Chapter 9 Discussion Questions

1.  In macroeconomics, there is a debate over “rules versus discretion.” The debate involves the extent to which monetary policy should be governed by the discretion of the head of the central bank (e.g., the Chairman of the Federal Reserve), or by relatively fixed rules that cannot be altered. Using the concepts from this chapter, can you provide an argument for each approach? Can you name other situations in business where there is a similar dilemma?

2.  In law firms, litigation work is done mostly by lawyers who work independently, and who become famous for their work. By contrast, corporate law is usually done by teams of lawyers with different specialties, and the law firm develops a brand name. What conflicts do you see in having litigators and corporate lawyers in the same firm? Does your analysis suggest anything about the relationship between the quality of a performance evaluation and a firm’s organizational structure?

3. Many business experts advocate systems such as “Management by Objective” (MBO) for managing employee incentives. Under MBO, the supervisor negotiates a set of mutually agreed upon objectives for the employee to work on during the year. At the end of the year, rewards are based on the extent to which the objectives were successfully achieved or not. What costs and benefits do you see in “negotiating” objectives with your subordinate?

4. Still other firms use “360° (Degree) Evaluations.” Under this system, the firm asks a manager’s subordinates, colleagues, and customers for feedback on the manager’s performance. What advantages do you see to such a system? Do you see any disadvantages? What other policies might make such an approach less prone to the problems that you see?