BSZ_IM_Ch20_4e - Managerial Economics and Organizational...

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Managerial Economics and Organizational Architecture Instructor’s Manual Part 1: Chapter Overview and Solutions Chapter 20: Page 1 CHAPTER 20 L EADERSHIP : M OTIVATING C HANGE WITHIN O RGANIZATIONS Previous chapters argued that firm value is enhanced by selecting appropriate strategies and architectures. These chapters, however, abstracted from the significant agency problems that can impede change within an organization. Even if managers can develop value-enhancing strategic and organizational proposals, there is no guarantee that they can get them implemented. Addressing these agency problems requires, what in the popular literature, is termed strong leadership skills . This chapter describes the agency problems that managers face when they try to motivate organizational changes and provides insights into how managers might address these problems. The chapter includes a short case study. The appendix provides a game-theoretic example of the strategic value of commitment and crisis in motivating change in an organization. C HAPTER O UTLINE L EADERSHIP Vision Setting Motivation D ECISION M AKING WITHIN F IRMS Incentive Problems and Organizational Politics Understanding Attitudes toward Change C HANGING O RGANIZATIONAL A RCHITECTURE P ROPOSAL D ESIGN Maintaining Flexibility Commitment Distributional Consequences M ARKETING A P ROPOSAL Careful Analysis and Groundwork Relying on Reputation Emphasizing a Crisis O RGANIZATIONAL P OWER Sources of Power Tying the Proposal to Another Initiative Coalitions and Logrolling Is Organizational Power Bad? T HE U SE OF S YMBOLS C ASE S TUDY : G LOBAL I NSURANCE S UMMARY A PPENDIX : S TRATEGIC V ALUE OF C OMMITMENT AND C RISIS
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Managerial Economics and Organizational Architecture Instructor’s Manual Part 1: Chapter Overview and Solutions Chapter 20: Page 2 T EACHING THE C HAPTER We do not lecture extensively on this chapter. The key topics in the chapter are reviewed and their importance is emphasized. We discuss the Global Insurance case. We sometimes assign Sealed Air Corp’s Recapitalization (Harvard Business School Case #9-294-122). While this case is somewhat dated, it is good for discussing concepts such as vision, agency problems with implementing change, commitment and crisis, and the interaction between organizational architecture and change. The discussion focuses on whether Sealed Air’s management displayed good leadership skills and whether the change could have been implemented without such a dramatic restructuring. C ASE S TUDY : G LOBAL I NSURANCE Global Insurance is a disability insurance company. Traditionally, it has organized its corporate headquarters around functional specialties. After an application for an insurance policy arrives at headquarters from a field agent, it is processed through a series of functional departments. One department checks to see if the application is filled out correctly, another department checks the medical history of the applicant, and so on. Among the final steps, is the underwriting decision where the company agrees to
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BSZ_IM_Ch20_4e - Managerial Economics and Organizational...

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