Rolls Royce Erp Execution
American Economic Association
Offers in Organizations Author(s): Robert Gibbons Origin: The Log of Economic Perspectives, Vol. 12, No . 4 (Autumn, 1998), pp. 115-132 Posted by: American Economic Connection Stable LINK: http://www.jstor.org/stable/2646897 Seen: 26/03/2009 twelve: 39 Your use of the JSTOR store indicates your acceptance of JSTOR's Conditions of Use, available at http://www.jstor.org/page/info/about/policies/terms.jsp. JSTOR's Terms and Conditions of Use provides, partly, that if you have obtained preceding permission, you might not download a complete issue of any journal or multiple clones of content articles, and you may use content inside the JSTOR store only for your own personal, noncommercial employ. Please get in touch with the author regarding any more use of this work. Author contact information could possibly be obtained at http://www.jstor.org/action/showPublisher?publisherCode=aea. Every single copy of any component to a JSTOR transmission must contain the same copyright notice that appears on the screen or perhaps printed site of these kinds of transmission. JSTOR is a not-for-profit organization founded in 95 to build reliable digital records for scholarship. We work together with the educational community to preserve their work and the materials they trust, and to make a common exploration platform that promotes the discovery and use of these types of resources. To find out more about JSTOR, please speak to [email protected] org.
American Economic Association is usually collaborating with JSTOR to digitize, protect and extend access to The Journal of Economic Perspectives.
doze, Journal of Economic Perspectives-Volume Number4-Fall 1998-Pages 115-132
Offers in Companies
n 1975, StevenKerrpublished" On the Follyof Satisfying WhileHopingfor A, B. " The disagreement was simple: you pay for what you get. Kerrdistilled this kind of unifying topic from a disparate set of examples including politicians, soldiers, doctors, orphanage directors, professors, and students, as well as making and paperwork employees and human-resource managers. From these types of examples, Kerr (pp. 77980) concluded that two main reasons for distorted bonuses are " fascination with an 'objective'criterion, [where] individualsseek to establishsimple, quantifiablestandards against which will to measure and incentive performance" and " overemphasis on remarkably visible behaviours, [when] a lot of parts of the taskare remarkably visiblewhile others are not. " It took organization theory 12-15 years to express Kerr's name, not to mention to evaluate or lengthen his findings. During this period, firm theory was obsessed with the tradeoff between incentives and insurance, although clear-eyed observationslike Kerr's regarding the design and gratification of actual incentive deals suggested that several other problems are at least as significant. Fortunately, new work has had agency theory not only to Kerr'sposition but further than. In this conventional paper I sum up four new strands in agency theory that help me think about offers in real organizations. As being a point of departure, I actually begin with a simple sketch of these agency unit. I then go over static models of objective overall performance measurement that sharpen Kerr's argument; repeated-game models of very subjective performance examination; incentives to get skill development rather than only for effort; and incentive legal agreements between vs . within agencies. I con-
* Robert Gibbons SloanDistinguished is Sloan School, Massachuof Professor Administration, settsInstituteof Technology, Research and National BureauofEconomic Associate, Research, bothin Cambridge, Massachusetts. e-mailaddressis ([email protected] edu). His
116 Journal of EconomicPerspectives
clude by recommending two techniques for further progress in company theory: better integration with organizational economics, as introduced by Coase (1937) and reinvigorated simply by Williamson (1975, 1985), and cross-pollination to fields that study organizations, including professional...
