Intro to Management, Spring 2015
Sample answers
Homework #1
1. Although I don’t want to say it’s a waste of time and effort, I believe that a formalized standard Hippocratic Oath for managers would not be that useful to the world. The authors use the term Hippocratic Oath that came from ancient Greece for doctors to compare the code of conducts for managers. Even by just reading the title, I thought these authors are taking this too far. I believe it was inappropriate for the authors to keep comparing doctors and lawyers to mangers. In other words, for now it might be too strong to say that we should make managers same kind of profession as doctors and lawyers. According to the commonly found internet dictionary, the definition of profession includes “a calling requiring specialized knowledge and often long and intensive academic preparation”. In the reading they do mention that there are further education that the society can mandate for people to be managers, but for now, MBA is enough and to be more precise, anyone can be a CEO of a small company or a small shop without “long and intensive academic preparation”. Perhaps managers can gain certain lessons or learn how to run a business mostly through experience and being involved in that field without intensive prior training. One can say that doctors and lawyers do need experience as well, but even before they are allowed to gain experience, doctors and lawyers need (or to be more precise must have) intense and thorough education and training.
To further the claim, unlike the field of medicines and laws, managing enterprises does not directly involve peoples’ lives nor has explicit short term results. If an immoral doctor chooses to ignore the code of conduct, which would be according to the reading, “doctors seek to further the health of their patients”, then those patients’ lives are directly involved and are at risk. For example, there might be a doctor who had been lobbied by a certain pharmaceutical company for the purpose of prescribing their company’s medicines more. This doctor might decide to prescribe medicines that might not be optimal for the patient’s conditions and thus making a patient’s health at risk. If this code is misconducted it can be visibly shown through patient’s health. However, the code of conduct for managers, “managers must be agents of society’s interest” is very vague, debatable and to simply put, does not directly involve a person dying. It is more like saying human beings should live morally with society in mind. I am not saying that managers don’t need professionalism at all. They certainly do need it but it cannot be measured or clearly be seen or even agreed like that of doctors and lawyers’ codes of conduct. I highly doubt that through this oath managers would behave morally and this will curb misconduct (authors’ claim). This is because I believe people who are moral will be moral without this conduct but people who aren’t moral will not change because of this oath. Even the most “professionalism” required job, which I believe are doctors, some can still be immoral just like the example given above. Hippocratic Oath for managers are a bit of an exaggeration just like how morality of human beings are commonly accepted and no one really makes it an “Oath”.
2. (a) There are two ways.
First option:
You and your child’s information flow should be to some extent equal which means you and your child should not have anything to hide to start with. You need to explain to your child the ultimate purpose of doing his homework and why you’re so desperate to make him do his homework. Maybe he currently doesn’t understand its value for his future because no one has ever told him about it. You might think he’s too young but you also need to approach to him with honesty and give him a feeling that you do really love him and care for his future and he is old enough to think for his future. And there’s the most important step to this process. You need to tell him that you and your child should have nothing to hide. So if he doesn’t do his homework on his own, you need to make sure that he says he didn’t do his homework. And lastly, you need to sit down with your child and talk about why he did not do his homework. Even in this process you need to encourage your child to tell the truth, such as “I didn’t have enough time” or “It was too difficult”, and according to his answers, you need to take the next step. If he says he didn’t have enough time, you need to help him to make a time schedule and teach him how to allot his time in doing things. If it was too difficult for him, then you need to find a way to encourage him that learning is fun and have him approach in a much easier way. In a long run, when your child is 100% honest with you, he himself would not want to say that he did not do his homework to you, so ultimately he will do his homework.
