ECONOMICS OF ORGANIZATION Lecture 15 – Subjective Performance Evaluation Friday, January 30, 2015

ECONOMICS OF ORGANIZATION Lecture 15 – Subjective Performance Evaluation Friday, January 30, 2015

ECONOMICS OF ORGANIZATION Lecture 15 – Subjective Performance Evaluation Friday, January 30, 2015 • Objective Performance Standards
• Level of Disclosure • Brand Reputation • Warranties

Besanko (6th ed.), p. 341

ECONOMICS OF ORGANIZATION Lecture 15 – Subjective Performance Evaluation Friday, January 30, 2015 • There are relevant information costs to collecting information that would make objective measurement less optimal than subjective measurements
Milgrom and Roberts, pp. 147 - 149

ECONOMICS OF ORGANIZATION Lecture 15 – Subjective Performance Evaluation Friday, January 30, 2015

• Objectives of Compensation
• Recruitment of productive employees • Satisfies the employee participation constraint – helping employees deal with earnings uncertainties • Signal – what the organization values • Signal – what behaviour and attitudes the organization discourages • Reward accomplishments and sucesses
Milgrom and Roberts - p. 390 Milgrom and Roberts, pp. 403 - 408

ECONOMICS OF ORGANIZATION Lecture 15 – Subjective Performance Evaluation Friday, January 30, 2015

• What Affects Both a and b:
• • • • • • Raises Merit Increases Pension contributions Employee discounts Employee Stock Ownership [not stock options] Fringe Benefits
Prendergast - p. 7 Milgrom and Roberts, pp. 369 - 371
Milgrom and Roberts, pp. 403 - 408

SUBJECTIVE PERFORMANCE STANDARDS

ECONOMICS OF ORGANIZATION Lecture 15 – Subjective Performance Evaluation Friday, January 30, 2015
• Subjective Performance Standards • Personal experience • Reports of friends and relatives • Third Party Reports – (Example – Report Cards)
Besanko (6th ed.), pp. 341, 344 - 349 Besanko (6th ed.), pp.