The Efficient Outcome and the Contract that can Implement Outcome

Placement
Name
Institution
Placement
The Problem
In LTC homes, the principal is the board, and the manager is the agent. It is essential to note that the average wait for placement into a long-term case is too long yet some patients do not have the urgent need as it may be construed. Living a healthy and independent life is quite vital, but the way resources are utilized should also be taken into control. The demands and needs of the clients should be met adequately, and other factors such as the appropriateness of client placement and the needs of the clients awaiting placements should be taken into consideration. It is critical to only have the patients whose needs can only be met at the Long Term Care (LTC) homes and ensure that those whose needs can be achieved elsewhere are released. The LTC homes should ensure that they adhere to the government directives to those who are eligible for the homes and that the median placement is reduced.
Representing Placement for the LTC using the Principal-Agent Framework
As earlier indicated, the principal of the LTC homes is the Board which also sets standards for care and rules governing eligibility. The agent that operates the organizations is the manager in charge of daily operations. It is worth noting that the goals of the principal and the agent can sometimes conflict, especially when it is hard for the principal to understand what the agent is doing while both parties may want to maximize their utility. The interest of the Board may be that the funds disbursed to LTC homes are utilized efficiently and that all the patients that intend to be admitted in those homes are taken care of by the agents. The principal may also want that the average placement period is as short as possible and that all those that are eligible are admitted in the homes. If the agent is not controlled or restrained, there is likelier that the interest of the principal will be ignored because of the shirking behavior of managers. The Board expects that the more patients they admit, the more they get from the Ontario Ministry of Health while the management is in charge of the day to day operations.
The Efficient Outcome and the Contract that can Implement the Outcome
The efficient outcome would be a reduction of the average wait for placement in the LTC homes and ensuring that only eligible patients whose needs cannot be met elsewhere are admitted. LTC homes require sufficient Board members who can ensure that their managers deliver what is expected of them by introducing an effective control mechanism which does not lead to agency problems. Managers working in the LTC homes, sometimes do not work for the financial gain because of the wage is always low. The cause of the organization is, therefore, expected to be the primary motive of working in the LTC homes considering the little control of the LTC homes' Boards. Managers who are the agents are supposed to work for the interest of the LTC homes, and the board is expected to exercise low control.
In reducing the average wait placement for LTC homes, there is a need to have a pay-for-performance kind of contract which is likely to minimize the challenges between the board and the management. The incentive mechanism can boost the morale of the agent to perform even better than expected because the compensation depends solely on the work also done through monetary rewards may clash with intrinsic motivation. The way performance of the manager can be measured through the manner in which program has utilized the funds allocated to it, the size of the LTC home and the reputation. The other way in which the principal-agent relationship can be improved is through the introduction of appropriate selection policy for the managers by ensuring that the agent’s personal goals are consistent with his principal’s goals. The contract between the board and the management is, therefore, outcome-based for the agent to serve the interest of the principal and the fact that the board has the information to verify the behavior of the management also encourages the contract.
Explaining the Relationship between Agent’s Pay and Performance using the following;
* Risk Preferences of the Agent and the Principal
When the agent is risk averse, the outcome based contract is likely to be affected negatively, which is also a similar situation when the principal is risk-averse. If the manager is a risk taker, then the pay-performance contract may work well. Risk takers go the extra mile to enhance their performance and therefore attaching their pay to their performance may go well with them. The background risk can sometimes make the board to increase their cost to offset the expected colossal outcome. The idea of reducing the average placement for LTC homes may be risky because the home may admit more patients than it can handle. The manager's performance is based on the performance, which may mean the number of people it accepts and the reputation of the home. The agent is however needed to ensure optimal use of funds to favor the patients and please the board which is a dilemma.
* Availability of Additional Performance Measures
Additional performance measurements arise when there are no clear objectives for an organization, but in the case of the LTC home, the aim is quite clear because the average wait placement period should be reduced and only patients whose needs cannot be met elsewhere are admitt...