References: Aggarwal, Rajesh, and Andrew Samwick, " Lack of of the Tradeoff: The Impact of Risk about Executive Settlement, " Record of Personal Economy, impending. Alston, Shelter, and Robert Higgs, " Contractual Mix in Southern Cultivation since the City War: Information, Hypotheses, and Test, " Journal of Economic History, 1982, 40, 327-53. Anderson, Kathryn, Rich Burkhauser, and Jennie Raymond, " The result of Creaming on Positioning Rates within the Job Teaching Partnership Act, " Professional and Labor RelationsReview, 93, 46, 613-24. Baker, George, " Incentive Contracts and gratification Measurement, '" JournalofPoliticalEconomy, 1992, 100, 598-614. Baker, George, Robert Gibbons, and Kevin J. Murphy, " Very subjective Performance Actions in Maximum Incentive Deals, " Quarterlyjournal of Economics, 1994, 109, 1125-56. Baker, George, Robert Gibbons, and Kevin L. Murphy, " Relational Legal agreements and the Theory of the Company. " Unpublished manuscript, UBER 's Sloan School, 1997. Baron, James, " The Employment Regards as a Sociable Relation, " Journal of theJapaneseand InternationalEconomies, 1988, 2, 492-525. Becker, Gary, " Investment in Human Capital: A Assumptive Analysis, " Journal of PoliticalEconomy, 1962, 70, 9-49. Becker, Whilst gary, and George Stigler, " Law Enforcement, Malfeasance and Payment of Enforcers, " Record of Legal Studies, mid 1970s, 3, 118. Brown, Keith, W. Harlow, and Laura Starks, " Of Tournaments and Temptations: An Analysis of Bureaucratic Incentives in the Mutual Fund Industry, " Journal of Finance, mil novecentos e noventa e seis, 51, 85- 110. Bull, Clive, " The Existence of Self-Enforcing Implicit Contracts, " Quarterlyjournal ofEconomics, 1987, 102, 147-59. Chevalier, Judith, and Glen Ellison, " RiskTaking by simply Mutual Cash as a Respond to Incentives, " Journal of Political Economic system, 1997, a hundred and five, 1167-1200. Coase, Ronald, " The Nature of the Firm, " Economica, 1937, 4, 386-405. Cockbum, Ian, Rebecca Henderson, and Jeff Stern, " Balancing Study and Creation: Internal capital markets and promotion policies as motivation instruments. " Unpublished manuscript. MIT is actually Sloan School, 1998. Projet, Olivier, " Communication in Re-
peated Games with Imperfect Private Monitoring, " Econometrica, 98, 66, 597-626. Cragg, Jordan, " Functionality Incentives inside the Public Sector: Evidence from your Job Schooling Partnership Act, " Diary of Rules, Economics, and Organization, 1997, 13, 147-68. Eccles, Robert, and Dwight Crane, DoingDeals: InvestmentBanks at the job. Boston: Harvard Business Institution Press, 1988. Fast, Grettle, and Norman Berg, " The Lincoln subsequently Electric Company. " Harvard Organization School Circumstance #376-028, 1975. Fershtman, Chaim, and Kenneth Judd, " Equilibrium Incentives in Oligopoly, " AmericanEconomicReview, 1987, 77, 927-40. Freeman, Richard, and Morris Kleiner, " The very last American Sneaker Manufacturers: Changing the Method of Pay to Survive Foreign Competition. " Unpublished manuscript, HarvardUniversity, 1998. Gibbons, Robert, " Taking Coase Seriously. " Administrative Scientific research Quarterly, impending, 1998. Gibbons, Robert, and Michael Waldman, " Careers in Organizations: Theory and Evidence. " In Ashenfelter, O., and D. Cards, eds., Guide III of LaborEconomics, Volumes and IV New York: North Holland, 1998. Grossman, Sanford, and Oliver Hart, " The Costs and Benefits of Ownership: A Theory of Top to bottom and Assortment Ownership, " Journal of PoliticalEconomy, 1986, 94, 481-510. Hayes, Rachel, and Scott Schaefer, " Implicit Agreements and the Explanatory Power of Best Executive Settlement for Future Performance. " Unpublished manuscript, Kellogg Graduate student School of Management, Northwestern University, 97. Higgs, Robert, " Contest, Tenure, and Resource Allocation in Southern Agriculture, 1910, " Log of Monetary History, 1973, 33, 149-69. Holnstrom, Bengt, " Bureaucratic Incentive Problems-A Dynamic Perspective. " In Essaysin Economics and Managementin Honor of Lars Wahlbeck. Helsinki: Swedish School of Economics, 1982. Holnstroim, Bengt, and Paul Milgrom, " Multitask Principal-Agent Analyses: Motivation Contracts, Asset Ownership, andJob Design, " Journal of Law, Economics, and Firm, 1991, several, 2452. Holmstroim, Bengt, and Paul Milgrom, " The Firm since an Incentive System, " American Economic Reviezv, 1994, 84, 972-91. Holnstrom, Bengt, andJean Tirole, " Transfer