Second option:
If talking to him and telling him the truth about his life doesn’t work, in other words if his future does not motivate him to do his homework, you need to give incentives to your child. Depending on children, receiving compliments by their parents and feeling that their parents are proud of them would be enough. You can begin to praise him and give compliments to him after he has completed his homework. For some children, there needs to be physical compensation such as allowing them to go out and hang out his friend for certain hours or even giving them cash. But there’s an important point to this. Your child might lie to you or cheat off of his friend’s homework, so you need to make sure that he understands that if he wants these physical compensations, that his actions should be monitored. If he agrees to do this, then you need to take time and actually monitor him, and once he has accomplished doing his homework, you need to give him the promised compensation. But this has to be the last option because you cannot always incentivize him with physical objects. If those incentives are gone, he would start not doing his homework again. I believe it is best to motivate him instead of incentivizing with something that would not disappear and last for his lifetime which would be the first option.
(b) According to the second reading on agency theory, “agency problem arises when the desires or goals of the principal and agent conflict and when it is difficult or expensive for the principal to verify what the agent is actually doing”. Through having truthful and honest conversation, principle (mother) and agent (son) can come to have same desires and goals, which would be completing homework for the son’s (or his own) future. When their goals are aligned, understood, and agreed upon each other, then one reason for conflict would be gone. Also by building trust with each other, mother doesn’t have to doubt whether he’s actually doing homework or not and just believe what the son says is the truth. Then it doesn’t cost extra effort or time to actually verify whether the son did his homework or not or have cheated.
Having read through the first reading, I came to believe in strategic competitive action which focuses on long-term sustainable growth over tactical competitive action which values short-term earnings and returns. When the son does his homework because of short-term earnings which would be physical compensations like cash, he would be willing to quit whenever that incentives disappear or when he believes is not enough. Once he understands the long-term sustainable growth he would have in the future and has motivation for being responsible for his work and doing his homework, he will actually be able to enter into a good university as his mother desires.
I believe entering into a good university requires one to take behavior-oriented actions rather than outcome-oriented actions. In other words, process is more important than the results. This is what the mother has to constantly remind her son. There will be good results if you try your best and put time and effort. One’s time, effort and energy will definitely be paid off and be rewarded. So if he does his homework by cheating, that’s only to show his mother that there’s an outcome, but this is not what he should be focusing on. Even if he cannot complete his homework perfectly, it is more important to put time and effort in doing the homework on his own. This is why it is important for the mother to fully explain this to his son.
3. I do believe agency theory is somewhat manipulative. This is obvious because the principal and agent relationship seems not horizontal but vertical. Just by looking at the definition, “agency theory is a theory that looks at how to ensure that agents act in the best interests of the principals of an organization”, I can see that this theory is very manipulative. Also, even when looking at agency problems, it predominantly focuses on how much agents can fail the principal. This is based on the assumption that there is asymmetrical information between agents and principals, that agents want to fulfill self-interests and that they are risk averse. Agency theory seems to overlook that principals can actually cheat on agents as well. This also shows that agency theory is very manipulative.
However, we cannot just get rid of agency theory because it is almost impossible to run a business, especially big firms without hiring professional managers. Then, it would be best to minimize the so called manipulation. In order for it to be less manipulative I believe that there should be negotiations. The contract should say something like agents act in the best interests of the agent themselves and the principals. If their interests could be aligned with each other’s, then it would no longer sound too manipulative. This could be achieved thorough agents holding stocks (becoming shareholders- or making agents part owners through compensation packages) of the principle’s firm. If the agent’s achievements are directly involved with his own stocks, then he would feel that he is working for himself to maximize his own profit. This would also lead to profiting the principle. In other words, if what the agent does to maximize his own profit means that the principle is also benefiting, the principle would no longer have to be so manipulative and would not have monitor every aspect or cast doubt on what the agent does. In this sense, agents would have much freedom in running the company and will do a better job keeping in mind successful business running means maximizing his own profits as well. Also, on top of incentivizing them (with stocks- economically), if principals can find ways to “motivate” the agents (psychologically), manipulation would not be so dominant in agent and principal relationship. Lastly, in addition to incentivizing and motivating agents, it would be best for the agents and principles to have corporate culture that share similar values and beliefs. If there is an increase in the overlap in how much they share their beliefs, this would also help to reduce the conflict of interests. This will eventually help create less manipulative environment for agents.
