Digital Monitoring of Employees

This Marketplace story describes some of the ways that employees can use devices to monitor digitally what the employees are doing: http://www.marketplace.org/2017/02/22/world/meet-workplace-sensors-are-watching-you.

1. How could an employer assess digitally the traits of job applicants to determine which ones to hire?
2. How could an employer monitor digitally what employers are doing or producing to determine which ones to reward monetarily or to promote?

Does Tim Cook's compensation scheme align his interests with the other owners' of Apple?

http://money.cnn.com/2017/01/06/technology/apple-tim-cook-pay-cut/index.html

How to give and to receive feedback

Feedback shouldn't be something to dread. When done right,feedback in the form of appreciation gives people a clear picture of where they’re adding value, helps them understand their strengths, and provides opportunity for improvement.

From qz.com.

Reblog: Organizational design at Wells Fargo

https://managerialecon.blogspot.com/2016/11/wells-fargo-are-economies-of-scope-big.html

Compensation in law firms

Law Firms Demote Partners as Pressure Mounts Over Profits
by: Sara Randazzo
Oct 11, 2016
Click here to view the full article on WSJ.com

TOPICS: Compensation

SUMMARY: Faced with client pressure to keep down costs and industry competition to achieve the highest profits, law firms now frequently assess which lawyers are worthy enough for the top rungs of partnership.

CLASSROOM APPLICATION: Based on the article, students can evaluate the compensation structure of law firms. Instructors can pose the question about why law firms are organized as partnerships, in which partners share in the revenues that each brings to the firm.

QUESTIONS: 
1. (Introductory) During a decrease in demand for legal services, why do law firms demote partners?

2. (Advanced) Why are some lawyers valuable to a firm despite the limited revenues that bring to the partnership?

3. (Advanced) Why are law firms organized as partnerships in which partners share in the earnings of the firms?

Reviewed By: James Dearden, Lehigh University

Was Wells Fargo unique?

http://money.cnn.com/2016/09/22/investing/wells-fargo-fake-accounts-banks/index.html

Unintended consequences of an incentive compensation scheme?

http://money.cnn.com/2016/09/08/investing/wells-fargo-created-phony-accounts-bank-fees/index.html

"The phony accounts earned the bank unwarranted fees and allowed Wells Fargo employees to boost their sales figures and make more money."

How could WF reduce the chances of similar mistakes AND maintain a program that encourages employees to cross-sell?

Addendum:

Wells Fargo to Pay $185 Million Fine Over Account Openings
by: Emily Glazer
Sep 09, 2016
Click here to view the full article on WSJ.com

TOPICS: Principal-Agent Problem

SUMMARY: Wells Fargo, the largest U.S. bank by market value, must pay $185 million related to a regulatory enforcement action over "widespread illegal practice" around account openings, sales targets and compensation incentives. The bank fired about 5,300 employees during the government's examination. Related article: The San Francisco bank, with its folksy stagecoach logo, has positioned itself as a solid, Main Street lender that avoided the excesses of the financial crisis. That image is now in danger.

CLASSROOM APPLICATION: Students can examine the effect of sales incentives on the decisions by Wells Fargo employees to pursue underhanded sales practices. "The sales tactics and practices, which were fueled by an incentive structure that rewarded employees on the more products they sold, got out of hand, according to regulators."

QUESTIONS: 
1. (Introductory) Why do sales incentives create the willingness of employees to engage in underhanded sales practices?

2. (Advanced) What is the "principal-agent problem"? Is the Wells Fargo case an example of workers (agents) not acting in the best interest of a principal (Wells Fargo)?

3. (Advanced) What actions could Wells Fargo take to regain its positive reputation?

Reviewed By: James Dearden, Lehigh University

Unintended consequences of an incentive compensation scheme?

http://money.cnn.com/2016/09/08/investing/wells-fargo-created-phony-accounts-bank-fees/index.html

"The phony accounts earned the bank unwarranted fees and allowed Wells Fargo employees to boost their sales figures and make more money."

How could WF reduce the chances of similar mistakes AND maintain a program that encourages employees to cross-sell?

Unintended consequences of an incentive compensation scheme?

http://money.cnn.com/2016/09/08/investing/wells-fargo-created-phony-accounts-bank-fees/index.html

"The phony accounts earned the bank unwarranted fees and allowed Wells Fargo employees to boost their sales figures and make more money."

How could WF reduce the chances of similar mistakes AND maintain a program that encourages employees to cross-sell?

What determines salaries?

Why There is No Science in Your Salary
by: Lauren Weber
Aug 03, 2016
Click here to view the full article on WSJ.com

TOPICS: Labor Economics

SUMMARY: An improving labor market and fair-pay laws are prompting companies to rethink the way they set salaries and, in some cases, implement a formal compensation structure or philosophy to guide their decisions. Related article 1: The ad hoc process of making salary decisions based on factors like a candidate's competing offer or the budget handed down by a distant finance team is looking less tenable to a lot of human-resources executives. Related article 2: Questions about pay equity may be moving into the boardroom. Among nonemployee corporate directors, women and minorities make less than their nondiverse counterparts, according to latest research.

