Our emphasis will be on for-profit firms, but much of what we cover will also apply to not-for-profit organizations, such as the university students in this class are attending. In intermediate microeconomics the student is confronted with a theory of the firm that is totally symmetric with the theory of the consumer. In that theory the firm is a decision maker whose objective is to maximize profit. The theory is meant to apply equally well to a small proprietorship (where the theory may be a good approximation of reality) and to a very large corporation (where the theory abstracts entirely from many interesting economic issues of the goings on inside the firm that will be of concern in this course).
Even in a small family run business or a modestly sized partnership, there are multiple decision makers whose preferences need not agree. How do those preferences get aggregated into a coherent preference for the entire organization? One possible way of doing this is to make one person the dictator, in which case that person’s preferences matter for the organization while none of the other organization members’ preferences matter. Recognizing that dictatorship produces coherent decision making, it certainly doesn’t accommodate the interests of other stakeholders. Arrow’s Impossibility Theorem tells us that apart from dictatorship there is no “rule” to do this that accounts for the preferences of all organization members. Organizations must find a process, imperfect though it may be, to accommodate preferences of the various stakeholders, since their collective decision making can’t be derived from rules.
This observation is intimately tied to the next point. Each member of the organization brings talents, resources, and information that other members of the organization do not possess. The organization must motivate members to participate in a way that provides for the good of the organization as a whole and to share information in a way that is jointly profitable. Thus the organization’s dual goals are to provide coherence to the decision making and to motivate members to act on behalf of the organization. These goals are pursued in an environment that is sufficiently complex where it is far from transparent to identify the best organizational behavior, even when the evaluation is done by well-informed insiders.
The economics approach to the organization abstracts from much of the complexity, treats the distribution of preferences, production capabilities, and information as exogenous, and then identifies efficient structures and contract forms for achieving the goals within that setting. The virtue of the economics approach is in establishing a framework for thinking about what might be possible for the organization and in producing well-reasoned conclusions about what efficient structures look like. This framework is the focus of the course.
However, economists are not the only ones who think hard about organizational issues. Indeed, these questions are often thought to be what gives management its purpose and sometimes, apart from management, the same issues are addressed by the leadership of organization members, where this means leadership from not just those at the top. Thus organization issues are part and parcel of management education and quite often are part of leadership training as well. One would like to know how these other approaches to organization compare with the economics approach. Some of the course will be devoted to addressing that.
A couple of excellent readings that bridge the different approaches are (1) Herbert Simon’s Nobel Prize Lecture and (2) George Akerlof’s paper on Labor Contracts As Partial Gift Exchange. Both pieces make an appeal to move away from the standard neoclassical model (the subject of intermediate microeconomics) and take a fundamentally interdisciplinary approach to the issues. Students are encouraged to read these papers on their own to get a better sense of why an interdisciplinary approach is needed. We will also cover these papers in class near the beginning of the semester, so students have a good appreciation of the what the course is about. We will look at a handful of other papers during the semester to similarly get at depth on some aspect of the course.
For the most part, however, rather than read individual articles on the subject for which the students might not have the appropriate background, we will follow a textbook that proceeds starting from the neoclassical model and then gradually moves away from it in different ways, with the first such step a discussion of “transfer pricing” that begins in chapter 3. Pedagogically, the idea is to start with ideas familiar from intermediate microeconomics and then introduce the unfamiliar new ideas in small doses. Each subsequent chapter adds a different piece to the puzzle. We will cover the textbook at a pace that fits the class. Where the content is difficult we will slow down. Better to learn what we do cover than to be exhaustive but superficial in the treatment. Do note, however, that we definitely will not cover the chapters on Finance, as these are suitable to be learned in other courses.
Regarding the math modeling in the textbook, do note that the way it is presented depends on the intended audience - MBA students. So much of the math in the book is done via examples rather than by general models and in some cases rather dramatic simplifying assumptions are made to facilitate the analysis. In some cases we will follow the book exactly. In other cases we will depart from the book a bit to look at the approach in greater generality. I have designed Excel workbooks for this purpose to illustrate the more general approach.
