1. SEEM 35301 Employment Relationships

2. SEEM 35302 Gaming Aspects of Employment Multiple employees Competition among employees for promotion The ginger root get the promotion because the ginger root is qualified. Do you want to know how Jacobs beat out Jackson for the promotion? I’ll tell you how he did it. Steroids. Great looking tie!

3. SEEM 35303 Gaming Aspects of Employment How should the company manage this “game” for promotion among its employees? How does the introduction of technology affect this game situation? Impact for the company? If employees use technology in effort to gain promotion instead of productivity gains, then company loses!

4. SEEM 35304 The productivity paradox As computers become more ubiquitous in the 1970’s and 1980’s, the prediction was that productivity would rise dramatically, but … Solow (1987): “You can see the computer age everywhere but in the productivity statistics” Brynjolfsson, Erik (1993). "The productivity paradox of information technology". Communications of the ACM 36 (12): 66–77. Is the investment in IT justified for companies?

5. SEEM 35305 “Office Politics” vs. “Real Work” Employees compete for promotion. In doing so, they may be devoting time to improve their promotion chances, instead of working directly to benefit the firm. Mis-alignment of objectives between employees and the firm! Competition among employees for promotion, bonus, perks, etc. Employer should not ignore this competition for promotion. If the internal labour market is perceived a a random process, then employees do not bother to compete and company do not even get peripheral benefits. Manager’s problem: how to direct employees’ resources towards productive activities? Should company provide employees with IT tools?

6. SEEM 35306 Example – Government Service Why do Governments produce and share information (e.g. trade statistics, maps)? “public good” – Government duty to provide service to society. “racing form” – everyone would spend effort to gather this info anyway; if the Government does it, duplication of effort is avoided. But people might then spend more effort to gain even more data for competitive advantage! Why do Google provide Googlemaps for free? What about GoogleEarth?

7. SEEM 35307 Promotion Game (Pingry and Issac, 1991) Internal labour market: employees compete for promotion. Each employee choose to engage in: Shirking Productive effort Office politics (“brilling”) – efforts directed at gaining promotion Brilling usually benefits the firm, but may not be the most effective for the firm. Brilling need not be purely opportunistic for personal gain. Individual may be trying to do the “best job”, just not the most beneficial for the company, e.g. Employee produces a report with NO typos, but the last three typos took 2 days to find! Employee has produced a perfect report (beyond the necessary quality) and does not have enough time to properly do the next report!

8. SEEM 35308 Promotion Game (Pingry and Issac, 1991) Two employees (equally qualified) are in contention for a promotion. The promotion will be given to the one deemed most productive. Employees can “brill” to appear more productive, e.g. devote part of their time to do additional background research for the company; these are somewhat useful but waste valuable resources. For the company, the brilling adds value Vf no matter how many employees brill, but the cost Cf to the firm increases with number of employees brilling. For the employee, the value of the promotion is Ve and brilling costs Ce.

9. SEEM 35309 The Promotion Game Expected Payoff to B Expected Payoff to Firm Mr. B Expected Payoff to A BrillNot brill Miss A Brill Ve/2 – Ce Vf – 2 Cf Ve/2 - Ce 0 Vf – Cf Ve - Ce Not brill Ve – Ce Vf – Cf 0 Ve/2 0 Ve/2 Prisoners’ dilemma for the employees!

10. SEEM 353010 Analysis of the Promotion Game For the employee: If Ve – Ce < 0, then it is a dominant strategy “not to brill”! If Ve – Ce > Ve/2, then it is a dominant strategy to “brill”! For the company: Suppose Vf – 2 Cf < 0, then it would not be useful for the company to have both employees “brill”. What can the managers do about this? By offering technological tools, the manager may change the costs of brilling or the benefits generated by real work or brilling.

11. SEEM 353011 Analysis of the Promotion Game Suppose currently Ce > Ve/2, then each employee has a dominant strategy not to “brill”. If company provides technological tools (e.g. I- phone, Blackberry) to increase productivity, this may lower Ce, making “brilling” dominant --- to the detriment of the firm (if Vf – 2Cf < 0)! On the other hand, if Vf – 2Cf > 0, then it is worthwhile for the company to provide IT tools to induce brilling from employees.

12. SEEM 353012 Technology impacts Should company provide Blackberry/I-phones? Cost of brilling reduced, may induce employees to brill --- to the detriment of the company. Employees may have bought their own blackberries anyway. Now company provides the tool, but employees use it for self-interest (to win promotion) rather than for the firm’s benefit! Depending on the relative costs and benefits, both employees may be encouraged to brill, benefiting the company but employees worse off! Other situations, brilling diverts attention of employees to office politics, and productivity lowered to the detriment of company! In brilling, employees amass private information and relationships, which is not shared to benefit the company. corporate culture Employee behaviour may be induced by payoffs or corporate culture. Sometimes, company may prefer a particular equilibrium, but cannot enforce it.

13. SEEM 353013 What can managers do? Monitoring Change incentives of the game Lower promotion bonus, Flatten the hierarchy (lower probability of promotion, fewer positions to aspire to), Announce that “frills” are not valued. Restrict the number of people playing the game. Changing organisational structure If company centrally controlled, then networking and gaming of less value. Work is clearly specified, effort measured, less asymmetry of info, (e.g. blue-collar work).