The Role of Revenue‐Focused Managerial Performance Measures in Supply Chain Coordination

Many firms employ revenue‐focused managerial performance measures (RF‐MPMs) that cause managers to worry more about revenues than about costs. Although this can seemingly misalign the interests of a manager, we show that the use of such measures can help supply chain partners to overcome hold‐up issues with respect to capacity and promotion investments. We develop a game theoretic model in which two supply chain partners engage in repeated interactions in which the supplier invests in capacity and the buyer invests in demand promotion. Following the realization of demand in each period, the two firms negotiate over the output quantity and wholesale price. The novelty of our model is that we allow the owners of each firm to delegate decision‐making power and negotiating responsibility to a free‐agent manager. We characterize the conditions under which the owners of both firms employ RF‐MPMs in equilibrium and benefit from doing so. For a special case of our model, we show that for the owners of the buyer, an RF‐MPM is equivalent to a price only relational contract, and that it complements a price and quantity relational contract as a mechanism for mitigating hold‐up issues.     

The Network Origins of Aggregate Fluctuations

This paper argues that, in the presence of intersectoral input–output linkages, microeconomic idiosyncratic shocks may lead to aggregate fluctuations. We show that, as the economy becomes more disaggregated, the rate at which aggregate volatility decays is determined by the structure of the network capturing such linkages. Our main results provide a characterization of this relationship in terms of the importance of different sectors as suppliers to their immediate customers, as well as their role as indirect suppliers to chains of downstream sectors. Such higher‐order interconnections capture the possibility of “cascade effects” whereby productivity shocks to a sector propagate not only to its immediate downstream customers, but also to the rest of the economy. Our results highlight that sizable aggregate volatility is obtained from sectoral idiosyncratic shocks only if there exists significant asymmetry in the roles that sectors play as suppliers to others, and that the “sparseness” of the input–output matrix is unrelated to the nature of aggregate fluctuations.     

Private equity regulation: a comparative analysis

This article examines the existing contractual arrangements and industry standards in private equity. It shows that investors are, in principle, capable of structuring their particular investments according to their own preferences, there are a range of governance problems and risks that could be potentially hazardous for some classes of investors. We examine the circumstances where existing industry codes and legal tools can be used to address the problems that arise in relation to private equity and buyout activity.     

A real option theoretic fuzzy evaluation model for enterprise resource planning investment

The high failure rate of ERP implementation is due to a common pitfall that ERP projects are often enacted as merely investment into installation of IT infrastructure, rather than systematic planning of operation changes, business process re-engineering and a paradigm shift for the operation and management. To manage ERP investment in a changing environment for high payoff, this paper adopts a real option theoretic method. Fuzzy payoff valuation is introduced to deal with uncertainties in order to minimize the risk of failure. The proposed ERP evaluation model is geared towards small and medium enterprises. A case study is presented to validate the proposed fuzzy real options. The results indicate the potential of modeling ERP investment as “Expand”, “Contain” and “Abandon” options in different scenarios. The fuzzy real option model bestows a novel ex-ante cost analysis for justifying ERP investment in the implementation cycle.     

Personal trainer, personal coach

The increasing number of fresh faces in the management ranks, many of them with highly polished credentials but little in the way of practical experience in the work-a-day management world, has increased the need for a new consulting professional--the personal coach. There simply aren't enough volunteer mentors to accommodate the growing medical management profession. Whatever the conditions under which this new professional's services are sought, both the individual to be coached and the organization for which the individual works should approach the arrangement with care and planning. The author offers some guidance for making the arrangement pay off.     

Getting the most for your consulting dollars

Major changes in the health care financing and delivery system have usually been accompanied by an increase in demand within the health care field for consulting services. The passage of Medicare/Medicaid in 1965 is one example. The passage of the DRG-based prospective pricing system in 1983 is another. Both spawned a substantial amount of work, and income, for consulting firms. Now the health care field is engaged in nearly total transformation as the forces of health care reform at the national level are met with myriad adjustments at the local and regional levels. Managed care, already a byword, is being strengthened by a multitude of so-called integrated system initiatives. It is not easy to survive, and the call is out to consultants to save the day, or at least stave off disaster. In the following four articles, Marilyn Kennedy, a member of the ACPE faculty and a consultant herself, gives some advice on how to make the consulting arrangement successful; three physician executives provide a glimpse at consults that have worked, and some that did not work.     

Capitation and informatics

When physicians, hospitals, and allied health professionals bill for services they render, their information processing requirements are relatively simple, at least compared to those of capitated organizations. When payers (insurers or employers) accept financial risk for the health care services of beneficiaries, they have usually invested in claims processing, membership tracking, and, under managed care, utilization review and provider profiling systems. But payers, for the most part, have not invested in electronic collection of clinical information about beneficiaries, nor have they tended to keep all claims they have processed in electronic form for study after accounts are settled and payments disbursed. In this article, we will explore why informatics is so important to capitated organizations and why payers that have traditionally taken financial risk for insuring the health care costs of populations are also learning about the importance of informatics.     

A comparison of quality and utilization problems in large and small group practices

Physicians practicing in large, multispecialty medical groups share an organizational culture that differs from that of physicians in small or independent practices. Since 1980, there has been a sharp increase in the size of multispecialty group practice organizations, in part because of increased efficiencies of large group practices. The greater number of physicians and support personnel in a large group practice also requires a relatively more sophisticated management structure. The efficiencies, conveniences, and management structure of a large group practice provide an optimal environment to practice medicine. However, a search of the literature found no data linking a large group practice environment to practice outcomes. The purpose of the study reported in this article was to determine if physicians in large practices have fewer quality and utilization problems than physicians in small or independent practices.     

Keeping the "care" in managed care: the importance of the therapeutic relationship and psychosocial factors in the managed care setting

There is much truth in the adage that "the more things change, the more they stay the same." Nowhere does this seem more apparent than in health care where, amidst monumental reconfiguration, basic foundations of physician-patient relationships and attention to the impact of psychosocial factors on health and health care delivery remain as critical influences. While the importance of the therapeutic relationship and the influence of psychosocial factors in medical care has been clear in traditional systems of delivery, these factors may be even more critical in managed care systems. These emphases must be incorporated by design, however, and not left to default.