Managerial Economics and Organizational Architecture

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Managerial Economics and Organizational Architecture



The McGraw-Hill Series in Economics


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Managerial Economics and Organizational Architecture Sixth Edition


William E. Simon Graduate School of Business Administration

University of Rochester




Published by McGraw-Hill Education, 2 Penn Plaza, New York, NY 10121. Copyright © 2016 by McGraw-Hill Education. All rights reserved. Printed in the United States of America. Previous editions © 2009, 2007, and 2004. No part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written consent of McGraw-Hill Education, including, but not limited to, in any network or other electronic storage or transmission, or broadcast for distance learning.

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Library of Congress Cataloging-in-Publication Data

Brickley, James A. Managerial economics and organizational architecture / James A. Brickley, Clifford

W. Smith, Jerold L. Zimmerman, William E. Simon, Graduate School of Business Administration, University of Rochester.—Sixth edition.

pages cm.—(The McGraw-Hill series in economics) ISBN 978-0-07-352314-9 (alk. paper)

1. Managerial economics. 2. Organizational effectiveness. I. Title. HD30.22.B729 2015 658—dc23


The Internet addresses listed in the text were accurate at the time of publication. The inclusion of a website does not indicate an endorsement by the authors or McGraw-Hill Education, and McGraw-Hill Education does not guarantee the accuracy of the information presented at these sites.



Dedicated to our children— London, Nic, Alexander, Taylor, Morgan, Daneille, and Amy.



PREFACE The past few decades have witnessed spectacular business failures and scandals. In 2001 and 2002, Enron, WorldCom, Arthur Andersen, as well as other prominent com- panies imploded in dramatic fashion. Internationally, scandals emerged at companies such as Parmalat, Royal Dutch Shell, Samsung, and Royal Ahold. In 2007 and 2008, prominent financial institutions around the world shocked financial markets by reporting staggering losses from subprime mortgages. Société Générale, the large French bank, reported over $7 billion in losses due to potentially fraudulent securities trading by one of its traders. JPMorgan Chase bailed out Bear Stearns, a top-tier in- vestment bank, following their massive subprime losses. Washington Mutual and Lehman Brothers were added to the list of “top business failures of all time.”

Due to these cases and others, executives now face a more skeptical investment community, additional government regulations, and stiffer penalties for misleading public disclosures. A common perception is that bad people caused many of these problems. Others argue that the sheer complexity of today’s world has made it virtu- ally impossible to be a “good” manager. These views have raised the cry for in- creased government regulation, which is argued to be a necessary step in averting fu- ture business problems.

We disagree with this view. We suggest that many business problems result from poorly structured organizational architectures. The blueprints for many of these prominent business scandals were designed into the firms’ “organizational DNA.” This book, in addition to covering traditional managerial economic topics, examines how firms can structure organizations that channel managers’ incentives into actions that create, rather than destroy, firm value. This topic is critical to anyone who works in or seeks to manage organizations—whether for-profit or not-for-profit.

New Demands: Relevant Yet Rigorous Education Thirty years ago, teaching managerial economics to business students was truly a “dis- mal science.” Many students dismissed standard economic tools of marginal analysis, production theory, and market structure as too esoteric to have any real relevance to the business problems they anticipated encountering. Few students expected they would be responsible for their prospective employers’ pricing decisions. Most sought positions in large firms, eventually hoping to manage finance, operations, marketing, or information systems staffs. Traditional managerial economics courses offered few insights that obviously were relevant for such careers. But a new generation of economists began applying traditional economic tools to problems involving corporate governance, merg- ers and acquisitions, incentive conflicts, and executive compensation. Their analysis fo- cused on the internal structure of the firm—not on the firm’s external markets. In this book, we draw heavily from this research and apply it to how organizations can create value through improved organizational design. In addition, we present traditional economic topics—such as demand, supply, markets, and strategy—in a manner that emphasizes their managerial relevance within today’s business environment.

Today’s students must understand more than just how markets work and the prin- ciples of supply and demand. They also must understand how self-interested parties within organizations interact, and how corporate governance mechanisms can control these interactions. Consequently, today’s managerial economics course must cover a broader menu of topics that are now more relevant than ever to aspiring managers facing this post-Enron world. Yet, to best serve our students, offering




Preface vii

relevant material must not come at the expense of rigor. Students must learn how to think logically about both markets and organizations. The basic tools of economics offer students the skill set necessary for rigorous analysis of business problems they likely will encounter throughout their careers.

