4.

Job design and internal structure 2 - teams

Presentation
I have drawn the topic of teams in job design and internal structure of the company. One of the
most interesting topics of this class, hence many firms make or break on their ability of the
managers to understand delegation of work and the importance of doing so.

Setting the scene

Simple structure in picture:

A job is a bundle of task the employee should perform and the rights that he has when doing them

Organizational structure can be who has the decision

rights
Main focus
A firm might think that a project can be solved better, faster or with fewer resources in team do to
the advantages of teamwork such as specialized knowledge, employee engagement etc.
But many costs can follow when working in team, like discussion time and freeriding.
I will further examine the free rider problem:
Suppose a team consists of two employees, e1 and e2. The effort cost of each is given by:
2
( ) e
c ei =
2
Jointly they can produce, assuming no complementarities: Efficient effort:
e 1+ e 2

The surplus of their effort will therefor be:

2 2
e1 e2
e 1+ e 2− −
2 2

FOC:
1=e 1=e 2
Optimal effort
1( e2
e 1+e 2 )−
2 2
Similarly, for e2. This means that only half of their original effort is optimal, hence they only get
half of the output/reward
1
FOC under optimal effort is =e 1=e 2
2

Some firms engage in bonus payments to motivate team. Here the bonus is represented by b and
paid if the combined effort is greater than or equal to 2. The pay-off would be under the desired
effort of 1 per member of the two man army:
e2 1
b− =1−
2 2

e2
If no bonus is paid the employee is left with and is therefore encouraged to work hard in the
2
team to reach the bonus
Discussion
Evidence for teams and profit sharing: from slides: Productivity of firms using profit-sharing plans
exceeds those that do not. (Limited studies)
Yet. Larger law partnerships typically result in worse cost containment and the same goes for
medical practises: doctors work fewer hours and overhead costs rise, when sharing of profits rise.

Bonus payments are one way to comprehend with the problems that can arise in teams. Another
way to deal with freeriding or a lack of productivity is peer pressure.
This solution arises for naturally due to the fact that no member of a team wants to do more then
his part, when equal pay the outcome
Teaser