Passage from: Hyde, “Pay for Results…” Pay for performance systems based on results make several key assumptions. First, that the organization has readily measurable results that can be transferred from organizational levels to managerial levels and ultimately work groups and individuals. Secondly, such systems assume that managers can and will make both fair and brutally candid assessments of their subordinates. Finally, they assume that individuals will be motivated by pay levels that differentiate between those who carry the true workload of the organization and those— recently identified by the Wall Street Journal— as employees who are “actively disengaged” at work. The latter concept is perhaps a new way of looking at the attitudes of those who once might be called “poor performers” but are in fact individuals who see a job as time spent on the job as opposed to time spent doing significant work. These assumptions shed light on which issues Important to agency theory? (next slide)

Agency Theory as the basis of Market Metaphor Contract* between principal and agent as the focus of the metaphor –Contract can be real or figurative (implied) Related Issues: Goal incongruity Information asymmetry Cost of monitoring Shirking Moral hazard Adverse selection Incentive Behavior-based vs. output based control From last slide Question: Does the length of the contract (short-, long-term) matter in using Agency theory in analyzing public Organizations? Why/how?

Prisons, Markets, Accountability: “The Prison Bazaar” “…Depending on whom you ask, it was either blackmail or the free market's finest hour. Holdenville and the state struck a 20-year deal, and in April 1996 the prison began filling up with Oklahoma inmates. “ Who is accountable to whom? Which of these principal-agent deals reflect accountability? –State of Ok/Hold’le city gov? –Other states/ Hold’le city gov –Citizens of OK/Hold’le city gov –Hold’le city gov/vendor –Citizens of other states/vendor Other accountability issues? Problems? To what extent are public officials acting as “political entrepreneurs”? Is that good or bad?

Chen, “Rethinking NPM:” Some terminology and applications Some terms: –New public management –(environmental) determinism –Dialectic logic –Politics- administration dichotomy –(strategically crafted) rhetorical persuasion How would advocates of NPR principles react to the “prison bazaar” situations? [Assume you are a critic of the NPR in general and of “prison bazaar” situations in particular. –How does the political metaphor offer you ammunition to argue against this arrangement? – Explain how the organic metaphor may appear to support the arrangement, but also point out the weaknesses in those “organic” arguments –Do the issues in “The Prison Bazaar” speak to political problems or managerial problems? Why is this relevant to the dialectical metaphor?] These questions are intended to help you better understand the Chen article

Thus far in the course, we have surveyed seven perspectives on organizations 1. machine, 2. organic-internal, 3. organic-open system and contingency theory, 4. organic-natural selection, 5. organic-shared futures, 6. brain, and 7. market-agency theory] used to diagnose weaknesses as well as strengths of organizations in particular situations. Select TWO of these perspectives to diagnose the organization situation depicted in “Can this Airport Be Saved?” For each, be sure to stress the new or additional insight gained (or “value added”) after your more basic justification for selecting each. 20 point total.Can this Airport Be Saved SCORING: justification a (5 pts) insight a (5 pts) justification b (5 pts) insight b (5 pts) [Sample diagnostic question]