Besides the heightened interest in corporate governance, global competition and rapid technological change are prompting firms to undertake major organizational restructurings as well as to produce fundamental industry realignments. Firms now attack problems with focused, cross-functional teams. Many firms are shifting from functional organizational structures (manufacturing, marketing, and distribution) to flatter, more process-oriented organizations organized around product or region. Moreover, this pace of change shows no sign of slowing. Today’s students recognize these issues; they want to develop skills that will make them effective executives and prepare them to manage organizational change.

Business school programs are evolving in response to these changes. Narrow tech- nical expertise within a single functional area—whether operations, accounting, fi- nance, information systems, or marketing—is no longer sufficient. Effective man- agers within this environment require cross-functional skills. To meet these challenges, business schools are becoming more integrated. Problems faced by man- agers are not just finance problems, operations problems, or marketing problems. Rather, most business problems involve facets that cut across traditional functional areas. For that reason, the curriculum must encourage students to apply concepts they have mastered across a variety of courses.

This book provides a multidisciplinary, cross-functional approach to managerial and organizational economics. We believe that this is its critical strength. Our interests span economics, finance, accounting, information systems, and financial in- stitutions; this allows us to draw examples from a number of functional areas to demonstrate the power of this underlying economic framework to analyze a variety of problems managers face regularly.

We have been extremely gratified by the reception afforded the first five editions of Managerial Economics and Organizational Architecture. Adopters report that the earlier editions helped them transform their courses into one of the most popular courses within their curriculum. This book has been adopted in microeconomics, human resources, and strategy courses in addition to courses that focus specifically on organizational economics. The prior editions were founded on powerful economic tools of analysis that examine how managers can design organizations that motivate self-interested individuals to make choices that increase firm value. Our sixth edition continues to focus on the fundamental importance of markets and organizational de- sign. We use the failures of Enron (Chapter 1), Société Générale (Chapter 1), Arthur Andersen (Chapter 22), and Adelphia (Chapter 10) as case studies to illustrate how poorly designed organizational architectures can be catastrophic. Other books provide little coverage of such managerially critical topics as developing effective organiza- tional architectures, including performance-evaluation systems and compensation plans; assigning decision-making authority among employees; and managing transfer- pricing disputes among divisions. Given the increased importance of corporate gover- nance, this omission has been both significant and problematic. Our primary objective in writing this book is to provide current and aspiring managers with a rigorous, sys- tematic, comprehensive framework for addressing such organizational problems. To that end, we have endeavored to write the underlying theoretical concepts in simple, intuitive terms and illustrate them with numerous examples—most drawn from actual company practice.



viii Preface

The Conceptual Framework Although the popular press and existing literature on organizations are replete with jargon—TQM, reengineering, outsourcing, teaming, venturing, empowerment, and cor- porate culture—they fail to provide managers with a systematic, comprehensive frame- work for examining organizational problems. This book uses economic analysis to develop such a framework and then employs that framework to organize and integrate the important organizational problems, thereby making the topics more accessible.

Throughout the text, readers will gain an understanding of the basic tools of eco- nomics and how to apply them to solve important business problems. While the book covers the standard managerial economics problems of pricing and production, it pays special attention to organizational issues. In particular, the book will help read- ers understand:

• How the business environment (technology, regulation, and competition in input and output markets) drives the firm’s choice of strategy.

• How strategy and the business environment affect the firm’s choice of organi- zational design—what we call organizational architecture.

• How the firm’s organizational architecture is like its DNA; it plays a key role in determining a firm’s ultimate success or failure, since it affects how people in the organization will behave in terms of creating or destroying firm value.

• How corporate policies such as strategy, financing, accounting, marketing, in- formation systems, operations, compensation, and human resources are inter- related and thus why it is critically important that they be coordinated.

• How the three key features of organizational architecture—the assignment of decision-making authority, the reward system, and the performance-evaluation

system—can be structured to help managers to achieve their desired results.

