ECON 1 Lecture Notes - Lecture 4: Dispersed Knowledge, Base Rate, Hierarchical Organization
Document Summary
Definition: administrative rules governing employment policies and practices. Structures (hierarchy), policies (high performance orientation), practices (talent pool), processes (promotions) Defining feature: ilms result in internal mobility. Vertical: along the hierarchy traditional ilm model. Horizontal: into jobs on the same hierarchical level. Hiring occurs at entry position ( port of entry hiring) Ports of entry must be defined according to destination. Example: apprenticeship, management trainee, assistant to chief officer. Training and development are delivered on the job (to acquire firm-specific skills) Wages are tied to jobs rather than productivity. Wages are tied to position rather than to individuals/performance. Promotion are scarce and workers compete for promotions (tournaments) Motivate workers to invest in firm-specific skills/human capital. Problem occurs with uncertainty at the hiring stage: Not all workers who are hired at the port of entry are eligible for promotion. When base rate is relatively low and/or when the promotion probability is relatively high, the entry level is soon overpopulated with ineligible workers.
