Free rider problem in teams

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1. (10 pts.) Discuss how organizational architecture and corporate culture are related. Use an example of a real-life firm and discuss how its corporate culture blends with its organizational architecture.

Organizational architecture involves the decision rights within the organization, how employees and teams are evaluated, and how this groups and individuals are rewarded for their efforts. On the other hand, corporate culture is concern with the same three aspects but also takes into consideration such things as the organizations customs, models, and rituals, which are considered the softer elements in the corporate culture. In addition, corporate culture also includes employee’s actions and how these actions can affect the organization culture. Therefore, both concepts are interdependent and support one another. A real life example of how corporate culture blends with its organizational architecture is Google. The organizational architecture for Google is for the most part flat, and divided in to teams that collaborate in projects along side with other teams throughout the organization. As a reflection of this organizational architecture, the corporate culture at Google is very relaxed, and easygoing. There are not strict dress codes, they are open to all cultures and rituals, and employees have the freedom to collaborate in other team projects even though they are not directly assigned to them Brickley, Smith, & Zimmerman, 2016)

2. (10 pts.) Billy Riggan is in charge of all technical developments at Always Round Tire. He makes all the choices concerning product innovations in the company. He finds that he is overworked and that several of his research scientists seem to be spending work hours playing tennis. What is going on?

This student considers that Billy Riggan is facing several problems. First, if he is the person in charge, he is not delegating or balancing the workload correctly within his team. Trying to do all of the work by himself shows his lack of confidence in his team, which will cause even more demotivation and will cause an even bigger lost in productivity. Secondly, If he has a manager that oversee his work, then his manager is overlooking the wok load that Billy has, putting quality, productivity, and innovation, which Billy is in charge of, at risk. Many organizations rely on innovation to remain competitive in the marketplace, and then overworking Billy causing him to burn out could affect the organization profitability. Lastly, a common problem in organizations where work is assigned to teams is the free-ride issue, where some of Billy’s team members simply let him do the work while sharing the benefit. The free-ride problem could also cost a drop in productivity, hence in profitability. Brickley, Smith, & Zimmerman, 2016)

3. (10 pts.) Always Round Tire tries to base its promotions on seniority (where education and training requirements are not necessary). The company finds that this system seems to work most of the time with shop floor supervisors and team managers. Nevertheless, the system breaks down for higher-level positions. Why?

First, we need to understand that as an employee gain experience in the organization is expected that that employee will have an increase in his payment rate. Likewise, that promotion is an effective way for organizations to increase employee productivity and motivation while offering incentives for higher positions within the organization. Furthermore, is necessary that employees understand that as the get promoted within the organization their payment rate will increase but also their responsibilities. Here is where Always Round Tire will find problems because the higher employees are promoted, the more accountabilities and trainings will need. Therefore, promotions based in seniority make sense for organization because it helps with the motivation and efficiency of those employees that have the most experience and knowledge in the organization; however, this promotions will work as long as employees are willing to take more responsibilities. Some of the drawbacks of this system are related to employee self-confidence, which will have an impact in motivation if employees are promoted to a level where they cannot cope with the amount of work assigned to that position. Another possible outcome of this system is that the organization may not be attracting motivated employees, because they will not want to wait till they have seniority within the organization to get promoted, some employees will prefer a promotion for performance system. Additionally, if organizations want to relay solely in the promotions on seniority system they might find difficult to fulfill entry-level positions with adequate candidates that have the necessary skills to take over higher positions if current employees pass on the opportunity or not perform as expected. (Brickley, Smith, & Zimmerman, 2016)

4. (10 pts.) Economists believe the free rider problem is very important in complex business organizational structures. , Businesses continue to build teams to solve problems or to deliver products to consumers. Often special rewards or bonuses are provided to the team rather than to the individuals on the team. Write a brief essay that either defends the economists' concern or explain why economists are wrong on this issue.

One of the benefits of using teams is that they are more efficient gathering specialized information for the use of the organization that move the information along all the levels in the organization. Moreover, teams promote cooperation towards a common goal for the organization. However, as team grow in size, the free-ride problem arises as team members rely on other to do their fair share of work. One of the counter measurements to avoid the free ride problem is to evaluate not only tem production, but also individuals. Economist worries that the free ride problem will financially affect the organization because using teams exceed the benefits of using them. However, this student considers that if the free rider problem can be contained the benefit of using teams is still greater than the result of individuals. For teams to be beneficial for the organization need to have an optimal size, where all members are needed and contribute with their fair share of work and knowledge, Also, supervisors need not only to evaluate team performance but also individuals by using techniques such as peer evaluations among the team members. Moreover, if teams can established the appropriate internal architecture where, each member of the team have their assignment and if this are not fulfilled, then a reprimand for not completing the task is established as well. With these basic characteristic organizations will ensure that teams are performing and bringing the right production effect to the organization without facing the free rider problem Brickley, Smith, & Zimmerman, 2016)

5. (10 pts.) Many firms today use 360-degree performance evaluations. Make a case for this type of evaluation based on the informativeness principle. What problems may be encountered from implementation of such a system?

The informativeness principle contains the idea that organizations need to use all indicators available, at a low cost, that will help the organization with the measurement of employee output. Under this principle, the 360-degree performance evaluations are supported because this type of evacuations is intended to be a thorough evaluation of the individual performance. Moreover, the informativeness principle relies on the premise that there are other employees performing similar tasks, and therefore can be use as a source of information. One of the benefits of using the informativeness principle in evaluations is that the principle reduces the risk of non-manageable factors. However, this type of evaluations might face some problems such as the amount of sources that need to be scrutinized in order to have a complete and fair evaluation. Moreover, if peers are to be a source of information, the organization need to implement systems to guarantee that the information provided by peers is unbiased; however, establishing those systems could be against the principle of informativeness which calls for a low cost of the information obtained. Brickley, Smith, & Zimmerman, 2016)

6. (10 pts.) Reflecting on what you have learned in this course, discuss the relevance of Responsible Stewardship in the context of economic analysis and organizational architecture.

MBA-540 has helping me in understanding the mechanics and concepts of managerial economics and how this mechanics and concepts affect business decisions. Regarding Responsible Stewardship, it is important to understand that organizations have more objectives besides Shareholder Wealth Maximization. Although Responsible Stewardship might not to be used in every organization because of its characteristics, it is clear that have its advantages for the organizations and for the individuals such leadership, motivation and trust. Although the concept of Responsible Stewardship has many advantages, it also has drawbacks, as one of concepts learned in this course, the law of diminishing returns, we can not obtain some benefit without giving away other, in this case, profits or the increase in value for the organization’s shareholders.

Bibliography Brickley, J. A., Smith, C. W., & Zimmerman, J. L. (2016). Managerial Economics and Organizational Architecture (6th ed.). New York: McGraw-Hill Irwin Publishing. Brickley, Smith, & Zimmerman, 2016)

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