These three components of or- ganizational architecture are like three legs of the accompanying stool. Firms must coordinate each leg with the other two so that the stool remains functional. More- over, each firm’s architecture must match its strategy; a balanced stool in the wrong setting is dysfunc- tional: Although milking stools are quite productive in a barn, tavern owners purchase taller stools.

Reasons for Adopting Our Approach This book focuses on topics that we believe are most relevant to managers. For in- stance, it provides an in-depth treatment of traditional microeconomic topics (demand, supply, pricing, and game theory) in addition to corporate governance topics (assign- ing decision-making authority, centralization versus decentralization, measuring and

The components of organizational architecture are like three legs of a stool. It is important that all three legs be designed so that the stool is balanced. Changing one leg without the careful consideration of the other two is typically a mistake.

Performance Evaluation (What are the key performance measures

used to evaluate managers and employees?)

Rewards (How are people rewarded for meeting performance goals?)

Decision-Rights Assignment (Who gets to make what decisions?)



Preface ix

rewarding performance, outsourcing, and transfer pricing). We believe these topics are more valuable to prospective managers than topics typically covered in economics texts such as public-policy aspects of minimum-wage legislation, antitrust policy, and income redistribution. A number of other important features differentiate this book from others currently available, such as:

• Our book provides a comprehensive, cross-functional framework for analyzing organizational problems. We do this by first describing and integrating important research findings published across several functional areas, then demonstrating how to apply the framework to specific organizational problems.

• This text integrates the topics of strategy and organizational architecture. Students learn how elements of the business environment (technology, compe- tition, and regulation) drive the firm’s choice of strategy as well as the interaction of strategy choice and organizational architecture.

• Reviewers, instructors, and students found the prior editions accessible and engaging. The text uses intuitive descriptions and simple examples; more technical material is provided in appendices for those who wish to pursue it.

• Numerous examples drawn from the business press and our experiences illus- trate the theoretical concepts. For example, the effect of the 9/11 terrorist attacks on demand curves is described in Chapter 4 and how one devastated company located in the World Trade Center responded is discussed in Chapter 14. These illustrations, many highlighted in boxes, reinforce the underlying principles and help the reader visualize the application of more abstract ideas. Each chapter begins with a specific case history that is used throughout the chapter to unify the material and aid the reader in recalling and applying the main constructs.

• Nontraditional economics topics dealing with strategy, outsourcing, leader- ship, organizational form, corporate ethics, and the implementation of man- agement innovations are examined. Business school curricula often are criti- cized for being slow in covering topics of current interest to business, such as corporate governance. The last six chapters examine recent management trends and demonstrate how the book’s framework can be used to analyze and understand topical issues.

• Problems, both within and at the end of chapter, are drawn from real organiza- tional experience—from the business press as well as our contact with execu- tive MBA students and consulting engagements. We have structured exercises that provide readers with a broad array of opportunities to apply the framework to problems like ones they will encounter as managers.

Organization of the Book • Part 1: Basic Concepts lays the groundwork for the book. Chapter 2 summa-

rizes the economic view of behavior, stressing its management implications. Chapter 3 presents an overview of markets, provides a rationale for the exis- tence of organizations, and stresses the critical role of the distribution of knowledge within the organization.

• Part 2: Managerial Economics applies the basic tools of economic theory to the firm. Chapters 4 through 7 cover the traditional managerial-economics top- ics of demand, production and cost, market structure, and pricing. These four chapters provide the reader with a fundamental set of microeconomic tools and



use these tools to analyze basic operational policies such as input, output, and product pricing decisions. Chapters 8 and 9 focus on corporate strategy—the former on creating and capturing values and the latter on employing game the- ory methods to examine the interaction between the firm and its competitors, suppliers, as well as other parties. These chapters also provide important background material for the subsequent chapters on organizations: A robust understanding of the market environment is important for making sound orga- nizational decisions. Chapter 10 examines conflicts of interest that exist within firms and how contracts can be structured to reduce or control these conflicts.

