The paper "Agency and Determinist Theories" is a great example of management coursework. The objective of management theories is too increasing organizational output and service quality. Managers are required to understand good management practices to create a business model that can improve their productivity and eliminate redundancy in processes. Managers are tasked with planning, staffing, coordinating, controlling among other functions. However, there are so many theories that demand that managers combine several for the best results. There are over 25 major management theories (Witzel and Warner, 2013). These theories often address different management strategies that touch on the workplace, workforce, among other things.
Others guide them on how to interact and handle shareholders. The principles can be reconciled into a universal theory of organization so that they become easy to be implemented. It is therefore important that managers use the different theories to guide them in everyday operations of their companies and short and long term strategies for their organizations. This essay will analyze the agency and determinist theories and provide a unified approach that can be implemented easily by managers. Discussion Agency Theory Agency theory seeks to solve the challenges that crop up due to the differences between organizations management and shareholders.
According to the theory, corporates are invisible units and have to be managed by agents (Gajavelli, Chaturvedi and Singh, 2017, p. 70). Most shareholders may not be privy to information or actions taken by the management. They often become aware of changes in companies when decisions have been made, and this generates frictions or conflicts. Most times it is shareholders that bear the brunt of bad decisions made by managers especially of the former contribute resources that are used by the latter at their discretion (Bergstein, 2014).
Moreover, the agency theory handles the various conflicts that may emerge between shareholders and managers (Elgoibar, Euwema and Munduate Jaca, 2016, p. 223)). It is an effective theory that shareholders use to guide their relationship with their managers. The agency approach emerged in economic literature during the 1960s and 1970s with the aim of establishing the maximum amount of risk-sharing among different people (Namazi, 2013, p. 40). Bamberg and Spremann, (2014) describe Agency Theory “ has a new branch of economics which focuses on the roles of information and of incentives when people cooperate with respect to the utilization of resources” .
However, it adopted in the management area to establish a good relationship between various individuals with the different objectives of an organization, and the realization of a common agenda (Fernando, 2009, p. 48). In its basic form, agency theory is applicable in cases in which one person (agent) is given responsibilities or engaged by another person (principal) to act on his/her behalf based on an agreed pay.
Since both want the best for the organization, problems often occur especially when there is uncertainty or the lack of information. In other words, the principal may initiate actions that negatively affect the principal’ s profits. There are many causes of the agency problem. Boshkoska (2014, p. 205) explains that agency problems stem from information asymmetries. Managers by virtue of their positions have more information than owners of the company and can use it for other purposes. The other source is information asymmetry. This occurs when managers behave outside the code of conduct.
Also, managers can make decisions according to their interest. Shareholders can use to reduce agency problems including instituting internal and external measures. The former includes an internal audit, the concentration of ownership, good corporate governance, and change in salaries and payments to managers. On the other hand, external measures include external audit and the use of the law.
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