Motivation at Work

Motivation at Work - (PowerpointOnly&WORKMOTIVATION...

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PRINCIPAL-AGENT PROBLEM (Powerpoint Only) WCOB 2033 Acquiring and Managing Human Capital
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Principal-Agent Problem Principals Individuals attempting to influence the agent into engaging in  specific behavior Typically the owners, stakeholders Agents Individuals that have their own interests (utility functions) that may  or may not correspond with those of the principal Typically the employees Principals and agents are self-interested They want to maximize their own utility (value) Principal and agent interests are  not inherently consistent
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Who represents the principal and who represents the  agent in these scenarios… An insurance company wants the consumer to drive carefully or take care  of their health The insurance company is the ___________ The consumer is the ___________ Corporations want to maximize profits and may or may not have ethical  standards.  The government is trying to deter illegal behavior by  corporations Corporations are the __________(s) The government is the ___________ An employer who is trying to ensure adequate effort from its employees.   Employees want to maximize utility which in part includes working as little  as they can The employer is the _____________ The employees are the ______________(s)
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The Employee Perspective: Agents Agents would like to maximize the value they receive from their  employment Agents decide how much effort to put forth on the job This effort is a function of utility and opportunity costs General utility function Effort Wages  – total compensation  received as a function of effort – all forms of  financial compensation including non-wage benefits Psychological outcomes  (non-financial attributes from the job) – such as self-esteem, identity, value from equity or reciprocity
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The Employer Perspective: Principals Principals attempt to design systems that induce optimal behavior The principal must consider the agents’ overall needs as well b/c the agent can  choose to walk away from the transaction Principals want to maximize profit Profit is a function of Effort  (as effort increases, profit increases) Wages  total compensation paid (as wages increase, profit decreases)  Psychological outcome costs   those costs associated with providing psychological outcomes  providing childcare facilities, a gym, reduced work hours, etc may indirectly lower profits if they are too costly to provide, but may indirectly raise profit if they induce employees to  increase/raise effort Agency costs Wages and psychological outcome costs can also be considered agency costs
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This note was uploaded on 10/14/2011 for the course WCOB 2033 taught by Professor A during the Fall '07 term at Arkansas.

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Motivation at Work - (PowerpointOnly&WORKMOTIVATION...

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