• Part 3: Designing Organizational Architecture develops the core frame- work of the book. Chapter 11 provides a basic overview of the organiza- tional-design problem. Chapters 12 and 13 focus on two aspects of the as- signment of decision rights within the firm—the level of decentralization chosen for various decisions followed by the bundling of various tasks into jobs and then jobs into subunits. Chapters 14 and 15 examine compensation policy. First we focus on the level of compensation necessary to attract and retain an appropriate group of employees. We then discuss the composition of the compensation package, examining how the mix of salary, fringe ben- efits, and incentive compensation affects the value of the firm. In Chapters 16 and 17, we analyze individual and divisional performance evaluation. Part 3 concludes with a capstone case on Arthur Andersen.

• Part 4: Applications of Organizational Architecture uses the framework that we have developed to provide insights into contemporary management is- sues. Chapters 18 through 23 discuss the legal form of organization, outsourc- ing, leadership, regulation, ethics, and management innovations.

Fitting the Text into the Business Curriculum Our book is an effective tool for a variety of classes at the MBA, executive MBA, and undergraduate level. Although this text grew out of an MBA elective course in the eco- nomics of organizations at the University of Rochester, the book’s modular design al- lows its use in a variety of courses. We have been encouraged by the creativity instruc- tors have shown in the diversity of courses adopting this text. Besides the introductory microeconomics course, this book also is used in elective courses on corporate gover- nance, strategy, the economics of organizations, and human resources management. The basic material on managerial economics is presented in the first 10 chapters. The tools necessary for understanding and applying the organizational framework we de- velop within this text have been selected for their managerial relevance. In our experi- ence, these economics tools are invaluable for those students with extensive work experience, and for those who didn’t major in economics as an undergraduate. Those with an economics background may choose to forgo components of this material. We have structured our discussions of demand, production/cost, market structure, pricing, and strategy to be optional. Thus, readers who do not require a review of these tools can skip Chapters 4 through 9 without loss of continuity.

We strongly recommend that all readers cover Chapters 1 through 3 and 10; these chapters introduce the underlying tools and framework for the text. Chapters 4 through 9, as we noted above, cover the basic managerial-economics topics of demand, costs, production, market structure, pricing, and strategy. Chapters 11 through 17 develop the organizational architecture framework; we recommend that these be covered in

x Preface



sequence. Finally, Chapters 18 through 23 cover special managerial topics: outsourc- ing, leadership, regulation, ethics, and the process of management innovation and man- aging organizational change. They are capstone chapters—chapters that apply and il- lustrate the framework. Instructors can assign them based on their specific interests and available time.

Sixth Edition This book is noted for using economics to analyze real-world management problems. The sixth edition maintains and extends this focus. Changes from the fifth edition include:

• Learning objectives have been added to focus on the core concepts of the chap- ter to aid in the assessment of learning outcomes.

• Extended and more in-depth coverage of important managerial economics concepts, including supply and demand analysis, comparative advantage, con- stant versus increasing cost industries, price competition with differentiated products, inter-temporal decisions (Fisher Separation Theorem) and behav- ioral economics.

• Managerial applications, examples, exhibits, and other boxed materials have been updated.

• Key managerial insights from important recent research in organizational economics have been added.

• Data has been updated, where appropriate.

• We have responded in various ways to reader feedback from earlier editions.

Supplements The following ancillaries are available for quick download and convenient access via the Instructor Library material available through McGraw-Hill Connect®.

• PowerPoint Presentations: Fully updated for the sixth edition, each chapter’s PowerPoint slides are closely tied to the book material and are enhanced by animated graphs. You can edit, print, or rearrange the slides to fit the needs of your course.

• Test Bank: The test bank offers hundreds of questions categorized by level of difficulty, AACSB learning categories, Bloom’s taxonomy, and topic.

• Computerized Test Bank: McGraw-Hill’s EZ Test is a flexible and easy-to- use electronic resting program that allows you to create tests from book- specific items. It accommodates a wide range of question types and you can add your own questions. Multiple versions of the test can be created and any test can be exported for use with course management systems. EZ Test Online gives you a place to administer your EZ Test-created exams and quizzes online. Addition- ally, you can access the test bank through McGraw-Hill Connect®.

• Instructor’s Manual: The instructor’s Manual provides chapter overviews, teaching tips, and suggested answers to the end-of-chapter Self-Evaluation Problems and Review Questions.

Preface xi



Digital Solutions McGraw-Hill Connect® Economics

Less Managing. More Teaching. Greater Learning.