In conclusion, different social status or positions are apparent in today’s society. Then, manipulation is somewhat unavoidable. Incentivizing, motivating and minimizing the gap in their values and beliefs would be a great way to start minimizing manipulation, or solving agency problem in general. If principles and agents can negotiate with each other and can be cooperative with each other, this will lessen the “manipulation” problem, and also make overall business successful.
4. (a) The coverage of the phenomenon on these two sets of readings have several significant differences. First and foremost, the biggest difference between agency theory and motivation is that agency theory is dealing with economics and motivation is dealing with psychology. Agency theory readings cover how the principals can maximize their benefits (economically) through agents. Even solutions for some of the agency problems were based on economics such as incentivizing agents through making senior executives part owners of the firm through their compensation packages. On the other hand, for the motivation readings, they deal with psychological aspects of employees. Their ideas were 1st reading: fulfilling employees four basic emotional drives (the drive to acquire, bond, comprehend, and defend) through organizational lever (the reward system, culture, job design, and performance-management and resource-allocation processes) and how that increases motivation of employees. 2nd reading: Increasing motivator factors such as achievement, recognition for achievement, the work itself, responsibility, and growth or advancement. Unlike agency theory readings where they incentivize workers through some kind of physical benefits, readings on motivation focuses on motivating workers with interior psychological feelings? as mentioned above.
Secondly, agency theory focuses more on the theory itself which means they are more theoretical while motivation focuses on empirical evidences which means they are more analytical. Agency theory is a “THEORY”. When dealing with this theory, none of the readings of the agency theory has mathematical data (mention of specific numbers or percentage related graphs or charts) because it cannot be “proven” right or wrong. However, for motivation theories, because they can support their ideas with empirical experiments (and they have), they came up with graphs and charts to prove their claims.
Thirdly, agency theory related readings cover various existing problems related to agency theory. They mention many of the prevalent problems that can be caused by agency theory and try to come up with the solutions to the problems. However, for motivation readings, they do not mention problems or negative side effects of their claims. They describe specific methods (detailed steps and processes managers should follow for the second motivation reading), or the ways in which managers can increase the motivation of the workers. Motivation readings seem like it was written in order to persuade the readers (managers) while agency theory readings were written to discuss about the theory itself.
Lastly, two readings on motivation make distinctive claims while two readings on agency theory mainly cover the same ideas. For motivation readings, their claims are significantly different in the sense that their approaching methods were different. First reading for motivation throws the idea of levers of motivation that are matched with basic needs while the second reading for motivation focuses on differentiating hygiene and motivator factors. Contrarily, both readings on agency theory discusses similar concepts such as agency problems and distinction between positivist stream and principal-agent stream.
(b) Regarding agency theory readings, the authors mention that there are controversies on how agency theory is contributed. For example, proponents like Ross argued that examples of agency are universal. Perrow claimed that agency theory addresses no clear problems. And Hirsch and Friedman called is excessively narrow, focusing only on stock price. On the contrary, when the motivation readings address ‘increasing motivation of the employees’ it is very clearly described in what aspects employees will change when their motivation goes up, and how those changes in workers will contribute to the success of the company. There are no controversies as to the authors’ arguments nor do they try to mention ideas that might go against their opinions.
Finally, and perhaps most importantly, while discussing agency theories and its problems, they make assumptions that there is asymmetrical information between agents and principals, agents are risk averse and that they seek for their self-interests only. However, for the motivation readings, it does not presume that this is the case but rather principals (managers) are trying to find ways to motivate agents (employees). In this sense, agent and principal relationship of agency theory is somewhat hostile (thinking of and for themselves) while for motivation, principal and agent are cooperating in order to motivate employees that will lead to making the business more successful.
