[DonQuigleone]

Originally Posted by oompa loompa

For the sake of discussion I'm going to play devils advocate and take the managers side of things

Sure. Always good to put ideas to the test.

At the end of the day the goal of the company is to make lots of moneh (it can always be translated into a version of this); thats it essentially.

I'd disagree, the purpose of a company is to serve the needs of it's customers. The purpose of the sharholders in investing in the company is to make money (and there's nothing wrong with that). However, the concerns of the employees should be in satisfying the customer. For providing a good service, the customer compensates the company for it's work, which is then largely distributed to the employees (with the remainder going into further development, or back to the shareholders).

The Employees are the company. The employees in working should not be working purely for their own selfish personal advancement, but rather to further the goals of the company. The company then compensates the employees, because that is fair.

This is a subjective question, but do you think its easier/cheaper to make/find a 100 people to love their work, or get a 100 people to work out of fear? If only 25 out of a 100 love their job though all of them have job security, would the output actually be better than the 100 people working out of fear? (Probably depends on the industry, I hear working at google is a pretty sweet deal for what you're talking about). Obviously, enforcement is a second best solution, ideally you'd want a solution where the incentives of all agents are aligned, but its difficult to go around since that amount of information transparency is difficult to achieve. If I had to think of it simply... it would be like maximizing a function where a part of the function can only be approximated as a constant. Depending on the amount of information transparency, maybe this solution is counter-productive, but I'm not sure I can say that the best solution stays the same always.

Fear is easier then love, that is why many companies work based on fear. People will often take the easy way out after all. But in the modern workplace, work is largely skilled, and so to get good results you need commitment from your employees. In a fear based environment you can extract meaningful work from unskilled workers, as you only have to police them doing a set of physical actions. But for skilled workers, they can simply pretend to work. Instead of pushing for the companies goals, these skilled workers will instead expend their energies in the easiest way possible, which is to spend most of your time on office politics, in order to seem like you're working, while in fact not doing anything at all.

You probably won't walk away with nothing, not unless they cheat you out of it. One could argue that the shareholders faith played a much bigger role in the success of the company than a single employee. Thats one of the biggest problems with the 'we work on researching and innovating so we should be paid more' is that its very very tough to actually know whether a researcher will come up with the goods. Should they be paid enormously for their achievment? Absolutely. Why don't they? Cos they probably signed a contract with both the employer and employee thinking that they wouldn't create anything amazing. If a dude is GUARANTEED to make a world-changing invention, I am completely sure he'll be compensated accordingly. I don't actually think companies want people to have too much loyalty, they want to be able to get rid of people and hire new ones as fast and as cheap as possible.

I would argue that they should be paid based on the current performance of the company, or their segment of the company. Doing this is tricky, however (for instance, how do you assess the performance of Customer Service?). But ideally, the employee needs to feel that if the company is successful, they will also be successful, and that they can't be successful if the company isn't successful.

I personally think that shareholder's faith plays much of a role in the success of a company. Rather, I would say it's a symptom, rather then a cause of problems. The failure or success of a company is in it's employees. What is a company but a group of people working towards fulfilling the needs of a set of customers? If the people aren't working to fulfill those needs, your company is paying people to do nothing.

what about the free-riders on the team if everyone is paid the same? Should probably be a balance between individual and overall success, which it generally is. The problem with the performance based bonus being the same is, that the same percentage increase in performance for two individuals in different positions ( even if they are identical), to have a very different effect on output. What people forget is the time variable in all of this. Its all well and good to have an ideal, robust, long-run system, but not if it takes forever to come together. and not if a more cut-throat, short-sighted firm drives you out of the market in the short/medium run. I think its up to the big companies to set standards of business fairness, and some do.

In terms of the free riders, they're brought into line by social pressure. IE "we're all working really hard, what are you doing?". It's not simply the manager policing, but all the workers looking at one another to ensure everyone is working effectively. If you have a worker who is stubbornly freeriding, then you just need to fire them.

In terms of performance based pay, I don't think the bonus should be a percentage of their wage, but an absolute quantity. I believe in lieu of other bonuses, a percentage of the net profit should be distributed equally between all employees (with the newest trainees receiving less, until they're integrated into the company). I mostly speak of industries where most of the work is skilled, however. So if a company does well, all employees will find themselves with a $4,000 bonus.

The mission is moneh, by which i mean REAL liquid tangible and emotional consumption for those involved. Wrong I know, but again, if you don't take that mentality someone else will and destroy you. There are exceptions; but they are exceptions.

Disagree, if all you're looking at is the bottom line, your customers will leave you for a company who cares a bit more. Likewise, a company where money is the mission, will funnel all the cash up to the top layers of shareholders and managers. The employees lower down the chain (who might I add are the ones doing the actual value-adding work), will look on in disgust as they're exploited, and find ways to exploit the company back.

The mission is customer satisfaction, money is simply the result.

Maybe that has something to do with why they are fortune 500 companies, (though a lot of fortune 500 companies are really good with the employees, again, maybe this depends on the business?).

I don't think we're morally twisted. I genuinely just think we as economists are too dumb to think up a better system.

I think you'll find out that most Fortune 500 companies start somewhat as I describe (they may not have such radically egalitarian pay structures though ), whereby they start out with a focus on providing a great product. Later as they grow and fossilize, companies will then settle into corrupt power structures, leading to the eventual downfall of the company (look at, say, GM or Enron, companies where it was all about the money...)

I take my queues from some very successful companies. For me, Toyota is what particularly impressed me. The reason Toyota at it's peak managed to produce such high quality cars with such efficiency is that they managed to create a sense of mission throughout the organization, whereby every level of the company was engaged in trying to continuously improve the company (the jargon for this being "Kaizen". The Toyota assembly line became incredibly efficient because every single line worker was continuously looking for ways to improve it. When problems occurred, employees weren't punished, but rather worked together to solve the problem.

To get this level of motivation and commitment from employees, Toyota had to get their trust, and they did this by paying them a decent wage, paying them bonuses if they improved the line, and rarely laying off workers. If you look at it's record, Toyota has had very few plant closures and large scale layoffs. Toyota employees stand by Toyota because they know that Toyota will stand by them. They might get their wages cut in bad times, but they know Toyota will do it's best not to lay them off, instead Toyota might invest in them by putting them through training programs.

Now Toyota is not perfect (and it's probably not as it good at it was at it's peak), but it shows you the power of employee participation.

The contrast is GM, where management never trusted it's employees, and consequently it fell behind. Again, this program illustrates it nicely.

Other successful companies with interesting management structures are Valve and Semco.