Exam 4: Organizational Architecture

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Solution to Linking Decision Rights and Knowledge (15 minutes)
The advantages of allowing the coach to make personnel choices include personal knowledge about the skills of the players.The coach that has been around the league for many years has directly observed the different players.Also,coaches are generally evaluated on the win/loss record of the team.The coach can't completely control whether a team wins when the coach is not able to choose players.The coach also knows with which players he or she is compatible.
On the other hand,coaches generally don't have the perspective of the owners of the organization.It is the responsibility of the general manager to direct the team according to the wishes of the owners.The coach may want the best players,but the owners don't always have the money to pay the high salaries of top players.General managers may also have more of a long-term view about the progress of the team.General managers usually have longer-term employment contracts with the team than coaches.

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Solution to Choosing Performance Measures (20 minutes)
Cleanliness and customer service are important to the success of the ice cream shop.The advantage of using cleanliness and customer service as performance measures is to motivate managers to make the business appealing to customers.Customers will be more likely to return and frequent other outlets of the company.Another advantage of using cleanliness and customer service as performance measures is their controllability by the manager.The disadvantage of using cleanliness and customer service as performance measures is that managers may ignore the costs of providing customer service.Without some measure of cost or profit as part of the manager's performance measure,a manager will be less likely to make the appropriate cost/benefit trade-off.
The benefit of using profit as a performance measure is that profit tends to include all aspects of operating the business.To improve profit,the manager should also be motivated to improve customer service because profit will increase with satisfied customers.If revenues and costs are accurately measured,then managers will make the appropriate cost/benefit trade-offs if evaluated on profit.One disadvantage of using profit as a performance measure is that profit is not completely controllable by the manager.There are uncontrollable environmental factors,such as the economy of Portland,that affect profit.Also,revenues and costs may not be appropriately measured in the short-run.If costs used to calculate profit don't reflect the opportunity cost,the manager may be motivated to make inappropriate decisions,such as postponing maintenance.

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Solution to Monitoring Computer Use (15 minutes)
The primary reason for observing what the engineers are doing on their computers is control.The president's observations become part of the engineers' performance measure.Even the threat of unobtrusive monitoring is enough to motivate managers not to surf the internet.From the perspective of monitoring,engineers should be pleased with the oversight because they can no longer be blamed for wasting time when they take longer on a project than expected.The president will always know when they are on task.
One problem with this type of monitoring is the cost in time spent by the president.Also,there is the possibility of stifling potentially creative behavior on the part of engineers.The engineers may actually benefit from surfing the internet for some projects.