McGraw-Hill’s Connect® Economics is an online assessment solution that connects students with the tools and resources they’ll need to achieve success.

McGraw-Hill’s Connect Economics Features

Connect Economics allows faculty to create and deliver exams easily with selectable test bank items. Instructors can also build their own questions into the system for homework or practice. Other features include:

Instructor Library The Connect Economics Instructor Library is your repository for additional resources to improve student engagement in and out of class. You can se- lect and use any asset that enhances your lecture. The Connect Economics Instructor Library includes all of the instructor supplements for this text.

Student Resources Any supplemental resources that align with the text for student use will be available through Connect.

Student Progress Tracking Connect Economics keeps instructors informed about how each student, section, and class is performing, allowing for more productive use of lecture and office hours. The progress-tracking function enables you to:

• View scored work immediately and track individual or group performance with assignment and grade reports.

• Access an instant view of student or class performance relative to learning objectives.

• Collect data and generate reports required by many accreditation organiza- tions, such as AACSB.

• Connect Insight is a powerful data analytics tool that allows instructors to leverage aggregated information about their courses and students to provide a more personalized teaching and learning experience.

Diagnostic and Adaptive Learning of Concepts: LearnSmart and SmartBook offer the first and only adaptive reading experience designed to change the way students read and learn.

Students want to make the best use of their study time. The LearnSmart adaptive self-study technology within Connect Economics provides students with a seamless combination of practice, assessment, and remediation for every concept in the textbook. LearnSmart’s intelligent software adapts to every student response and automatically delivers concepts that advance students’ understanding while reducing time devoted to the concepts already mastered. The result for every student is the fastest path to mastery of the chapter concepts. LearnSmart:

• Applies an intelligent concept engine to identify the relationships between con- cepts and to serve new concepts to each student only when he or she is ready.

xii Preface



• Adapts automatically to each student, so students spend less time on the topics they understand and practice more those they have yet to master.

• Provides continual reinforcement and remediation, but gives only as much guidance as students need.

• Integrates diagnostics as part of the learning experience.

• Enables …

Stella Ann Freeman is having a difficult time deciding whether or not to purchase a new car. How would understanding the concept of opportunity costs help her make a decision?

MBA 540 Mid-term Exam


1. (10 pts.) Stella Ann Freeman is having a difficult time deciding whether or not to purchase a new car. How would understanding the concept of opportunity costs help her make a decision?


2. (10 pts.) Referring to the table below, hiring a driver costs $10. Each machine costs $100. Which method should he use and why?



3. (10 pts.) Enron will be an example of a dysfunctional company for many years to come. It was clearly a company riddled with fraud and excess and its conduct drove it into bankruptcy. The text argues that individual behavior was not at the core of Enron’s problems. What were the problems with this corporation from an organizational architecture point of view?


4. (10 pts.) For many corporations such as utility companies, a major portion of the cost of production is fixed in the short run. Should these very large fixed costs be ignored when the executives are making output and pricing decisions? Why?


5. (10pts.) Choose a real-life example of a firm that you think is part of an oligopoly market and describe the characteristics of the market structure that explain why the firm would be classified as such.


6. (10 pts.; 2 pts each) You are the manager for Dunkin Donuts and know the following elasticities:


η= 1.5 η I = 1.2 η xy1 = 0.5 η xy2 = -0.5


η is the price elasticity of demand for Dunkin Donuts (DD) glazed doughnuts, ηxy1 is the cross elasticity of demand between DD glazed doughnuts and Krispy Kreme (KK) glazed doughnuts, ηxy2 is the cross elasticity of demand between DD glazed doughnuts and DD French Vanilla coffee, and η I is the income elasticity of DD glazed doughnuts.


a) If you want to increase your sales of glazed doughnuts by 30%, in what direction and by how much do you need to change the price?



b) If you make the percentage price change that you calculated in part a) will total revenue increase or decrease? How do you know?


c) Krispy Kreme lowers its price of glazed doughnuts by 20%. The demand for Dunkin Donuts glazed doughnuts will change by what percentage and in what direction?

d) Dunkin Donuts raises the price of its French Vanilla coffee by 15%. The demand for Dunkin Donuts glazed doughnuts will change by what percentage and in what direction?



e) If average income increases by 5% by what percentage and in what direction will the demand for Dunkin Donuts glazed doughnuts change? Are DD glazed doughnuts a normal good or an inferior good and how do you know?


