In­cent­ives and Be­ha­vi­or in Or­gan­iz­a­tions

Course content

One of the most important challenges of firm owners is to motivate firm managers to behave in line with firm value maximization. Managers, in turn, face the challenge to motivate their employees to work hard and do the right things. This is often a challenge, because managers and employees typically have conflicting objectives, and the performance of employees is not always easy to measure. How should performance be measured and what are the most efficient incentives to enhance employees' and executives' motivation? Economics is a powerful tool to analyze conflicts of interest between managers and employees (or owners and managers), evaluate the consequences of such conflicts, and explore the optimal design of incentives. This course covers important principles of incentives in organizations. We will discuss crucial issues and possible solutions for improving the effectiveness of work as well as the experience and behavior of people at work (eg, by improving the well-being of individuals in organizations, their intrinsic motivation to work hard and correctly and by mitigating the temptations of unethical behaviors). We will explore the effects of rewards and performance-related pay on individual performance and behavior in the workplace; the causes and the consequences of employees' and executives' turnover; the determinants and effects of unethical behaviors in organizations. We will also discuss possible gender issues in organizations and gender differences in performance and motivation.