Management and Transaction Costs

I have worked a few part time jobs in the past, and through this I have noticed the differences in managing tactics that can create certain transaction costs or opportunistic behavior. My last job was working at a video rental store. There was a change in management while I was working there. The differences between the approaches that each manager took was evident, as were the consequences of these different approaches. The first manager was definitely much better at managing out than managing down within the store. Most notably, the way she communicated with the employees was unprofessional and inefficient. It left room for miscommunication that led to transaction costs and opportunistic behavior. When the second manager came in, he was able to set a new tone with steady communication and clear expectations.

The first manager did well when doing the tasks in the store herself, but was not clear about the delegation of tasks to the employees under her. Maybe she thought we all should just know what we should be doing, but we did not. She also told each employee different things about the expectations for workers during a shift which led to confusion between the employees. Some would be doing more tasks than others or the wrong tasks and in the wrong way. She understood what she was supposed to be doing and her goals but was not transferring the information down to us. Because information was not being properly communicated, these coordination costs added up, and the store was not doing well.

Also, because there was not much communication within the store, some employees were able to opportunistically without it being noticed. They would often skip tasks they knew they had to do because they were unpleasant the manager was not going to discipline them. This made the employees that were doing work feel like they were not being treated fairly. Some employees would also drop their shifts the day of, and there would be a scramble to cover them. Because there was no set protocol for when there was a conflict in schedule or emergency, this happened often.

Transitioning from that manager to the next caused no additional transaction costs because he had been working for the company for a while. He jumped right in with little confusion. He set a new tone for the store with guidelines and clear expectations. He kept us in the loop when it came to higher management goals by giving out a weekly update. This gave us a better idea of what our goals should be when working. He created a list of tasks for employees at each shift which made it easier to hold people accountable for their activity. He also had a clear process for scheduling and conflicts that cut down the amount of days people called off.

Transaction costs were cut down because information was being communicated better and was more readily available. This created a better relationship between the employees because no one felt as though they were being treated unfairly, and although there was some opportunistic behavior still present, it was definitely cut down. Efficiency was higher as well because everyone knew what they were supposed to be doing, and there was no excuse for not knowing. Overall, the new manager created a better environment for the employees and a better kept store.


It has been interesting learning about these different topics, and being able to identify more clearly what was happening in this situation. At the time, it was just an annoying experience, but now I can fully understand the importance of good managing skills.

Comments

  1. Professor ArvanSeptember 16, 2017 at 10:54 AM

    Hmm, a video rental store. We used to go to Blockbuster to get VHS tapes when the kids were little. But with Netflix and other streaming services nowadays, I have no current experience as a customer to match up with your experience as an employee. So it would have helped me in reading this piece to give more specific information about the nature of the work.

    My prior understanding is that this sort of rental service is a lot like how a library works. Indeed, in the basement of the undergraduate library on campus there a videos that can be checked out. That I've done on occasion in the last few years. So I wonder if there is a parallel there or if where you worked is different.

    A big thing with the Library is that you can browse for titles online and check for their availability that way. In the old days when I went to Blockbuster, you only did that face to face.

    I am not sure what tasks you meant when you they were unpleasant. I can imagine dealing with a customer who is late in returning the video as something that is not fun. But otherwise, I couldn't come up with examples that fit what you meant. Also, I didn't really understand how this work is so difficult that it might not be done well, or that different staff would get in each other's way. That too could have used some elaboration.

    You said the first manager was good at managing out. I'd have liked to see some example of what that means, because I didn't understand it in this context. Was this person ultimately fired? Or did she leave voluntarily?

    Finally, let me address your last paragraph. My suspicion in this work is that there are known tasks to do and the question is whether they are done and then in a timely manner or not. Not all work is like this. What is good management in that setting might not be good management at all in a different setting.

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