Managerial Economics & Organizational Architecture 6th Edition by James Brickley , Clifford Smith ,Jerold Zimmerman

Exercise 1

ANALYZING MANAGERIAL DECISIONS: Semco S.A.
Semco S.A. in Sao Paulo, Brazil, has 500 employees and manufactures capital goods. The employees elect their managers and evaluate them every six months. Managers rated poorly are transferred or fired. There are 100 nonunion employees who set their own performance standards and arrange their own work schedules. Twice a year, the nonunion employees receive a market salary survey and are asked to set their own pay for the next six months. Employees setting their pay too low receive that amount, as do employees requesting too high a salary. If management decides after one year that the employees' salaries were above what they were worth to the company, these employees are fired. The 400 unionized employees' pay is set by union contract. Critically evaluate Semco's performance-evaluation system.