CLASSROOM APPLICATION: Instructors can use the articles to introduce important practical issues in salary determination, paying particular attention to pay equity. One point is that pay is determined as a function of job and market data and managerial discretion. Pay inequities can creep into salary determination mostly through the use of managerial discretion.

QUESTIONS: 
1. (Advanced) How should prior salaries be used in determining salaries of new employees?

2. (Introductory) Why did female hires at Google in 2015 receive a 30% bigger raise over their prior salary than male new hires?

3. (Advanced) Should employers use data from the labor market when setting salaries? Should employers respond to offers made by other firms to attract star employees?

4. (Advanced) Is setting salaries an art or a science? What does it mean for an economic process to be an art?

Reviewed By: James Dearden, Lehigh University

RELATED ARTICLES: 
What is the Best Way to Pay Workers?
by Lauren Weber
Aug 03, 2016
Page: B6

Pay Inequality Poses a Concern in Boardrooms, Too
by Rachel Feintzeig
Aug 03, 2016
Page: B6

Incentives in ObamaCare

http://time.com/4292290/how-obamacare-is-fueling-americas-opioid-epidemic/?xid=homepage

Surveillance and behavior modification

This article says that the ultimate goal of Internet survelliance is behavior modification: http://www.faz.net/aktuell/feuilleton/debatten/the-digital-debate/shoshana-zuboff-secrets-of-surveillance-capitalism-14103616-p2.html?printPagedArticle=true.

What are some possible applications? Let's dream.

1. Consumers when shopping in bricks and mortar stores?
2. Consumers when browsing the Internet?
3. Reduction of information asymmetries in insurance markets?
4. Rewarding employees for good performance?
5. Providing feedback to employees?
6. Replacing supervisors?
7. Replacing salespeople?
8. ...

Do we need human coaches?

http://www.bbc.com/news/technology-35579005

Could this technology replace the instructor in bricks and mortar classrooms?

Does the compensation scheme for doctors affect how they code your illness?

http://www.npr.org/sections/health-shots/2016/03/04/469104086/flordia-doctor-says-false-diagnoses-inflated-bills-could-harm-patients

IBM revises its system to evaluate employees

http://timesofindia.indiatimes.com/tech/jobs/Goodbye-annual-appraisals-IBM-embraces-Checkpoint-rating-system/articleshow/50832717.cms?from=mdr

Optional material for aligning interests

1. This article in Slate describes Google’s obsession with data analytics. Here is a money quote: “‘We make thousands of people decisions every day—who we should hire, how much we should pay them, who we should promote, who we should let go of,’ says Prasad Setty, who heads POPS’ ‘people analytics’ group. ‘What we try to do is bring the same level of rigor to people decisions that we do to engineering decisions. Our mission is to have all people decisions be informed by data.’”
2. More on testing: http://www.wsj.com/articles/SB10001424053111904836104576563350928693850, and http://www.wsj.com/articles/are-workplace-personality-tests-fair-1412044257.
3. this post and the link from it on the use of employment gaps as a screen for job applicants.
4. This article reports flaws of basing hiring decisions on interviews and offers a couple of alternatives. It is a good introduction to the use of screening in the job market.

Optional material for aligning interests

1. This story from NPR is a great example of the effect of incentives. It is an account of a car dealership that earns a sizable bonus if it sells 129 cars in the month.
2. This video on the Cobra Effect. It has several examples of incentives that created unwanted responses.
3. This post from HBR discusses over-reliance on incentive compensation
4. The links from this post give two perspectives on the importance of monetary compensation schemes. Non-monetary incentives are useful complements to monetary incentives. (Pay attention in MGMT 641.)
5. View this clip.  (The instructor predicts that you will laugh.) Is the monkey that rejects cucumber rational?
6. View this humorous clip to see Captain Ron use incentives to prompt good effort.
7. View this humorous clip from Jerry McGuire. What motivates the football player?
8. Better than money? Geoffry James gives a list of 10 things he claims are more important to employees than money.
9. Here is a humorous critique of recognition rewards.
10. Millner’s blog, label = aligning interests. Even more from the instructor!
11. Froeb’s blog, label = Chapter 21
12. Read this report from Stern Stewart to see an example of the disadvantages of making a scheme complex.

When did return on investment begin to measure success?

http://qz.com/569738/the-dupont-invention-that-forever-changed-how-things-work-in-the-corporate-world/

On leadership

http://www.realcleardefense.com/articles/2015/11/23/what_29_years_in_the_navy_taught_me_about_leadership_108709.html

What behaviors does tipping induce?

http://qz.com/524279/a-new-york-restaurant-empire-is-finally-ending-the-injustice-of-tipping/