7. (10 pts.) Westinghouse and General Electric are competing on the newest version of clothes washer and dryer combinations. Two pricing strategies exist: price high or price low. The profit from each of the four possible combinations of decisions is given in the following payoff matrix:


    Westinghouse’s price
    High ($4000) Low ($2000)
General Electric’s


High ($4000)  

W: $10,000,000

GE: $10,000,000



W: $16,000,000

GE: $-4,000,000


  Low ($2000)  

GE: $16,000,000

W: $-4,000,000



W: $4,000,000

GE: $4,000,000


    Payoffs in dollars of profit.




a) (2 pts.) Which strategy offers both Westinghouse and General Electric the best financial outcome?


b) (2 pts.) Does either firm have a dominant strategy? If yes, which firm and what strategy?


c) (4 pts.) The Nash equilibrium is for Westinghouse to set its price at __________ and earn a profit of __________ and for General Electric to set its price at ______________ and earn a profit of _____________.


d) (2 pts.) Why do we see that the strategy that results is not the strategy that offers both players the best financial outcome?



The difference between forgettable presentations and effective technology-supported learning is a matter of mindful approach

Assignment 4: PowerPoint


The difference between forgettable presentations and effective technology-supported learning is a matter of mindful approach, construction, delivery, assessment, and critical reflection (Glisczinski, 2005*). PowerPoint has for some time been a standard application as a tool to enhance presentations as well as a multimedia tool that can be used in a variety of other ways to communicate or enhance communication with a given audience. Some examples of ways in which PowerPoint can be used to these ends are:

  1. Similar to an overhead projector, used to display text to serve as a visual aid for enhance a verbal presentation.
    • The text on the slides can be accompanied by detailed notes on each slide by using the accompanying notes page. Since the slides should contain only key points and not full sentences or extended detail, the notes pages are important to provide more detail as needed for the presenter to have as a printed copy to use in the same way as you might use a lesson plan or lecture notes [for example, download sample presentation that comes from the PowerPoint application packaged examples]
  2. Expanding on the same purpose as (1) above, going beyond the overhead projector capabilities by including stationary pictures (photographs, clip art, drawings) and animations (video clips, animated pictures & drawings).
    • Slides can be printed out (various options from 1 -9 slides per page) to be provided as handouts or the 1 slide per page can be printed on overhead transparencies in cases where a computer projector is not available.
    • Slides can also be saved as a pdf file for users who do not have the PowerPoint program or PowerPoint Viewer.
  3. Similar to (2) above, but specifically for slides shows, replacing the old slide projectors. [for example, download Photo Album that comes from the PowerPoint application packaged examples]
  4. Stand-alone learning stations (e.g. for a class) or kiosks (e.g. at an exhibit), where users watch a series of slides that are set on a timed loop or where they can manually advanced slides following prompts on the screen. [Download Kiosk example that comes from the PowerPoint application packaged examples] For learning stations, the notes pages that accompany each slide can include extra detail for viewers as needed (but then viewers need to be directed to view the notes on the computer, or else have a printed copy of the slides and accompanying notes for viewers to look at as they watch the presentation on the computer).
  5. For games, such as Jeopardy (See detail & example at How to Create a Power Point Jeopardy Quiz) or Who Wants To Be A Millionaire?
  6. Converted to Quick Time movies and shown as a movie.
  7. Converted to a web page so that slides can be viewed online (See Guidelines on How To Save a PowerPoint Presentation as a Web Page).

Key questions to ask are:

  • How can PowerPoint be used effectively as multi-media tool to support and enhance learning?
  • To what extent is my time, energy, and financial investment in creating this presentation rewarded in terms of significantly advancing student learning?


  • Experiment with and learn how to use all the key features of PowerPoint, learning from trial-and-error, from sharing ideas with peers, by using the PowerPoint help documentation, and by using other resources (online and print).
  • Construct effectives PowerPoint slides to support learning experiences and which which embody sound learning practices.
  • Utilize effective practices in designing PowerPoint layout, content, and multimedia content (In Educ 5412 you learn about how to make the actual PowerPoint slides; however, you only teach using PowerPoint during the Educ 5413 class. There the focus will be on using PowerPoint as a tool for teaching, while here it is on how to create different types of PowerPoint slides using the features within PowerPoint).
  • Critically reflect upon PowerPoint best practices for supporting learning.


