Organizational Architecture

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The response address the queries posted in 1736 words with references.

//Before writing about the most problematic situation, it is essential to have knowledge about the Multitask Principal-Agent Theory. One should know about the main tenets and principles of the 'Multitask Principal-Agent Theory', which further will aid in analyzing the situation in an effective manner.//

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Multitask Principal-Agent Theory

According to the Multitask principal-agent theory, the incentive devices for an agent appear to be complementary. It happens due to the requirement of an equal distribution of labor among various tasks. This concept has been verified and supplemented by a variety of literature sources. In case, each task has a number of signals, then the incentive devices should be determined on the basis of individual signals. Subsequently, these incentive devices can act as substitutes or complements for each other.

This theory believes that the investments of the agents are interrelated in an interesting manner. In fact, an increase in the incentive of an agent for a type of incentive decreases its incentive for another type of incentive (Information Exploitation and Interorganizational Systems of Ownership, 2004). In fact, the existence of such type of interrelationship among the different kinds of investments assists in the presentation of facts in a better manner. At the same time, it offers a variety of information in order to study this relationship. The theory also recommends that limitations may prove to be useful in certain circumstances. These limitations can direct the work of agents toward the goals of the organization in a very effective manner, even when the performance is not measured on a formal basis.

The theory implies that restrictions are useful for controlling the work of agents towards achievement of goals and targets. Constraints are effective even if performance is measured in a formal manner. Agents have incentives and are motivated to improve the performance which is measurable (Bond &Gomes, 2007). They are less devoted to tasks which cannot be measured. When proper incentives cannot be provided, restrictions are put on the tasks. It is an alternate for performance incentive and is widely used when it becomes difficult to evaluate the agents' performance.

In 1990's, Arthur Andersen faced several strategic and organizational changes. Most significant changes were related to developing strategy for increasing the revenue and reducing the costs through various measures. The performance of the partners was evaluated on the basis of new business they brought to the company. Costs were reduced by imposing a new policy which required auditing partners to retire at the age of 56. These measures adopted for decreasing the operating costs and increasing the earnings were successful and partners were able to receive higher ...