Sample answers
Homework #1
1. Although I don’t want to say it’s a waste of time and effort, I believe that a formalized standard Hippocratic Oath for managers would not be that useful to the world. The authors use the term Hippocratic Oath that came from ancient Greece for doctors to compare the code of conducts for managers. Even by just reading the title, I thought these authors are taking this too far. I believe it was inappropriate for the authors to keep comparing doctors and lawyers to mangers. In other words, for now it might be too strong to say that we should make managers same kind of profession as doctors and lawyers. According to the commonly found internet dictionary, the definition of profession includes “a calling requiring specialized knowledge and often long and intensive academic preparation”. In the reading they do mention that there are further education that the society can mandate for people to be managers, but for now, MBA is enough and to be more precise, anyone can be a CEO of a small company or a small shop without “long and intensive academic preparation”. Perhaps managers can gain certain lessons or learn how to run a business mostly through experience and being involved in that field without intensive prior training. One can say that doctors and lawyers do need experience as well, but even before they are allowed to gain experience, doctors and lawyers need (or to be more precise must have) intense and thorough education and training.
To further the claim, unlike the field of medicines and laws, managing enterprises does not directly involve peoples’ lives nor has explicit short term results. If an immoral doctor chooses to ignore the code of conduct, which would be according to the reading, “doctors seek to further the health of their patients”, then those patients’ lives are directly involved and are at risk. For example, there might be a doctor who had been lobbied by a certain pharmaceutical company for the purpose of prescribing their company’s medicines more. This doctor might decide to prescribe medicines that might not be optimal for the patient’s conditions and thus making a patient’s health at risk. If this code is misconducted it can be visibly shown through patient’s health. However, the code of conduct for managers, “managers must be agents of society’s interest” is very vague, debatable and to simply put, does not directly involve a person dying. It is more like saying human beings should live morally with society in mind. I am not saying that managers don’t need professionalism at all. They certainly do need it but it cannot be measured or clearly be seen or even agreed like that of doctors and lawyers’ codes of conduct. I highly doubt that through this oath managers would behave morally and this will curb misconduct (authors’ claim). This is because I believe people who are moral will be moral without this conduct but people who aren’t moral will not change because of this oath. Even the most “professionalism” required job, which I believe are doctors, some can still be immoral just like the example given above. Hippocratic Oath for managers are a bit of an exaggeration just like how morality of human beings are commonly accepted and no one really makes it an “Oath”.
2. (a) There are two ways.
First option:
You and your child’s information flow should be to some extent equal which means you and your child should not have anything to hide to start with. You need to explain to your child the ultimate purpose of doing his homework and why you’re so desperate to make him do his homework. Maybe he currently doesn’t understand its value for his future because no one has ever told him about it. You might think he’s too young but you also need to approach to him with honesty and give him a feeling that you do really love him and care for his future and he is old enough to think for his future. And there’s the most important step to this process. You need to tell him that you and your child should have nothing to hide. So if he doesn’t do his homework on his own, you need to make sure that he says he didn’t do his homework. And lastly, you need to sit down with your child and talk about why he did not do his homework. Even in this process you need to encourage your child to tell the truth, such as “I didn’t have enough time” or “It was too difficult”, and according to his answers, you need to take the next step. If he says he didn’t have enough time, you need to help him to make a time schedule and teach him how to allot his time in doing things. If it was too difficult for him, then you need to find a way to encourage him that learning is fun and have him approach in a much easier way. In a long run, when your child is 100% honest with you, he himself would not want to say that he did not do his homework to you, so ultimately he will do his homework.
