Lecture 2

Question 1

How are managers motivated?

Answer 1

 Managers are motivated by goals that they are asked to achieve.
 Managers are motivated by rewards that they may get from their efforts.
 Managers are motivated by the social context in which they work.

Question 2

When can goals have a positive effect on effort?

Answer 2

1. When goals are clear and directional
2. When goals are not too distant
3. When achievement is valued positively

Question 3

How do you base motivation by social context?

Answer 3

External factors: work ethics
Internal factors: organizational culture, management style, tone-at-the-top

Question 4

What motivates people?

Answer 4

→ Extrinsic motivation: think of rewards, motivation from outside
→ Intrinsic motivation: personal reasons to work hard, to broaden your horizons, to gain knowledge, etc.

Question 5

The economic model of human behaviour:

Answer 5

• People make rational and deliberate choices and decisions in their quest to maximize utility.
• Main motivator for time and efforts is to receive monetary payments.
• People are very calculative in deciding how much effort to put in, in return for the money they can earn.
• Financial sector maximized the pay-off from their work, with little regard for the damage done to others (the credit crisis 2007-2008).

Question 6

What is agency theory?

Answer 6

• Consider organizations to be a performance contract between owner (principal) and managers (agent)
• Principal employs the agent; use contract to ensure agent will work for principal’s benefit AND their own, not only their own
• The contract should reduce the agency problem
• Without external uncertainty: a simple pay-for-performance may work well
• If high external uncertainty: (and agent is risk averse), optimal contract may include a higher proportion of fixed pay
• Performance metrics coupled with monetary rewards → output controls.

Question 7

The sociological model of human behaviour

Answer 7

People are considered to be members of groups in which certain rules and patterns of behaviour exist.

Question 8

The psychological model of human behaviour

Answer 8

• Two generic drivers of behaviour: beliefs and desires
• Beliefs constitute our knowledge about the world
• Desires constitute the way we want the world to be.
• Motivation is defined as the direction of effort, the amount of effort and the persistence of effort that people exert towards certain personal of professional objectives.
• Management control system design and use should pay attention to these three elements.

Question 9

What is the goal setting theory?

Answer 9

Motivation by clear and challenging goals
* Sufficient personal and organizational resources
* Self-efficacy of people
* Efficacy is the ability to produce a desired or intended result.

Limitations:
* Multiple; uncertain, changing goals have little motivational power.
* Goals that are too difficult to achieve may cause goal setting to fail
* May not be powerful if not coupled to reward.

Question 10

What automatic drivers of motivation?

Answer 10

• Humans are motivated to fill needs
• Humans have strong urge to direct and control their own lives
• Self-determination theory
  o Extrinsic rewards
  o Intrinsic rewards; labor ipse voluptas (labor itself is the reward)
• Management control systems and processes may stimulate intrinsic drivers
  o Bottom-up control processes
  o Enabling control systems

Question 11

What is the contemporary psychology theory?

Answer 11

• Human cognition
  o People may not have a full understanding of the context in which they work
  o Everybody does not see the world in the same way
  o Improved communication is necessary.
• Social structures help individuals to perform well
  o Interpersonal trust

Question 12

What is MC Principle 1?

Answer 12

Principle 1: Management control systems should motivate managers and employees.

• Managers and employees should be motivated by the goals that they are asked to achieve
• Managers and employees should be motivated by the rewards they may get for their efforts

Question 13

What is MC Principle 2?

Answer 13

Principle 2: Management control should consider managerial and employee abilities and inabilities.

• Managers and employees should be encouraged to learn and innovate
• Managers and employees’ tacit knowledge should be cherished
• Managers and employees should be helped to overcome natural cognitive limitations

Question 14

What is MC Principle 3?

Answer 14

Principle 3: Management control systems should support a healthy, social and ethical environment.

Question 15

What is Hofstede’s and Mink’s model of culture?

Answer 15

Zie samenvatting en slides.