1. 1 Business Economics I Labor Relations and Team Production

2. 2 Plan of the topic 1. Introduction 2. What is a Team? 3. What does Team production mean and Why is it important? 4. Major problems in team production 5. Advantages and disadvantages of teams 6. Decision making and the degree of control

3. 3 Introduction Are the players of FC Barcelona a team? What about the group of people who attend a concert of Estopa? Are the persons who work at La Caixa a team? Is the army a team? Who is involved in the design of the new models at Toyota, for example? What is a team? Is teamwork and team production the same?

4. 4 What is a team? When do we speak of team work and/or team production? Complementarities: interdependence between the tasks performed by the team-members The product of the team is greater than the sum of the products of the individual members if they worked alone. Example: sport teams; an organization; surgeon + nurses + anaesthetist

5. 5 Major problems of teamwork I How do we pay team members? As a function of their contribution? How do we measure their contribution? When we have team production it is costly (difficult) to evaluate the contribution of each team member. Example Who in your team has contributed how much to doing the homework?

6. 6 Major problems of teamwork II Free riding (el problema del polizón): individual team members tend to exert lower effort. Why? Individual team members bear the full cost of their efforts BUT share the gains that accrue to the team Example: if you have worked hard on the homework, you have spent hours in reading and thinking. Everybody gets the high grade, however. If you didn’t do any work, you still get the grade of the team.

7. 7 Solving the problem - Control The free riding problem gives rise to the necessity to control the performance of the team members. Types of control systems: Unspecialized control (mutual control, changing turns) Professional services; the EU presidency Specialized control (there is a controller who is remunerated in relation to his control activity; residual payment in relation to team performance). Managers (regional sales manager gets a bonus related to regional sales).

8. 8 Disadvantages of Teams Coordination Collective decision making takes long Free riding: gets worse with the increase of the size of the team. Why? External manipulation Are the members working for the team or for their original departments? Conflict of interests between the manager and the team Who is actually in charge? Who benefits in case of success and who suffers in case of failure?

9. 9 Steps of decision-making I Initiation: Generation of proposals for resource utilization and structuring of contracts Ratification:Choice of decision to be implemented Implementation:Implementing the decision, i.e. acting according with the decision Monitoring:Performance measurement and implementation of rewards

10. 10 Steps of decision-making II Initiation: There should be a pricing policy Ratification:The price should be>=150 Euros Implementation: A salesman proposes a price of 151 Euros Monitoring:Total sales, profits, products returned, qualitative evaluations, etc.

11. 11 Steps of decision-making III Initiation & Implementation = Decision Management Ratification & Monitoring = Decision Control Basic Principle: If the decision maker does not bear the major wealth effects of their decisions, decision management and decision control will be held by different decision makers. Example: CEO and boards of directors

12. 12 Command & Control The manager tells employees what to do and controls whether employees have done what he said.

13. 13 Command & Control Example: No price less than 150 Euros should be charged by salesmen. Limitations: The decision of the manager may be wrong, inefficient or inapplicable because of a lack of specific information. The evaluation may be biased, based on wrong criteria or de- motivating for the team.

14. 14 Decision & Control The team proposes initiatives that are implemented only when accepted by the manager who then performs the control.

15. 15 Decision & Control Example: The Chief Executive Officer proposes a strategy to the shareholders. When they accept the strategy, the CEO implements the strategy and is controlled by the shareholders.

16. 16 Decision & Control Limitations: There is a risk of blockage when the management refuses the initiatives of the team. It can be difficult for the team to propose decisions that are acceptable by the management and by the team. It can be difficult for the manager to take decisions that he didn’t initiate (lack of knowledge, of appropriation). The management may be reluctant to evaluate negatively, because it is also his decisions.

17. 17 Controlled Autonomy The team proposes, decides and implements without management’s authority. The manager remains responsible for the evaluation.

18. 18 Controlled Autonomy Example: The Chief Executive Officer proposes a strategy to the shareholders. When they accept the strategy, the CEO implements the strategy and is controlled by the shareholders.

19. 19 Controlled Autonomy Limitations: The team may lack incentives to inform the management about its decisions. The management has not much influence on the decision- making process. He can appraise the team (positively or negatively) only a posteriori.

20. 20 Guided Autonomy The team is fully responsible for the decision-making process. The manager acts as a guide outside the team by imposing norms and standards.

21. 21 Guided Autonomy Examples: A franchised company. A spin-off company. A consulting company that is helping a firm in the decision-making process.

22. 22 Guided Autonomy Limitations: The architecture necessitates a common interest. It cannot manage a conflict of interest. It can be difficult for the management to be aware of the principles that, if followed by the team, will preserve convergence of interest. Change initiated by the management can be difficult to accept for the team.