Part 1: Demonstration ability to use tools

Working on your own or with a partner (but each using your own computer), create a set of PowerPoint slides that demonstrates your ability to use the tools that are part of PowerPoint. Note: the content of these slides is completely unimportant to the purpose of this exercise. Please do not spend time thinking about the words you write on the slides or having the slides make any sense at all. All you need is to have text, pictures, and graphics on the page in order for you to apply the PowerPoint tools.

A good way to become aware of the different tools within PowerPoint is to go to the view menu –> select “toolbars” –> then from the bottom of the toolbars drop down menu, select “Customize toolbars/menus.” From the dialog box that appears, check all the options, so that all these tool bars appear on the screen. Then play around with each of them to see what they do, making liberal use of the PowerPoint help documentation to guide you (even when you don’t have a question, it’s amazing the tips you can pick up from using the help documentation!)

Include the following:

  1. Slides: show that you can use different types of slides including title slide, bulleted list, 2 column text, table, text and chart, organizational chart, chart, title only, clip art and text, text & picture (in any combination), large picture, picture with heading, a collage of pictures on one slide
  2. Use notes page to expand detail on main slides
  3. Using different types of format (slide design, layout, color scheme, background)
  4. Changes to master slides
  5. Headers and footers
  6. Text formatted in a variety of ways: different sizes, style of font, color, bold, italics, underlined; also insert text boxes formatted in different ways.
  7. Formatting of paragraphs: use numbered and bulleted lists, and have a series of sublevels under the bullet and numbered lists; show different ways of formatting numbers and bullets, and animate these so they each appear separately.
  8. Use of drawing tools to create your own graphics (experiment with different types of boxes, circles, lines, call outs, color, etc)
  9. Photos and clip art that you have formatted in a variety of ways (e.g. resize, rotate, use different effects, giving shadow, adjusting variations, creating border, and in clip art, changing the color of different parts of the picture.
  10. Use custom animation effects for animating text and pictures on slides. Experiment with having different parts of graphics appear one at a time so as to build viewer understanding of a sequence of steps (e.g. arrows fly in to point to different parts of a diagram, one at a time).
  11. Use action buttons
  12. Sound: Insert music from CD, insert a sound file, record narration.
  13. Video clips
  14. Interactive slides: use hyperlinks to the Internet, to other slides within your presentation, and to other computer files.
  15. Save your presentation in different formats: standard, as a pdf, as a web page, as a movie, and as a package which runs automatically upon being opened. Save these all into the same folder and make sure your last name is part of the file name).

Part 2: Create a “real” set of PowerPoint slides

On your own or with a partner brainstorm common interests in something fun and professionally revealing which most folks could stand to learn more about. Professionally revealing means your choice reveals something important about you–in a way which provides subtle evidence of your merit as a professional educator. Then explore the possibilities for creating a project enjoyable, useful, and meaningful to you.

Incorporate the following content items into PowerPoint learning experience (approximately ten slides in length):

  1. An original and thematically fitting slide background (existing PPT designs will not be accepted)
  2. An interactive navigation slide or repeated element
  3. Judicious use of text in appropriate typefaces, point sizes, and colors
  4. Original, modified, and instructive images
  5. Borrowed, modified, cited, Fair-Use approved, and instructive images
  6. Instructive sound file(s)
  7. Instructive video file(s)
  8. Slide transitions, animations, and timings as are useful
  9. A references page with working URL links to cited sources (and other resources as you choose)
  10. A slide footer including your names, PowerPoint title, and page numbers
  11. High-contrast, readable content
  12. Your work saved as a regular presentation or as a PowerPoint package
  13. Submit these to Helen via web-drop. Helen will then upload these to her web site.

Checklist: Your work features . . .

