Scenario
Abraham Tan, the founder of a small but fast growing company always believes that a good system of rewarding and punishing performances is the key to the success of his company. He advises his managers to be bold and decisive in rewarding good workers and punishing the bad ones. He often lives by what he preaches through making unilateral decisions on rewarding or punishing workers whom he perceived as deserving sometimes without even consulting the supervisors or the heads of the departments. This resulted in many managers feeling unhappy as they felt being sidelined. Many of them also complained that they are finding it increasingly difficult to get their subordinates to do their bidding and the working environment has also fast becoming very political with all employees jostling to obtain Abraham’s attention. This gives rise to high turnover among managers. Abraham was frustrated as he could not understand why the managers are “put off” when their subordinates are rewarded or punished.
Question 1: Based on what you have learnt in Seminar 2 on the role of organizational architecture, comment on the actions of Abraham.
Hi All

Based on the scenario, Abraham belief in a system of rewarding and punishing performance is the key to the success of his company is only partially correct. In fact, all organisations must construct the following three activities (called organisational architecture).
1. A system that measures performance.
2. A system that rewards and punishes performance.
3. A system that partitions decision rights.
In terms of measuring the agent (people who work for the company) performance, Abraham recognises the agent’s performance based on his own perception, without even seeking the views of the agent’s supervisors or the heads of the departments at times is not appropriate. The problem with this way of determining the agent’s