Strategic Organization
Week 1: Waarom bestaan bedrijven?
Week 2: Menselijke motivatie and motivatie systemen
Week 3: Besluitvorming
Week 4: Coordinatie van bedrijven
Week 5: Verticale integratie
Week 6: Diversificatie
Meeting 2: Human motivation and the design of motivational systems
Control is a very important facet of organizational design. In essence it’s checking one’s
performance in order to correct behaviors if necessary.
a. Establishing objectives and standards (outputs or inputs)
b. Measuring actual performance
c. Comparing the actual performance with the objectives and standards
d. Taking corrective actions if needed
Control can be used as motivational system; strategic planning, training, performance
appraisal, just-in-time scheduling, many financial management activities, management-
by-objectives.
What is monitored and rewarded?
At what level?
What type of rewards or sanctions?
Type of reward can be classified in multiple ways; Input/behavior/action control –
output control – clan and social control.
Article 1: Eisenhardt, K. M. 1985. Control: Organizational and economic
approaches. Management Science, 31:134-149.
Economic approach - Agency Theory – 5 assumptions
Bounded rationality
o Complete contract is impossible
Self interest
o If the agent isn’t monitored they shirk
o All sources of motivation are monetary
Objectives of the principal and the agent are in conflict
Information can be purchased
Agent is more risk averse than the principal (who can diversify)
Goal of agency theory = to find a contract between principal and an agent tha tis most
efficient in solving the following problems:
Motivate the agent to pursue the principal’s objectives
o Monitor the agents behavior (Hierarchy – firm)
o Monitor the agents output (Price – market)
Share risk when the agent is more risk averse than the principal
o Agent’s outcome is usually only partly the result of the agent’s effort
Week 1: Waarom bestaan bedrijven?
Week 2: Menselijke motivatie and motivatie systemen
Week 3: Besluitvorming
Week 4: Coordinatie van bedrijven
Week 5: Verticale integratie
Week 6: Diversificatie
Meeting 2: Human motivation and the design of motivational systems
Control is a very important facet of organizational design. In essence it’s checking one’s
performance in order to correct behaviors if necessary.
a. Establishing objectives and standards (outputs or inputs)
b. Measuring actual performance
c. Comparing the actual performance with the objectives and standards
d. Taking corrective actions if needed
Control can be used as motivational system; strategic planning, training, performance
appraisal, just-in-time scheduling, many financial management activities, management-
by-objectives.
What is monitored and rewarded?
At what level?
What type of rewards or sanctions?
Type of reward can be classified in multiple ways; Input/behavior/action control –
output control – clan and social control.
Article 1: Eisenhardt, K. M. 1985. Control: Organizational and economic
approaches. Management Science, 31:134-149.
Economic approach - Agency Theory – 5 assumptions
Bounded rationality
o Complete contract is impossible
Self interest
o If the agent isn’t monitored they shirk
o All sources of motivation are monetary
Objectives of the principal and the agent are in conflict
Information can be purchased
Agent is more risk averse than the principal (who can diversify)
Goal of agency theory = to find a contract between principal and an agent tha tis most
efficient in solving the following problems:
Motivate the agent to pursue the principal’s objectives
o Monitor the agents behavior (Hierarchy – firm)
o Monitor the agents output (Price – market)
Share risk when the agent is more risk averse than the principal
o Agent’s outcome is usually only partly the result of the agent’s effort