  • __ Absence of spelling and grammar errors
  • __ An original and thematically fitting slide background (existing PPT designs will not be accepted)
  • __ An interactive navigation slide or repeated element
  • __ Judicious use of text in appropriate typefaces, point sizes, and colors
  • __ Original, modified, and instructive images
  • __ Borrowed, modified, cited, fair-use approved, and instructive images
  • __ Instructive sound file
  • __ Instructive sound file video file
  • __ Slide transitions, animations, and timings as are useful
  • __ A references page with working URL links to cited sources (and other resources as you choose)
  • __ A slide footer including your names, PPT title, and page numbers
  • __ High-contrast, readable content
  • __ Your work saved as a PowerPoint package to a CD and one other location

Rubric for Part 2:






Striking utilization of space, shapes, colors, shades, modified images, text, sizes, and related elements create lucid readability and distinctive theme.

Layout is clearly original and technically demanding.

Smart combinations of space, shapes, colors, shades, modified images, text, sizes, and related elements enable solid readability and recognizable theme.

Layout appears original and skillful or is a fresh and skillful modification of an existing form.

Array of space, shapes, colors, shades, images, text, sizes, and related elements are functional.

Layout is a functional creation or reuse of an existing form.

Organization and form are confusing or insufficiently cohesive.

Layout lacks evidence of modification or personalization.


Interactive navigation, multimedia files, external links, and appearances, transitions, and timings are used in a manner which optimizes learning.

Interactive navigation, multimedia files, and external links are responsive and consistent.

Navigation, links, and related files generally work. Navigation, links, and related files are consistently unresponsive.


Project makes a compelling case for the value of its written content through highly developed and revised professional writing and reflection.

Project is conscientious in choice of content–as explained and demonstrated in reflective writing which requires little or no additional revision or explanation. Project communicates content with functional writing and reflection. Written content may contain frequent errors or reflection which lacks support and explanation.

Part 3: Reflection on what you learned

When notified by Helen that the class’s PowerPoint presentations are on the website and the PowerPoint Web Crossing discussion has opened, view the presentations created by your classmates from your assigned WebCrossing PowerPoint group (and from other groups if you wish). Then incorporate the following reflection items in your assigned group’s WebX discussion folder:

  1. What things your classmates have done with the design** of their PowerPoint which help you learn and that impressed you?
  2. What things your classmates have done with the design of their PowerPoint which might get in the way of your learning if you were a student/attendee in a class/session in which this presentation was given?
  3. Reflect on what educators ought to bear in mind when designing PowerPoint or any other presentation software. Explain why you have made these recommendations.

**note: in Educ 5412 you learn how to create the PowerPoint slides, but we do not yet focus on the actual teaching with the slides. Thus your analysis here is about the slides themselves. In Educ 5413 you will teach a lesson using PowerPoint, and at that point the focus will be on you actual delivery rather than on the slide design per se.

* Dan Glisczinski, Educ 5412 Rethinking PowerPoint, UMD Education Department (2005)

For this assignment assume you are working in the Human Resources department of a large insurance company

For this assignment assume you are working in the Human Resources department of a large insurance company. The company relies on having a well-educated workforce, especially in the fast-moving field of information technology. To help employees stay current, the company has started offering lunch-time seminars on special topics. To get things rolling, your boss asks you to prepare a presentation on one of the following 7 topics:

Digital Rights Management
Creative Commons
History of Computing Hardware
The Internet
Computer Program
Artificial Intelligence

Pick a topic above and create a PowerPoint presentation that summaries the topic. The hyperlinks on the topics above take you to the Wikipedia article for the topic. You are free to use another information source, but the quality of your source should be as good as or better than that of the Wikipedia article. If you do use another source, be sure to site your source in your presentation.

The audience for your presentation are entry-level corporate employees that have some computer experience but are by no means experts.

Since this is an assignment designed to exercise your PowerPoint skills, there are certain requirements:

Your presentation should have 7 or more slides.
Your presentation should use a specific PowerPoint theme (something other than the default “Office Theme”).
Your presentation should have a title page that includes a subtitle with your name and affiliation.
Enter some text in the speaker notes area on at least the first two slides.
At least one of the slides should have a multi-level bulleted list.
At least one of the slides should contain a picture.
Your presentation should contain at least one transition.
Animate the bullets of a slide so they fade in one-by-one. Hint, use the Animations tab and Animations group.

Once you are finished, save your work as PP-ASN.pptx and submit it through Blackboard.
Assignment Q&A