To get exposure to non-economic approaches we will also read another textbook that is often used in leadership training, as a way to get multiple perspectives on the organization. Students will likely find this second book “lighter fare,” far less analytical and more anecdotal in its approach, and therefore a contrast with the primary text. We will cover this other book except for its last section, which has an emphasis on leadership. Students are encouraged to read that after the course has concluded, as they likely will have intrinsic interest in the subject.
Tentative Class Format
Once we get up to speed, certainly by the third week of the semester, we will take a dual approach into the subject. One aspect will be a narrative/storytelling approach. The other aspect will be a math/problem solving approach. Roughly speaking, the first class session of the week will be exclusively for the narrative storytelling and the second class session of the week will be split between the math modeling/problem solving and the narrative approaches. (There will also be online micro-lectures for some of the math modeling.) Time permitting we'll also critique the models or give talkie discussions about how the models might be extended, so there will be narrative/storytelling in that. (An excellent piece to read that provides justification for this dual approach is Robert Solow's How Did Economics Get That Way and What Way Did It Get? Note, however, that Solow's essay is a lament about macroeconomics, so while it is quite interesting it is outside the scope of our class.)
One of the goals in course design is to create a cycle between the out of class work that students are assigned and our in class activities. Students will do three different sorts of homework, (1) blogging, (2) math model exercises done in Excel, and (3) concept quizzes to review presentation content delivered in PowerPoint. The blogging will mainly be reflections on the readings, particularly as it pertains to the student's own experience, according to a prompt I provide. This will be followed up later by class discussion on the same topic, so in that sense the blogging will be a getting ready exercise for what happens in class. To make the ideas part of your own world view you must first get familiar with the ideas by using them in context and second you must establish connections between the ideas and other things you already know. The blogging is there to help with both of those.
NOTE: Students have the option of choosing their own theme other than the prompt, as long as they can tie what they write about into the flow of the class. So if there is some subject matter which you wish to explore further with your blogging, you are free to do so.
The following paragraph was from years past when enrollments were under 30.
To motivate the blogging more I plan to comment on each of your posts and then use some of them in class discussion to incorporate points brought up by students in their blog posts. I will not grade individual posts. Rather, I will use a portfolio approach to the blogging, giving one grade at mid semester on the first half of your posts and a second grade near the end of the course. At around the time of the mid semester evaluation, I would like to meet with you each individually outside of regular class hours to discuss your blogging and how the course is going for you, perhaps to offer pointers on how to improve your performance. I will announce when I'm ready to have those meetings. After that I will expect you to contact me to set up a meeting time.
Now class capacity is 50. If we near capacity we need a different mechanism for monitoring and evaluating your blog posts as I can't read and comment on 50 posts when that is all to be done over the weekend. It is too much work for me.
I plan to divide the class into three groups, each roughly equal in number. I will read the posts of two of the the three groups and comment on those posts I do read. The posts of the third group will be commented on by students, who will act as my substitute. Students will be put into teams with 3 students per team, one from each group. The student who doesn't receive a comment from me will receive a comment from the other two team members. If you want to meet with me about your blogging at mid semester, that's fine. However, I won't try to meet with everyone in the class as it will become overwhelming given the class size.
There will be specific instructions for setting up your blog given in class and on the class site. When you've done so and made your first post, please email me with the url to that. I will have a gadget on the class site that provides snippets from the most current posts written by students.
Posts should be between 600 and 1000 words. They are meant to demonstrate your thinking and should take some time to compose. Students who are new to writing blog posts (and who don't write frequently in general) should understand that there needs to be some time before you go to the keyboard, just to organize your thoughts and to give you a general sense of what you want to say. That is called pre-writing. It is quite important. If you do that, you'll find the time composing text enjoyable. If you don't, you'll likely get writer's block and find the blogging requirement drudge work.
The approach with the math modeling is different. The homework will be auto-graded (built into Excel) and the expectation is that you will do it till it's all correct. So the grade on that will only be a participation grade for having completed the assignment correctly (and that you submit the result by the deadline). If you have difficulties completing the homework you can post queries to the class site before the deadline. I or other students in the class will offer up some response. My goal is that all students submit complete assignments on time. There is no partial credit. The in-class time is meant for me to play the role of TA and review the problems so you understand them at a deeper level or for you to work in small groups on related problems to solve. In other words, math modeling in the homework is meant as preparation for the live class.
