ABOUT THE AUTHORS PREFACE

ACKNOWLEDGMENTS

PART ONE SORTING AND INVESTING IN EMPLOYEES CHAPTER 1 SETTING HIRING STANDARDS An Example: Hiring Risky Workers

New Hires as Options

Analysis

A Counterargument

Setting Hiring Standards

Balancing Benefits Against Costs

Foreign Competition

The Method of Production

How Many Workers to Hire?

Other Factors

Making Decisions with Imperfect Information

Make a Decision Independent of Analysis

Estimate the Relevant Information

Experiment

Summary

Study Questions

References

Further Reading

Appendix (available online)

CHAPTER 2 RECRUITMENT
Introduction

Screening Job Applicants

Credentials

Learning a Worker's Productivity

Is Screening Profitable? For Whom?

Probation

Signaling

Who Pays, and Who Benefits?

Examples

Signaling More Formally: Separating and Pooling Equilibria

Which Type of Firm is More Likely to use Signaling?

Summary

Study Questions

References

Further Reading

Appendix (available online)

CHAPTER 3 INVESTMENT IN SKILLS
Introduction

Matching

Investments in Education

Effects of Costs and Benefits

Was Benjamin Franklin Correct?

Investments in On the Job Training

General vs. Firm-Specific Human Capital

Who Should Pay for Training?

Implications of On the Job Training

Rent Sharing and Compensation

Implicit Contracting

Summary

Study Questions

References

Further Reading

Appendix (available online) CHAPTER 4 MANAGING TURNOVER
Introduction

Is Turnover Good or Bad?

Importance of Sorting

Technical Change

Organizational Change

Hierarchical Structure

Specific Human Capital

Retention Strategies

Reducing Costs of Losing Key Employees

Embracing Turnover

Bidding for Employees

Raiding Other Firms: Benefits and Pitfalls

Offer Matching

Layoffs and Buyouts

Who to Target for Layoffs

Buyouts

Summary

Study Questions

References

Further Reading

Appendix (available online)

PART TWO ORGANIZATIONAL AND JOB DESIGN

CHAPTER 5 DECISION MAKING
Introduction

The Organization of an Economy

Markets as Information Systems

Markets as Incentive Systems

Markets and Innovation

Benefits of Central Planning

The Market as Metaphor for Organizational Design

Benefits of Centralization

Economies of Scale or Public Goods

Better Use of Central Knowledge

Coordination

Benefits of Decentralization

Specific vs. General Knowledge

Other Benefits of Decentralization

Authority and Responsibility

Decision Making as a Multistage Process

Flat vs. Hierarchical Structures

Investing in Better Quality Decision Making

Summary

Study Questions

References

Further Reading

Appendix (available online)

CHAPTER 6 ORGANIZATIONAL STRUCTURE
Introduction

Types of Organizational Structures

Hierarchy

Functional Structure

Divisional Structure

Matrix or Project Structure

Network Structure

Which Structure Should a Firm Use?

Coordination

Two Types of Coordination Problems

Coordination Mechanisms

Implementation

Span of Control and Number of Levels in a Hierarchy

Skills, Pay, and Structure

Evolution of a Firm's Structure

Summary

Study Questions

References

Further Reading

CHAPTER 7 JOB DESIGN
Introduction

Patterns of Job Design

Optimal Job Design: Skills, Tasks, and Decisions

Multiskilling and Multitasking

Decisions

Complementarity and Job Design

When to Use Different Job Designs

Taylorism

Factors Pushing Toward Taylorism or Continuous Improvement

Intrinsic Motivation

Summary

Study Questions

References

Further Reading

Appendix (available online)

CHAPTER 8 ADVANCED JOB DESIGN
Introduction

Teams

Group Decision Making

Free Rider Effects

When to Use Teams

Other Benefits of Team Production

Implementation of Teams

Team Composition

Worker-Owned Firms

Effects of Information Technology Effects on Organizational Structure

Effects on Job Design

High Reliability Organizations

Summary

Study Questions

References

Further Reading

Appendix (available online)

PART THREE PAYING FOR PERFORMANCE

CHAPTER 9 PERFORMANCE EVALUATION
Introduction

Purposes of Performance Evaluation

Ways to Evaluate Performance

Quantitative Performance Measurement

Risk Profile

Risk vs. Distortion: Performance Measure Scope

Match of the Performance Measure to Job Design

Manipulation

Subjective Evaluation

Why Use Subjective Evaluations?

The Benefits of Subjective Evaluations

Practical Considerations

Summary

Study Questions

References

Further Reading

CHAPTER 10 REWARDING PERFORMANCE
Introduction

How Strong Should Incentives Be?

Intuition

Imperfect Evaluations and Optimal Incentives

Summary: How Strong Should Incentives Be?

Paying for Performance: Common Examples

Rewards or Penalties?

Lump Sums, Demotions, or Promotions

Caps on Rewards

Applications

Profit Sharing and ESOPs

Organizational Form and Contracting

Motivating Creativity

Summary

Study Questions

References

Further Reading

Appendix (available online)

CHAPTER 11 CAREER-BASED INCENTIVES
Introduction

Promotions and Incentives

Should Promotions be Used as an Incentive System?

Promotion Rule: Tournament or Standard?

How Do Promotions Generate Incentives?

Advanced Issues

Turnover

Evidence

Career Concerns

Seniority Pay and Incentives

Practical Considerations

Summary

Study Questions

References

Further Reading

Appendix (available online)

CHAPTER 12 OPTIONS AND EXECUTIVE PAY
Introduction

Employee Stock Options

Stock Options-A Brief Overview

Should Firms Grant Employees Options?

Options as Incentive Pay

Executive Pay

What is the Most Important Question?

Executive Pay for Performance

Other Incentives & Controls

Do Executive Incentives Matter?

Summary

Employee Stock Options

Executive Pay

Study Questions

References

Further Reading

Appendix (available online)

PART FOUR APPLICATIONS
CHAPTER 13 BENEFITS
Introduction

Wages vs. Benefits

Why Offer Benefits?

Cost Advantage

Value Advantage

Government Mandate

Implementation of Benefits

Improving Employee Sorting

Cafeteria Plans

Pensions

Paid Time Off

Summary

Study Questions

References

Further Reading

CHAPTER 14 ENTREPRENEURSHIP AND INTRAPRENEURSHIP
Introduction

Entrepreneurship

The Choice to become an Entrepreneur

Intrapreneurship

Internal Markets

Creativity vs. Control

Speed of Decision Making

Reducing Bureaucracy

Continuous Improvement

Summary

Study Questions

References

Further Reading

Appendix (available online)

CHAPTER 15 THE EMPLOYMENT RELATIONSHIP
Introduction

Employment as an Economic Transaction

Perfect Competition

Imperfect Competition

Complex Contracting

Summary

Communication between Management and Workers

Communication from Management to Workers

Communication from Workers to Management

The Decision to Empower Workers

Improving Cooperation

From the Prisoner's Dilemma to Employment

Reputation and the Employment Relationship

Investing in Reputation

Summary

Personnel Economics in Practice

Study Questions

References

Further Reading

Appendix (available online)

GLOSSARY

INDEX