Second option:
If talking to him and telling him the truth about his life doesn’t work, in other words if his future does not motivate him to do his homework, you need to give incentives to your child. Depending on children, receiving compliments by their parents and feeling that their parents are proud of them would be enough. You can begin to praise him and give compliments to him after he has completed his homework. For some children, there needs to be physical compensation such as allowing them to go out and hang out his friend for certain hours or even giving them cash. But there’s an important point to this. Your child might lie to you or cheat off of his friend’s homework, so you need to make sure that he understands that if he wants these physical compensations, that his actions should be monitored. If he agrees to do this, then you need to take time and actually monitor him, and once he has accomplished doing his homework, you need to give him the promised compensation. But this has to be the last option because you cannot always incentivize him with physical objects. If those incentives are gone, he would start not doing his homework again. I believe it is best to motivate him instead of incentivizing with something that would not disappear and last for his lifetime which would be the first option.
(b) According to the second reading on agency theory, “agency problem arises when the desires or goals of the principal and agent conflict and when it is difficult or expensive for the principal to verify what the agent is actually doing”. Through having truthful and honest conversation, principle (mother) and agent (son) can come to have same desires and goals, which would be completing homework for the son’s (or his own) future. When their goals are aligned, understood, and agreed upon each other, then one reason for conflict would be gone. Also by building trust with each other, mother doesn’t have to doubt whether he’s actually doing homework or not and just believe what the son says is the truth. Then it doesn’t cost extra effort or time to actually verify whether the son did his homework or not or have cheated.
Having read through the first reading, I came to believe in strategic competitive action which focuses on long-term sustainable growth over tactical competitive action which values short-term earnings and returns. When the son does his homework because of short-term earnings which would be physical compensations like cash, he would be willing to quit whenever that incentives disappear or when he believes is not enough. Once he understands the long-term sustainable growth he would have in the future and has motivation for being responsible for his work and doing his homework, he will actually be able to enter into a good university as his mother desires.
I believe entering into a good university requires one to take behavior-oriented actions rather than outcome-oriented actions. In other words, process is more important than the results. This is what the mother has to constantly remind her son. There will be good results if you try your best and put time and effort. One’s time, effort and energy will definitely be paid off and be rewarded. So if he does his homework by cheating, that’s only to show his mother that there’s an outcome, but this is not what he should be focusing on. Even if he cannot complete his homework perfectly, it is more important to put time and effort in doing the homework on his own. This is why it is important for the mother to fully explain this to his son.
3. I do believe agency theory is somewhat manipulative. This is obvious because the principal and agent relationship seems not horizontal but vertical. Just by looking at the definition, “agency theory is a theory that looks at how to ensure that agents act in the best interests of the principals of an organization”, I can see that this theory is very manipulative. Also, even when looking at agency problems, it predominantly focuses on how much agents can fail the principal. This is based on the assumption that there is asymmetrical information between agents and principals, that agents want to fulfill self-interests and that they are risk averse. Agency theory seems to overlook that principals can actually cheat on agents as well. This also shows that agency theory is very manipulative.
However, we cannot just get rid of agency theory because it is almost impossible to run a business, especially big firms without hiring professional managers. Then, it would be best to minimize the so called manipulation. In order for it to be less manipulative I believe that there should be negotiations. The contract should say something like agents act in the best interests of the agent themselves and the principals. If their interests could be aligned with each other’s, then it would no longer sound too manipulative. This could be achieved thorough agents holding stocks (becoming shareholders- or making agents part owners through compensation packages) of the principle’s firm. If the agent’s achievements are directly involved with his own stocks, then he would feel that he is working for himself to maximize his own profit. This would also lead to profiting the principle. In other words, if what the agent does to maximize his own profit means that the principle is also benefiting, the principle would no longer have to be so manipulative and would not have monitor every aspect or cast doubt on what the agent does. In this sense, agents would have much freedom in running the company and will do a better job keeping in mind successful business running means maximizing his own profits as well. Also, on top of incentivizing them (with stocks- economically), if principals can find ways to “motivate” the agents (psychologically), manipulation would not be so dominant in agent and principal relationship. Lastly, in addition to incentivizing and motivating agents, it would be best for the agents and principles to have corporate culture that share similar values and beliefs. If there is an increase in the overlap in how much they share their beliefs, this would also help to reduce the conflict of interests. This will eventually help create less manipulative environment for agents.