The concept quizzes are new this semester and are intended to be very lightweight. I have several PowerPoint files that I would prefer students to review before class so we can discuss the issues in them during class. In general, class should be mainly for discussion. There might be spot lectures on a topic students find confusing, but most presentation content for the course will be delivered online and should be accessed before class. In the past, many students have ignored this content. So the concept quizzes are a way to see if we can get the bulk of the class to access the presentation before the class discussion.
In lieu of in class exams, we'll do online quizzes done in Moodle, which you will complete outside the live class session. I've tried this a couple of times. I need to tweak it some, but for the most part it worked and I believe really is better than the in class tests, which students tend to stress out about too much. As part of this practice, the quizzes will count for a smaller share of the grade than they have in the past. Ideally, this course should be taught as a seminar. Exams make sense in a lecture class, but not in a seminar. Our course is somewhere between a lecture and a seminar.
After a few weeks of this we will do some larger evaluation to see how the course is working. I'm a big believer in early feedback from students influencing the approach taken thereafter. So we'll surely tweak the approach based on that and on my impressions of how the course is going.
Note that the questions in this early evaluation will parallel questions about organizations:
- What are the organization's goals?
- How is coherence (alignment) achieved so that members of the organization have their individual efforts come together in productive organization function?
- How are individuals motivated to deliver their best effort?
- This question is sometimes broken up into the role of extrinsic motivation (pay for employees, grades for students) and the role of intrinsic motivation (the work itself as an object of engagement and satisfaction).
Eighty percent of success is showing up.
Woody Allen
I hope that students enjoy this class and that they come because they find the subject matter interesting and that the approach we take engages them. But we are creatures of habit. My experience is that students come regularly or not very much at all.
The last few times I taught the course, the class attendance has been an issue. Attendance was pretty good for three years before that. I am not sure what explains the change. I will note here that the class used to start at 11 AM. Now it starts at 9:30. (There were too many other classes starting at 11.) I've had students tell me that they weren't morning people and other students tell me they were at the bars till closing. I'll be curious to see what impact the earlier starting time has on attendance and on the class dynamic.
One of the themes of the course is that in many instances one can elicit greater effort from individuals in a trust setting than where there is pay for performance, especially when the work is complex and output not readily quantified, because in a pay for performance setting individuals will tend to slack on components of the work that are not well measured or not measured at all and focus only on the components that are directly rewarded, while in a trust setting effort is put forth out of a sense of obligation and loyalty to co-workers independent of direct compensation. In that spirit I will not require you to attend class. I’ve tried it in the past and it backfired, for the reasons mentioned here. However, do note that good students come to class regularly and in class students can interact freely with me. So my hope is that students do come and that they look forward to our class sessions.
I do recognize that there is a tendency to start thinking about the finish line, especially if you are graduating in December. That said please also understand that you communicate by your actions. Showing up demonstrates some personal commitment. Not doing so without communicating about your absence in advance of class demonstrates the opposite.
If you have to miss class, for a University supported activity, because you are sick, or because you have an interview for an internship or job, the adult thing to do is to drop me a note ahead of time and let me know. Likewise, you should let your teammates know. Accommodations can be made if absence can be anticipated. Otherwise, it can gum up the works.
Technology Use in the Classroom
Especially at the start of the semester, there may be a technology demo in class which I will do at the start of the session. After that I will ask students to put away their phones, tablets, and laptops. We will get better discussion going when the devices are put away.
Deadlines for Homework/A Word About Deadlines
Most weeks of the semester there will be a blog post due. There will be a prompt in the calendar the week before. Except for the very first post, where I want you to follow the prompt, you have the freedom to post about a topic of your own choosing, as long as you feel the topic is relevant to the course. If you do this, part of the post should show the connection. If you choose to follow the prompt, part of the post should be on why the prompt is relevant to the larger class discussion.
