Personnel Selection and Coordination Methods

Organizational Efficiency/Size of Tasks

• Organizations are more efficient than individual efforts when handling larger tasks
• Institutions create enforceable expectations for economic agents' behavior to achieve common goals
• Rules influencing member behavior assure goal achievement
• Task allocation determines who performs each task
• Decision rights and performance measurement are crucial, and sanctions are applied for deviating members

Functional Perspective

• Division of labor, specializing in tasks, reduces time wasted between tasks
• Technological advancements allow for larger-scale efficiency
• Vertical separation distinguishes decision-making from execution
• Horizontal separation divides processing steps

Coordination

• Challenges arise from matching tasks to units, synchronizing activities, and resource allocation
• Organizations exchange resources to enable division of labor
• Transaction costs include obtaining partner information, negotiating contracts, monitoring partner performance, and enforcing contract compliance

Transaction Costs

• Transaction costs depend on goods' characteristics, actors involved, and institutional settings
• Economic actors have bounded rationality and incomplete information
• Opportunistic behavior results in information gathering and risk mitigation efforts to avoid losses

Properties of Goods

• Specificity, location, and time influence transaction costs
• Goods' specificity to a given task affects their possible other uses

Properties of Actors

• Bounded rationality, limited information, and opportunistic behavior affect transaction costs

Institutional Setting

• Market transactions are typically short-term and identity-irrelevant with verifiable complete contracts
• Hierarchy transactions are long-term, with identity importance and relational contracts (relationships defined), which can be non-verifiable.

Stakeholder Perspective

• Stakeholders influence organizational objectives, demanding a fair share of organizational outputs
• Transaction value surpasses input value when valuable for stakeholders

Utility Function

• Utility is influenced by compensation and effort, with disutility linked to effort.
• Indifference curves show equal utility at different points
• Pareto efficiency achieves optimal resource utilization, respecting tradeoffs among all individuals

Value Maximization

• Organizations should maximize value creation (outputs minus inputs)
• Value creation is optimized when marginal output equals marginal effort costs

Effective Organization Design

• Design elements like task allocation (specialization) and coordination mechanisms are needed.
• Incentives are used to motivate self-interested agents to perform at optimal levels of effort
• Coordination and motivation are crucial tasks in handling organizations with different goals and tasks
• Optimal balance is needed between providing incentives and the opportunity costs associated with them.

Information Processing in Organizations

• Organizations need to process information to effectively respond to environmental demands
• Organizations should adapt to changing environments
• Organizations need to handle tradeoffs between their processing capabilities and external demands from information requirements

Decision Rights

• Allocation of decision rights affects an organizations' performance.
• Transferring of decision rights from one department to the next is necessary.
• Coordination within an organization is achieved through the combination of different mechanisms
• Division of roles and decision rights impacts the performance and efficiency of different departments
• Decision making can be distributed laterally or vertically in an organization.

Incentive Problems

• Incentives for accurate information and avoiding manipulation of resource allocation are crucial
• Problems arise from incomplete information and difficulties in evaluating the output quality from various divisions
• Compensation should be based on total output, not just the output of one division/unit to establish incentives for optimal resource allocation.

People in Organizations

• Selection of personnel involves screening and signalling, with issues related to information asymmetry and hidden characteristics
• Motivation depends on individual needs and incentives