In conclusion, different social status or positions are apparent in today’s society. Then, manipulation is somewhat unavoidable. Incentivizing, motivating and minimizing the gap in their values and beliefs would be a great way to start minimizing manipulation, or solving agency problem in general. If principles and agents can negotiate with each other and can be cooperative with each other, this will lessen the “manipulation” problem, and also make overall business successful.
4. (a) The coverage of the phenomenon on these two sets of readings have several significant differences. First and foremost, the biggest difference between agency theory and motivation is that agency theory is dealing with economics and motivation is dealing with psychology. Agency theory readings cover how the principals can maximize their benefits (economically) through agents. Even solutions for some of the agency problems were based on economics such as incentivizing agents through making senior executives part owners of the firm through their compensation packages. On the other hand, for the motivation readings, they deal with psychological aspects of employees. Their ideas were 1st reading: fulfilling employees four basic emotional drives (the drive to acquire, bond, comprehend, and defend) through organizational lever (the reward system, culture, job design, and performance-management and resource-allocation processes) and how that increases motivation of employees. 2nd reading: Increasing motivator factors such as achievement, recognition for achievement, the work itself, responsibility, and growth or advancement. Unlike agency theory readings where they incentivize workers through some kind of physical benefits, readings on motivation focuses on motivating workers with interior psychological feelings? as mentioned above.
Secondly, agency theory focuses more on the theory itself which means they are more theoretical while motivation focuses on empirical evidences which means they are more analytical. Agency theory is a “THEORY”. When dealing with this theory, none of the readings of the agency theory has mathematical data (mention of specific numbers or percentage related graphs or charts) because it cannot be “proven” right or wrong. However, for motivation theories, because they can support their ideas with empirical experiments (and they have), they came up with graphs and charts to prove their claims.
Thirdly, agency theory related readings cover various existing problems related to agency theory. They mention many of the prevalent problems that can be caused by agency theory and try to come up with the solutions to the problems. However, for motivation readings, they do not mention problems or negative side effects of their claims. They describe specific methods (detailed steps and processes managers should follow for the second motivation reading), or the ways in which managers can increase the motivation of the workers. Motivation readings seem like it was written in order to persuade the readers (managers) while agency theory readings were written to discuss about the theory itself.
Lastly, two readings on motivation make distinctive claims while two readings on agency theory mainly cover the same ideas. For motivation readings, their claims are significantly different in the sense that their approaching methods were different. First reading for motivation throws the idea of levers of motivation that are matched with basic needs while the second reading for motivation focuses on differentiating hygiene and motivator factors. Contrarily, both readings on agency theory discusses similar concepts such as agency problems and distinction between positivist stream and principal-agent stream.
(b) Regarding agency theory readings, the authors mention that there are controversies on how agency theory is contributed. For example, proponents like Ross argued that examples of agency are universal. Perrow claimed that agency theory addresses no clear problems. And Hirsch and Friedman called is excessively narrow, focusing only on stock price. On the contrary, when the motivation readings address ‘increasing motivation of the employees’ it is very clearly described in what aspects employees will change when their motivation goes up, and how those changes in workers will contribute to the success of the company. There are no controversies as to the authors’ arguments nor do they try to mention ideas that might go against their opinions.
Finally, and perhaps most importantly, while discussing agency theories and its problems, they make assumptions that there is asymmetrical information between agents and principals, agents are risk averse and that they seek for their self-interests only. However, for the motivation readings, it does not presume that this is the case but rather principals (managers) are trying to find ways to motivate agents (employees). In this sense, agent and principal relationship of agency theory is somewhat hostile (thinking of and for themselves) while for motivation, principal and agent are cooperating in order to motivate employees that will lead to making the business more successful.