The Deadline for Blog Posts is Friday at noon. (Getting them done sooner is perfectly okay.) I will read them and comment on them over the weekend. Likewise, students will put in their comments over the weekend or on the the following Monday before class.
Soft Deadlines: If you get the post in later on Friday, that will have no consequence on my reading, so you will not be penalized for that. In that sense the purpose of the noon deadline is to communicate something about me. I'm soon to be 65 and with kids who are recent grads of the U of I. As a result I know something about student nocturnal patterns. Better to stick with my deadline and have fun after than vice versa. If you are later than Friday with your post, it will be hit or miss for you as to whether I read and comment on it. If it is a miss, you might not get credit for the post. Normally, I will give you some slack the first time. You will be penalized if it seems being tardy has become your pattern.
There will be Math Exercises in Excel most weeks, but not all weeks. You will be clearly alerted when one is due. The deadline for completion of these exercises is Wednesday evening at 11 PM. I will check the submission form Thursday morning before class. All the same caveats apply about getting credit.
There will be a concept quiz due before class on those days where we will review ideas found in an online PowerPoint presentation. The class calendar and, in particular the upcoming items box in the left sidebar will alert you to when the concept quiz is due.
Soft deadlines mean that if you turn in the work a bit late, only once in a while, you will still get credit for the work. It is chronic lateness we'd like to avoid.
Blogging and Privacy
Each student in the class will have a blog. Students will use the blog to write weekly reflective pieces. As you might gather from this course site, I like to use Blogger. You are free to use that or any other commercial blogging software. The Campus also offers a blogging service (which uses WordPress, but forces those making comments to log in.)
Experience suggests that students may be reluctant to have their course work viewed by potential future employers. To address this legitimate concern, each student will receive an assigned alias. I expect each student to blog under their alias (typically the name of a famous economist concatenated with Econ_of_Org_Semester#). If you use Blogger or most other commercial blogging software, they have a place for your profile. In your profile you get a display name. One significant purpose of your assigned alias is to use that for your display name. This approach with display name should be sufficient that potential employers can't track your blog.
I've used this approach in the past and it has worked well. However, if you feel it inadequately protects your privacy, then you can use Moodle as an alternative. Using Moodle offers even more privacy, because only members of the class will be able to see your posts. It is substantially less convenient, however. For example, individual posts don't get a permalink, so can't readily be referenced in the posts of others. Also, those posts can't be seen from the class blogroll. Ultimately, it is your choice which to use.
Commenting on the Posts of Other Students
Students will provide comments on the posts of the student on their team who is not receiving a comment from me that week. Please take this obligation seriously. It is meant to give the poster some serious feedback on what the poster has written. If by late Sunday there is still no post from that student the students should find some other blog from that group and make a comment there. There will be a page on the class site that lists the blogs by groups to facilitate this.
Responding to My Comments or to the Comments of Other Students
Partly for me to be sure that you've read the comments on your posts and partly to convey the idea the learning is having a conversation, in which case when you get a comment you should respond to it, students will be required to post a written comment in response to the comments they receive. In the ideal, if the initial commenting is done on Saturday or Sunday morning, then students will post their responses on Sunday afternoon or Monday. The entire series of post, initial comment(s), and then student response is meant to happen before the class session on Tuesday. When things work well, that's the timeframe in which they should happen.
Grading
We will use a point scheme. I used to have the course allocation 1000 points, so every 10 points was 1% of the total. I've learned to allocate a bit more than that, so students have some leeway and if necessary can blow off a particular assignment, if something else of importance comes up.
Composition of Grades
Blogging 360 points
Comments 200 points
Excel Homework 200 points
Concept Quizzes 100 points
Moodle Quiz 1 50 points
Moodle Quiz 2 50 points
Moodle Final Quiz 100 points
Course Total 1060 poins
Final Course Grades
A+ = 975 points and above
A = 925 - 974 points
A- = 900 - 924 points
B+ = 875 - 899 points
B = 825 - 874 points
B- = 800 - 824 points
C+ = 775 - 799 points
C = 725 - 774 points
C- = 700 - 724 points
F = 699 points and below (I don't give out D's.)
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