Chapter 23, 6, & 15b - Behavioral Perspective on Motivation

Chapter 23, 6, & 15b - Behavioral Perspective on Motivation

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Chapter 23 – Pgs. 813-816 I. Distinction Between Managers and Organization Units a. Performance evaluation of a manager should be distinguished from the performance evaluation of that manager’s subunit b. The Basic Tradeoff: Creating Incentives versus Imposing Risk i. How the performance of managers and other employees is measured and evaluated affects their rewards ii. Moral Hazard: 1. Situation in which an employee prefers to exert less effort (or report distorted information) compared with the effort (or accurate information) desired by the owner because the employee’s effort cannot be accurately monitored or enforced c. Intensity of Incentives and Financial and Nonfinancial Measurements i. How large should the incentive component of a manager’s compensation be relative to the salary component? 1. Preferred performance measures are those that are sensitive to or that change significantly with the manager’s performance a. They do not change much with changes in factors that are beyond the manager’s control 2. Sensitive performance measures motivate the manager as well as limit the manager’s exposure to risk, reducing the cost of providing incentives a. The more that owners have sensitive performance measures available to them, the more they can rely on incentive compensation for their managers ii. The salary component of compensation dominates when performance measures that are sensitive to manager’s actions are not available Chapter 6 – Pgs. 198-201 I. Responsibility and Controllability a. Controllability: i. The degree of influence that a specific manager has over costs, revenues, or related items for which he or she is responsible 1. Controllable Cost:
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a. Any cost that is primarily subject to the influence of a given
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This note was uploaded on 04/24/2011 for the course MGMT 505 taught by Professor Staff during the Spring '08 term at Purdue.

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Chapter 23, 6, & 15b - Behavioral Perspective on Motivation

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