Journal of Economic Points of views
Pricing and Organizational Type, " Log of Legislation, Economics, and Organization, 1991, 7, 20128. Ichniowski, Casey, Kathryn Shaw, and Giovanna Prennushi, " The Effects of Human Resource Management Practices about Productivity: A report of Metal Finishing Lines, " AmericanEconomicReviezv, 1997, 87, 291-313. Schute, Charles, and Gur Huberman, " Twosided Uncertainty and 'Up-or-Out ' Contracts, " 1988, 6, 423-44. Journal of LaborEconomics, Kandori, Michihiro, and Hitoshi Matsushima, " Private Observation, Communication and Col1998, 66, 627-52. lusion, " Econometrica, Kerr, Steven, " For the Folly of Rewarding A, While Dreaming about B, " Academyof Supervision Journal, 1975, 18, 769-83. Kole, Stacey, " The Complexity of Compensation Contracts, " Journal of Financial Economics, 1997, 43, 79-104. Kreps, David, " Inbuilt Motivation and Extrinsic Bonuses, " American Economic Reviezv, 1997, 87, 359-64. Lazear, Edward, " WhyIs There MandatoryRetirement? " Journal of PoliticalEconomy, lates 1970s, 87, 1261-84. Lazear, Edward cullen, " Spend Equality and Industrial Politics, " Diary of Politics Economy, 1989, 97, 561-80. Lazear, Edward cullen, " Efficiency Pay and Productivity. " Unpublished manuscript, Stanford University, 1997. Lazear, Edward, and Sherwin Rosen, " RankOrder Tournaments because Optimum Labor Con1981, fifth 89, 841 of tracts, " Jov; rnal PoliticalEconomy, sixty four. MacLeod, Bentley, and Wayne Malcomson, " Motivation and Markets, " AmericanEconomicReviezv, 1998, 88, 388-411. Malcomson, Wayne, " Bonus Contracts in Labor Marketplaces. " In Ashenfelter, To., and Deb. Card, III eds., Handbookof LaborEconomics, Volumes of prints and IV. New York: North Holland, 98.
McMillan, Ruben, " Controlling Suppliers: Motivation Systems in Japanese and U. H. Industry, " CalReview, 1990, 32, 38-55. iforniaManagement Milgrom, Paul, and John Roberts, " An Economic Approach to Affect Activities in Or1988, Log of Sociology, ganizations, " American 94, S154-79. Milgrom, Paul, and John Roberts, " Complementarities and Fit: Strategy, Structure, and Company Change in Making, " Record 1995, 19, 179-208. of Accountingand Economics, Murphy, KevinJ., " Exec Compensation. " In Ashenfelter, O., and D. Cards, eds., Handbook III of LaborEconomics, Volumes and 4. New York: North Holland, 1998. Prendergast, Canice, " The Role of Promotion in Inducing Certain Human Capital AcquisiJournal of Economics, 1993, 108, tion, " Quarterly 523-34. Prendergast, Canice, " The Provision of Incentives in Companies, " Diary of Economic Literature, future. Rotemberg, Julio, " Human Relations at work, " Log of Political Economy, year 1994, 102, 684-717. Shapiro, Carl, and Joseph Stiglitz, " Equilibrium Joblessness as a Self-discipline Device, " Economic Review, 1984, 74, 433-44. American Staw, Craig, " Inspiration in Organizations: Towards Synthesis and Redirection. " In B. Stawand G. Salancik, eds., New Directionsin Organizational Behavior. Chi town: St . Evident Press, 1977. Stewart, James, " Taking Dare, " TheNew Yorker, 26, 1993, 34-39. July Tirole, Jean, " Hierarchies and Bureaucracies: On the Function of Complicite in Companies, '" Record of Rules, Economics, and Organization, 1986, 2, 181-214. Williamson, Oliver, Markets and Hierarchies. Nyc: The Free of charge Press, 1975. Institutionsof Williamson, Oliver, TheEconomic New York: The Free Press, 1985. Capitalism.