Teams, Hierarchies, and Employee Ownership Model Results - PowerPoint PPT Presentation

Teams, Hierarchies, and Employee Ownership Karen F Bernhardt- Walther Introduction Teams, Hierarchies, and Employee Ownership Model Results Conclusion Karen F Bernhardt-Walther University of Chicago Booth School of Business February 25th, 2011

Teams, Employee participation is not just profit-sharing. Hierarchies, and Employee Ownership Karen F Bernhardt- Walther Care about sharing not only Introduction Model • Profit Results Conclusion but also • Information • Control • Decision rights � Understand firm’s internal environment and organization.

Teams, Illustration Hierarchies, and Employee Ownership Karen F Bernhardt- Walther Introduction Model Results Conclusion Design Surgery Production

Teams, Contribution Hierarchies, and Employee Ownership Karen F Bernhardt- Walther Introduction Rich baseline model of organizational design, driven by � Model what the firm does. Results Conclusion • Complexity of tasks matters. • Predictability of tasks matters. • Organizational design & managerial expertise required are affected.

Teams, Model: Knowledge, Problems, and the Firm Hierarchies, and Employee Ownership Knowledge (Agents) Karen F Bernhardt- Walther • 2 discrete units, 3 knowledge sets: { A } , { B } , { A, B } . Introduction • Cost: c A , c B , c AB . Model Results Conclusion

Teams, Model: Knowledge, Problems, and the Firm Hierarchies, and Employee Ownership Knowledge (Agents) Karen F Bernhardt- Walther • 2 discrete units, 3 knowledge sets: { A } , { B } , { A, B } . Introduction • Cost: c A , c B , c AB . Model Results Problem (Task, project) Conclusion • 3 problems: a , b , ab . • revenue if solved: v a , v b , v ab • can be attempted multiple times

Teams, Model: Knowledge, Problems, and the Firm Hierarchies, and Employee Ownership Knowledge (Agents) Karen F Bernhardt- Walther • 2 discrete units, 3 knowledge sets: { A } , { B } , { A, B } . Introduction • Cost: c A , c B , c AB . Model Results Problem (Task, project) Conclusion • 3 problems: a , b , ab . • revenue if solved: v a , v b , v ab • can be attempted multiple times Firm • Owns problem distribution: ( p a , p b , p ab ) . • Generates revenue by solving problems. Knowledge only input. • Buys access to knowledge. (Hires agents.)

Teams, Firm’s Optimization Problem Hierarchies, and Employee Ownership Karen F Question Bernhardt- Walther Which knowledge sets should attempt to solve the problems in Introduction which order given the distribution of problems? Model Results Notation Conclusion A knowledge sequence of the form K 1 → K 2 → ... → K l . Firm Optimization Problem � max value of problems solved { K 1 ,...,K l } ,l � − cost of knowledge sets .

Teams, The protocol of a knowledge sequence ... Hierarchies, and Employee corresponds to an organizational form Ownership Karen F Bernhardt- Walther Knowledge sequence Introduction Model A B AB A AB AB Results Organization Conclusion

Teams, The protocol of a knowledge sequence ... Hierarchies, and Employee corresponds to an organizational form Ownership Karen F Bernhardt- Walther Knowledge sequence Introduction Model A B AB A AB AB Results Organization Conclusion ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? Π = Π = Π = Firm owns 6 urns with problem distribution (p a , p b , p ab ) = ( 2 / 3 , 1 / 6 , 1 / 6 )

Teams, The protocol of a knowledge sequence ... Hierarchies, and Employee corresponds to an organizational form Ownership Karen F Bernhardt- Walther Knowledge sequence Introduction Model A B AB A AB AB Results Organization Conclusion A A A A A A a a ? a a ? ? ? ? ? ? ? ? ? ? ? ? ? Π = Π = Π = p a v A - c A Firm owns 6 urns with problem distribution (p a , p b , p ab ) = ( 2 / 3 , 1 / 6 , 1 / 6 )

Teams, The protocol of a knowledge sequence ... Hierarchies, and Employee corresponds to an organizational form Ownership Karen F Bernhardt- Walther Knowledge sequence Introduction Model A B AB A AB AB Results Organization Conclusion A A A A A A A A A A A A a a ? a a ? a a ? a a ? ? ? ? ? ? ? Π = Π = Π = p a v A p a v A - c A - c A Firm owns 6 urns with problem distribution (p a , p b , p ab ) = ( 2 / 3 , 1 / 6 , 1 / 6 )

Teams, The protocol of a knowledge sequence ... Hierarchies, and Employee corresponds to an organizational form Ownership Karen F Bernhardt- Walther Knowledge sequence Introduction Model A B AB A AB AB Results Organization Conclusion A A A A A A A A A A A AB AB A AB AB AB AB a a ? a a ? a a ? a a ? a a b a a ab Π = Π = Π = p a v A p a v A p a v A +p b v B + p ab v AB - c A - c A - c AB Firm owns 6 urns with problem distribution (p a , p b , p ab ) = ( 2 / 3 , 1 / 6 , 1 / 6 )

