UM 6 Economics

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UM 6 Economics

  1. 1. Bill Adams, FEA, University of Malaya Organizational Economics Theory
  2. 2. Bill Adams, FEA, University of Malaya
  3. 3. Bill Adams, FEA, University of Malaya Describing an Elephant in the Dark
  4. 4. Psychology Interpersonal Behavior Sociology Group Behavior Anthropology Organizational Culture Political Science Political & Power Relationships Bill Adams, FEA, University of Malaya Statistics Quantitative “Mgt. Science” Economics Economic Analysis
  5. 5. Bill Adams, FEA, University of Malaya Organizational Economics Theory
  6. 6. People respond to incentives! (We constantly weigh costs and benefits) Costs Benefits Bill Adams, FEA, University of Malaya So if the market is free to set prices based on demand, resources will be allocated to try to meet that demand.
  7. 7. Jensen & Meckling: Agency Costs, Managers & Firms Organization = cluster of contracting (legal) relationships among individuals. So, important to understand: ● legal “property rights” ● agent status (owner delegates decision-making authority to agents) Bill Adams, FEA, University of Malaya ● monitoring expenses ● bonding expenses ● “residual loss” (agent errors) (what about “residual gain?!”)
  8. 8. Jensen & Meckling: Agency Costs, Managers & Firms Managers may not act entirely in the interests of the owners! Bill Adams, FEA, University of Malaya Because managers will usually act in their own personal best interests, owners must use incentives and must monitor the managers.
  9. 9. Williamson: Transaction Costs With specialization (division of labor), as process/products move between people, “transaction costs” are due to: Bill Adams, FEA, University of Malaya ● time (and delays), ● monitoring (supervision/record-keeping), ● imperfect communication (misunderstandings)
  10. 10. Williamson: Transaction Costs Sometimes a big advantage of doing things “in-house” within an organization (not “outsourcing”) may be lower Bill Adams, FEA, University of Malaya “transaction costs” If outsourced: imperfect contracts, opportunism, conflict resolution hassles, and communication transaction costs.
  11. 11. Williamson: Transaction Costs “… structures that have better transaction cost economizing properties will eventually displace those that have worse, Bill Adams, FEA, University of Malaya ceteris paribus. The cetera, however, are not always paria.”
  12. 12. Bill Adams, FEA, University of Malaya and Email Memos Writing
  13. 13. Why write a memo?  Memo: To/From/Date/Subject on paper  Communicate news, policy, discussions  Summarize complex issues/information Bill Adams, FEA, University of Malaya  Paper “of record” as a reference  Saves management time over meetings
  14. 14. Elements of an effective memo  Succinct but informative subject line  Concise (ideally one page max)  Short declarative sentences  Uses active, not passive, voice Bill Adams, FEA, University of Malaya  Uses bullets and/or short paragraphs (i.e., not a huge mass of gray text)
  15. 15. Types of Memos Recommendation News Options Memo (Announcement) Options Plus, the Headline Issue (& recommendation (journalism style) Importance) Key lead Schedule goal paragraph for decision Policy Option A (define, Clear policy Bill Adams, FEA, University of Malaya Details pros, cons) statement For more info, Option B (define, Details of the go to… pros, cons) new policy Option C (define, Justification? & pros, cons) “for more info”
  16. 16. Other Memo Tips  Order names by  Before sending it, professional status, be sure to profread, then alphabetically. proofreed, proofread!  Consider using 1.5  Uses attachments if line spacing. necessary rather than pack the cover memo. Bill Adams, FEA, University of Malaya  Use headings for memo sections (e.g.,  Memos can be cold. Option A, Option B, Consider closing with Recommendation). a warm touch (thank you for your help in this matter).
  17. 17. Paper or electronic? PAPER:  Some especially important things carry more “weight” via paper  When people will need to refer to it  When you need a signoff signature Bill Adams, FEA, University of Malaya EMAIL:  Increasing used of course  Rapid distribution  Less expensive
  18. 18. Email Tips  Cogent subject line  Maintain correct full names by each email in your address book.  CC your supervisor selectively to keep up to date on activities. Bill Adams, FEA, University of Malaya  If important, write a reply so it can “stand alone” and makes sense without prior email.  All memo tips apply, but even more concise!
  19. 19. Responding to Email  If “reply all” check the CCs to be sure.  If you cannot answer soon, (because people  Consider whether expect instant replies) every recipient really notify when you will. Bill Adams, FEA, University of Malaya needs to receive it! (“Sorry, but I’m in meetings all day. Will  Be careful what you get back to you early put in writing! tomorrow.”)
  20. 20. Some things should never be written! Do NOT use paper memos or email, IF the topic involves…  any complaints to a colleague  even the hint of personal criticism  any inter-personal “issues”  humor (especially sarcasm) can easily Bill Adams, FEA, University of Malaya be misunderstood & look unprofessional  anything you would not want published verbatim on the front page of The Star!  plots, gossip, criticism of a third party!
  21. 21. Some things should never be written! Consider “disassociating” yourself from inappropriate emails by a gentle rebuke (“I think you’re being awfully hard on him. We can chat over lunch.”) or a more explicit request if they do not get the hint. Bill Adams, FEA, University of Malaya
  22. 22. Using Email or Paper Memos for a “Paper Trail” of Documentation! After an important meeting (with anybody), consider the value of a “for the record” statement of your understanding of the conclusion! Can be helpful to have a record of an (otherwise unwritten) agreement. Bill Adams, FEA, University of Malaya ● Sometimes subtle (“good to see you. I look forward to…”) ● Sometimes explicit (“Just to confirm my understanding…”)
  23. 23. A Little Latin Lesson! ceteris paribus = other things being equal Bill Adams, FEA, University of Malaya
  24. 24. Range of Latin & Roman Empire (circa 100AD) [English] French Romanian Spanish Italian Bill Adams, FEA, University of Malaya Portuguese
  25. 25. Common Latin Words & Phrases LATIN TRANSLATION pro for (favor, support) pro bono for public good (not money) pro rata for the portion (proportionally) Bill Adams, FEA, University of Malaya pro forma for form (formality) pro for the time (temporarily) tempore e.g., “President pro tempore of the Senate”
  26. 26. Common Latin Words & Phrases LATIN TRANSLATION per for each per capita for each person per se for itself; by itself Bill Adams, FEA, University of Malaya per annum for each year per diem for each day carpe diem “seize the day!”
  27. 27. Common Latin Words & Phrases LATIN TRANSLATION post after p.s. (post scriptum) after writing post partum after childbirth Bill Adams, FEA, University of Malaya post mortem after death (autopsy) ex post facto after the fact
  28. 28. Common Latin Phrases LATIN TRANSLATION ex post facto after the fact ipso facto due to that fact de facto in fact; in reality Bill Adams, FEA, University of Malaya de jure in law; legally
  29. 29. Common Latin Abbreviations LATIN TRANSLATION etc. (et cetera) and so forth et al. and others e.g. for example Bill Adams, FEA, University of Malaya i.e. in other words circa; c. about; approx.
  30. 30. Common Latin Words & Phrases LATIN TRANSLATION from the office (so holds ex officio another role automatically) in absentia in one's absence ad hoc just for this purpose Bill Adams, FEA, University of Malaya current thing; status quo current state of affairs quid pro quo thing for a thing; favor for favor

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