The hierarchy caricature of work, we have indicated to the employer, but most of the authority to determine the terms of employment as events unfold; employee can trust the employer not to misuse power despite the lack of market-based discipline because of goodwill, the balance of power, or the desire of the employer to protect its reputation
This -. the boss demands and the worker accedes – is the standard caricature image of employment; why else use the term boss? Yet although it is standard caricature, in other employment relationships, custom and law dictate other decision-making procedures, or what in the jargon of economics, is called governance. There are cases, for example, where the employee has most of its discretion. One example of this is the relationship between the director and the board; CEO is an employee of the Board, (largely) it is the CEO who decides what to do on a day to day basis. Another example is the relationship between the client (employer) and lawyer or physician (employee); the latter will in many, if not most, cases, decide which tasks to perform and even what fees to charge.
Even more, the division of the decision not only reach one person. In some cases, the employee and the employer maintain power over different decisions. Teachers might be assigned classes to teach by their Dean or Dean, but be free to determine what to put in the course how to deal with specific issues that arise in class, and so on. Scientists to decide what they will do on day to day basis, subject to broad directions from their superiors. Car assembly line operators are given the flexibility to stop the assembly line when the problem appeared for them, but others in the company determine what mix of cars will be assembled and (that much) any position on the line employee will fill on a day to day basis. Self-managing teams are given general tasks to accomplish but are left to work out their how to achieve those missions. This type of division of authority / decision shall follow the level of confidence in both (or all) sides
In some cases, the consensus between the parties is required for some decisions. neither party has individual discretion. What ways have room distributed on one against the other in special cases? Why is the standard caricature what it is? In most cases, the answers to these questions mix three factors. First, it is a tradition. Things tend to do in a manner similar to the way they were doing before. This is not blind obedience to the past-there are solid reasons for it. Second, it is the law. Society intervenes heavily in employment, giving by statute particular powers and reserved rights to one party or the other. There are good reasons for the community to do this, but managers can sometimes benefit from such restrictions on their powers of his. And finally, it is efficiency: The form of administration used in special cases will tend to be those that improve efficiency, because it is generally in favor of the party, and also because more efficient arrangements will tend to survive and be imitated .
But what leads to governance form that enhances efficiency? We find that two factors dominate.
1. Superior Information – Permission to call the shots should be on cost efficiency reasons, the rest of the party that best understands what the immediate circumstances. In many cases the employer and not the employee who possesses the necessary information and the ability to use it. This happens because the employer specializes in information acquisition and processing, both as a natural result of her work as a manager, and because she, as (probably) supervisor number of employees can best take advantage of economies of scale and scope of the collection and processing of information . Indeed, because employers coordinate the actions of a number of subordinates, they are in a better position to know what each is doing and what needs to be done to coordinate their actions.
This is true in some cases, but not all. When workers form a joint union council-union or workers or council can have officers (or their employees) that specialize in gathering and analyzing information about the company, such as on the basis of information dissemination authority decision will be feasible. Indeed, a particularly effective use of the councils of workers, companies have found it useful to share information freely both employees of the Council and employees. Line workers at a car assembly factory gives room to shut down the production line result, management believes, they have valuable information about how to improve the manufacturing process, information managers lack. Even so, for them to use their discretion and knowledge effectively, it is important for the line workers have a broader picture of the production process, resulting in policy frequent job rotation, increased levels of managerial communication with line personnel policy and even financial issues, and so on.
2. Adequate Reputation Stake – Although it makes sense to transfer decision-making authority to better-informed parties, to encourage cooperation and it is also necessary to offer guarantees to the other side that this authority will not be abused. To the extent that we rely on to make decisions reputation as an assurance or guarantee of the other party, we should seek the reasons for the party in authority will have a reputation stake adequate to offer necessary guarantees. Return to the caricature of a simple hierarchy sketched above, the employer presumably deals more with more workers find it difficult to move if she spots her reputation in one local, and undergoes greater scrutiny of external forces. Improving their relative reputation employer’s share and the push towards giving its scope, banking on her desire to protect her reputation.
But when workers form a joint, the joint is a persistent lack of mobility and often with management in a way that one staff not. Therefore, the worker collectives can have a reputation stake that workers do not have one, and we can contemplate power sharing with the joint in cases where power sharing with individual workers is much harder to imagine. To be sure, you can point to cases where individual employees have a substantial reputation in stakes-such as CEOs, lawyers, movie directors and doctors and consequently they are granted very broad scope of the employer on the projects will be done, when, and how. When it becomes desirable to allow for persons who do not have such a strong reputation stakes, employers want to promote accountability of employees; guarantees lifetime employment or to deal with workers who are naturally less mobile are the means to this end.