Teams, The protocol of a knowledge sequence ... Hierarchies, and Employee corresponds to an organizational form Ownership Karen F Bernhardt- Walther Knowledge sequence Introduction Model A B AB A AB AB Results Organization Conclusion B B A A A A A A A A A A A AB AB A AB AB AB AB a a b a a ? a a ? a a ? a a b a a ab Π = Π = Π = p a v A +p b v B p a v A p a v A +p b v B + p ab v AB - c A - (1- p a )c B - c A - c AB Firm owns 6 urns with problem distribution (p a , p b , p ab ) = ( 2 / 3 , 1 / 6 , 1 / 6 )

Teams, The protocol of a knowledge sequence ... Hierarchies, and Employee corresponds to an organizational form Ownership Karen F Bernhardt- Walther Knowledge sequence Introduction Model A B AB A AB AB Results Organization Conclusion AB AB B B A A A A A A A A A A A AB AB A AB AB AB AB a a b a a ? a a b a a ab a a b a a ab Π = Π = Π = p a v A +p b v B p a v A +p b v B + p ab v AB p a v A +p b v B + p ab v AB - c A - (1- p a )c B - c A - (1- p a )c AB - c AB Firm owns 6 urns with problem distribution (p a , p b , p ab ) = ( 2 / 3 , 1 / 6 , 1 / 6 )

Teams, The protocol of a knowledge sequence ... Hierarchies, and Employee corresponds to an organizational form Ownership Karen F Bernhardt- Walther Introduction Knowledge sequence Model A B AB A AB AB Results Organization Conclusion AB AB AB B B A A A A A A A A A A A A AB AB AB AB AB AB a a b a a ab a a b a a ab a a b a a ab Π = Π = Π = p a v A +p b v B + p ab v AB p a v A +p b v B + p ab v AB p a v A +p b v B + p ab v AB - c A - (1- p a )c B - p ab c AB - c A - (1- p a )c AB - c AB Firm owns 6 urns with problem distribution (p a , p b , p ab ) = ( 2 / 3 , 1 / 6 , 1 / 6 )

Teams, The protocol of a knowledge sequence ... Hierarchies, and Employee corresponds to an organizational form Ownership Karen F Bernhardt- Walther Knowledge sequence Introduction Model A B AB A AB AB Results Organization Conclusion AB AB AB B B A A A A A A A A A A A AB AB A AB AB AB AB ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? Multilayer Hierarchy Flat Hierarchy Team/Expert Firm owns 6 urns with problem distribution (p a , p b , p ab ) = ( 2 / 3 , 1 / 6 , 1 / 6 ) Skip to results

Teams, Potentially Optimal Knowledge Arrangements ... Hierarchies, and Employee Ownership Contingency Sequence Revenue - Cost Karen F Bernhardt- Walther no production Introduction A Model B Results Conclusion � Strategy for firm with ( p a , p b , p ab ) : Compute all potential profits, choose maximum.

Teams, Potentially Optimal Knowledge Arrangements ... Hierarchies, and Employee Ownership Contingency Sequence Revenue - Cost Karen F Bernhardt- Walther no production Introduction A Model B Results A → B Conclusion B → A � Strategy for firm with ( p a , p b , p ab ) : Compute all potential profits, choose maximum.

Teams, Potentially Optimal Knowledge Arrangements ... Hierarchies, and Employee Ownership Contingency Sequence Revenue - Cost Karen F Bernhardt- Walther no production Introduction A Model B Results A → B Conclusion B → A AB � Strategy for firm with ( p a , p b , p ab ) : Compute all potential profits, choose maximum.

Teams, Potentially Optimal Knowledge Arrangements ... Hierarchies, and Employee Ownership Contingency Sequence Revenue - Cost Karen F Bernhardt- Walther no production Introduction A Model B Results A → B Conclusion B → A AB A → AB B → AB � Strategy for firm with ( p a , p b , p ab ) : Compute all potential profits, choose maximum.

Teams, Potentially Optimal Knowledge Arrangements ... Hierarchies, and Employee Ownership Contingency Sequence Revenue - Cost Karen F Bernhardt- Walther no production Introduction A Model B Results A → B Conclusion B → A AB A → AB B → AB A → B → AB B → A → AB � Strategy for firm with ( p a , p b , p ab ) : Compute all potential profits, choose maximum.

Teams, Potentially Optimal Knowledge Arrangements ... Hierarchies, and Employee Ownership Contingency Sequence Revenue - Cost Karen F Bernhardt- Walther no production 0 − 0 Introduction A Model B Results A → B Conclusion B → A AB A → AB B → AB A → B → AB B → A → AB � Strategy for firm with ( p a , p b , p ab ) : Compute all potential profits, choose maximum.