BSZ_IM_Ch12_4e - Managerial Economics and Organizational...

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Managerial Economics and Organizational Architecture Instructor’s Manual Part 1: Chapter Overview and Solutions Chapter 12: Page 1 CHAPTER 12 D ECISION R IGHTS : T HE L EVEL OF E MPOWERMENT This is the first of two chapters on the assignment of decision rights. It considers the optimal assignment of a given decision right (such as the right to set the price of a product). It begins by considering whether the right should be centralized or decentralized. Then it examines where in a hierarchical level the decision right should be placed and whether the right should be granted to an individual or a team of workers. The chapter also introduces the important concepts of decision management, decision control, and influence costs. It provides a short case study and an appendix that analyzes the economics of collective decision making (for example, team decision making) in greater detail. C HAPTER O UTLINE A SSIGNING T ASKS AND D ECISION R IGHTS C ENTRALIZATION VERSUS D ECENTRALIZATION Benefits of Decentralization Costs of Decentralization Illustrating the Trade-offs Management Implications L ATERAL D ECISION -R IGHT A SSIGNMENT A SSIGNING D ECISION R IGHTS TO T EAMS Benefits of Team Decision Making Costs of Team Decision Making Management Implications D ECISION M ANAGEMENT AND C ONTROL D ECISION R IGHT A SSIGNMENT AND K NOWLEDGE C REATION I NFLUENCE C OSTS C ASE S TUDY : M EDFORD U NIVERSITY S UMMARY A PPENDIX : C OLLECTIVE D ECISION M AKING
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Managerial Economics and Organizational Architecture Instructor’s Manual Part 1: Chapter Overview and Solutions Chapter 12: Page 2 T EACHING THE C HAPTER We start the lecture by displaying Figure 12.1. Job design is an important policy choice that relates directly to the assignment of decision rights. Two important dimensions of job design are displayed in the figure. Chapter 12 focuses on the horizontal axis (decision authority), while chapter 13 focuses on the vertical axis (the bundling of tasks). We summarize some of the recent trends in job design and present the popular argument that “task-oriented jobs with low empowerment are obsolete.” Also emphasized is the “one size fits all” argument can lead to managerial mistakes. Students will better understand the current trends when they complete chapters 12 and 13 and be able to make better decisions about whether their particular firms should follow these trends. After this initial discussion, we summarize the benefits and costs of decentralization, elaborate on decision management and control, and cover the Medford University Case. This case is based on a real example and leads to interesting discussion. We complete the lecture by discussing some of the problems at the end of the chapter or other contemporary examples that might be in the financial press at the time. Depending on the class, we also might provide a more elaborate discussion of the appendix — collective decision making. We typically use
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BSZ_IM_Ch12_4e - Managerial Economics and Organizational...

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