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Uncertainty and Organization Design

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  • Avner Ben-Ner

    ()

  • Fanmin Kong

    ()

  • Stephanie Lluis

    ()

Abstract

The task environment, characterized by the degree of complexity, variability, and routine of workers’ tasks, creates varying degrees of asymmetric information between workers and their supervisors, as well as poses varying degrees of difficulty for supervisors and workers in making correct decisions. Thus the task environment generates internal uncertainty, some of which is under the control of workers, in contrast with external uncertainty, which arises from the market and is beyond their control. The measures that address problems associated with internal uncertainty (including incentives, delegation of decision-making to workers, monitoring by supervisors and internal labor markets) are elements of organization design. We explore theoretically and empirically the relationship between uncertainty and organization design, expanding on Baker and Jorgensen’s (2003) idea that the risk-incentives relationship depends on the nature and sources of risk and Prendergast’s (2002a) idea that incentive pay is not a direct response to a firm’s task attributes but is part of a broader organization design that includes additional complementary and substitutable elements.

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Paper provided by Human Resources and Labor Studies, University of Minnesota (Twin Cities Campus) in its series Working Papers with number 0107.

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Handle: RePEc:hrr:papers:0107

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  1. Carmichael, H Lorne, 1988. "Incentives in Academics: Why Is There Tenure?," Journal of Political Economy, University of Chicago Press, vol. 96(3), pages 453-72, June.
  2. Demougin, Dominique & Fluet, Claude, 2001. "Monitoring versus incentives," European Economic Review, Elsevier, vol. 45(9), pages 1741-1764, October.
  3. Oliver Hart & John Moore, 2005. "On the Design of Hierarchies: Coordination versus Specialization," Journal of Political Economy, University of Chicago Press, vol. 113(4), pages 675-702, August.
  4. repec:eme:rlepps:v:18:y:1999:i:1999:p:177-242 is not listed on IDEAS
  5. Susan Athey & Scott Stern, 1998. "An Empirical Framework for Testing Theories About Complimentarity in Organizational Design," NBER Working Papers 6600, National Bureau of Economic Research, Inc.
  6. Ben-Ner, A. & Montias, J.M. & Neuberger, E., 1993. "Basic Issues in Organizations: A Comparative Perspective," Papers 93-01, Minnesota - Industrial Relations Center.
  7. David H. Autor & Frank Levy & Richard J. Murnane, 2003. "The Skill Content Of Recent Technological Change: An Empirical Exploration," The Quarterly Journal of Economics, MIT Press, vol. 118(4), pages 1279-1333, November.
  8. Milgrom, Paul & Roberts, John, 1995. "Complementarities and fit strategy, structure, and organizational change in manufacturing," Journal of Accounting and Economics, Elsevier, vol. 19(2-3), pages 179-208, April.
  9. Francine Lafontaine & Margaret E. Slade, 1998. "Incentive Contracting and the Franchise Decision," NBER Working Papers 6544, National Bureau of Economic Research, Inc.
  10. Grandori, Anna, 1991. "Negotiating efficient organization forms," Journal of Economic Behavior & Organization, Elsevier, vol. 16(3), pages 319-340, December.
  11. Ben-Ner, A. & Jones, D., 1992. "An New Conceptual Framework for the Analysis of the Impact of Employees Participation, Profit Sharing and Ownership on Firm Performance," Papers 92-10, Minnesota - Industrial Relations Center.
  12. Rebitzer, James B., 1995. "Is there a trade-off between supervision and wages? An empirical test of efficiency wage theory," Journal of Economic Behavior & Organization, Elsevier, vol. 28(1), pages 107-129, September.
  13. Timothy F. Bresnahan & Erik Brynjolfsson & Lorin M. Hitt, 1999. "Information Technology, Workplace Organization and the Demand for Skilled Labor: Firm-Level Evidence," NBER Working Papers 7136, National Bureau of Economic Research, Inc.
  14. W. Bentley MacLeod & Daniel Parent, 1998. "Job Characteristics and the Form of Compensation," CIRANO Working Papers 98s-08, CIRANO.
  15. Neal, Derek, 1993. "Supervision and Wages across Industries," The Review of Economics and Statistics, MIT Press, vol. 75(3), pages 409-17, August.
  16. Canice Prendergast, 1999. "The Provision of Incentives in Firms," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 7-63, March.
  17. Jed DeVaro & Fidan Ana Kurtulus, 2010. "An An Empirical Analysis of Risk, Incentives and the Delegation of Worker Authority," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 63(4), pages 641-661, July.
  18. Paul Osterman, 1994. "How common is workplace transformation and who adopts it?," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 47(2), pages 173-188, January.
  19. Canice Prendergast, 2002. "The Tenuous Trade-off between Risk and Incentives," Journal of Political Economy, University of Chicago Press, vol. 110(5), pages 1071-1102, October.
  20. Lindbeck, Assar & Snower, Dennis J, 2000. "Multitask Learning and the Reorganization of Work: From Tayloristic to Holistic Organization," Journal of Labor Economics, University of Chicago Press, vol. 18(3), pages 353-76, July.
  21. Carmichael, H Lorne & MacLeod, W Bentley, 2000. "Worker Cooperation and the Ratchet Effect," Journal of Labor Economics, University of Chicago Press, vol. 18(1), pages 1-19, January.
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Cited by:
  1. Jed Devaro & Fidan Ana Kurtulus, 2011. "An Empirical Analysis of Risk, Incentives and The Delegation of Worker Authority," UMASS Amherst Economics Working Papers 2011-13, University of Massachusetts Amherst, Department of Economics.
  2. Fidan Ana Kurtulus & Douglas Kruse & Joseph Blasi, 2011. "Worker Attitudes Towards Employee Ownership, Profit Sharing and Variable Pay," UMASS Amherst Economics Working Papers 2011-15, University of Massachusetts Amherst, Department of Economics.

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