork in organizations, the free rider problem exists when the team is rewarded for outcomes, rather than individuals within the team. The free rider problem is particularly irksome to those who perceive that they are doing most of the work, or the most important work, but where compensation does to recognize the different levels of contribution that different individuals make. There are a few issues at play here. Economically, it is easier to reward the team. First, it takes a lot less time and effort -- and is less subjective -- to have a team-based reward rather than individual rewards. The added costs of individual rewards might not pay off. They may end up alienating people whose contributions are relatively minor, when ultimately the organization is measuring the team output. Thus, it wants to motivate team performance, as individual performance within the team context is meaningless if the team fails; meaningless at least to the organization. Thus, team-based compensation is the best approach for management, because it motivates towards the outcomes that matter for the organization. Free riders are ultimately a small price to pay for ensuring that all personnel working on a project contribute to their best possible efforts.

5. I cannot make a case for 360 degree evaluation. The underlying logic of this evaluation is that more feedback from more people provides better information (Heathfield, 2015), but that logic runs into some serious problems. While there is the chance that more information will reveal things that the manager did not notice, there is also a lot more noise. First, the people giving the feedback are not trained professionals -- their responses are as likely to be incoherent gibberish as they are to be refined, valuable information. Feedback provided by people who know nothing about giving feedback is not going to be valuable. Second, there will be a lot of information that has nothing much to do with the task at hand. Third, personal biases will be in this feedback -- a popular but useless coworker will score well. Fourth, the feedback is not based on the actual criteria related to job performance. Fifth, there is also the risk that people will give glowing reviews to everybody because they know that they will also be reviewed -- such an approach does not incentivize honesty. There is just no reasonable case to be made for 360 degree feedback -- the opinions of people unqualified to give them adds little of value to understanding whether or not somebody is helping the organization to meet its strategic objectives.