You took your new iPad mittens idea on Shark Tank and have a new partner, Mark Cuban. He wants to grow the business and expand, even possibly through franchising. You need to hire a workforce (managers and salespeople) as well as layout a framework for the business. You recently took an economics class and understand how concepts of adverse selection, moral hazards, principal-agent problems, and incentives are important considerations in the hiring and overall framework of the organization. Also, you know you have a winner and are reviewing ways to lower the risk and uncertainty of your investment.
a. Develop a compensation package for both managers and sales people. Explain the differences as well as the rationale for the design.
b. After developing a compensation package, you are now looking to hire. You have hundreds of applicants. Please discuss your selection process with the above considerations in mind.
c. You have now hired your staff and are examining supervision. Please discuss how much or little to supervise with the above considerations in mind. Should this be considered during the design of the overall compensation package? Are there ways to discourage shirking?
d. Explain how you might be able to lower the risks and uncertainties of your new business. Please give examples of both risks and uncertainty that this business faces, and how you might be able to account for them (or not) in the hiring process.