Asst. Prof. Dr.

Akin Seber / (IJAEST) INTERNATIONAL JOURNAL OF ADVANCED ENGINEERING SCIENCES AND TECHNOLOGIES
Vol No. 4, Issue No. 2, 010 - 013

Chicken – Egg Problem in Education

and Organization Theory
(Product, Performance Measure, Conduct and Organization Structure)

Asst. Prof. Dr. Akin Seber

Department of Financial Economics and
Faculty of Commercial Sciences
Yeditepe University, Istanbul, Turkey
aseber@yeditepe.edu.tr

Abstract — In this paper, we search for different criteria that superior to the older. Furthermore, we prove that the new
may be used in graduate school evaluations that will encourage performance evaluation system would actually lead to a new
students to learn and apply knowledge LAK rather than to focus design of organizational structure with improved comparative
on their getting a ―good passing grade GPG‖. We compare the

performance of our 2 performance evaluation systems (one
―p otential oriented – PO‖ and the other ― comparative
downgrading – CD‖) for 3 types of exams in graduate school –
entrance exam, course exam and qualifying exam. In the paper,
we show that the success of each performance measure depends
on the criteria chosen for success, further determining the
organizational structure leading to differences in comparative
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advantage even with similar productive efficiency. Actually,
the new performance evaluation system solves the “Chicken
and Egg Problem” in organization theory, that is, does the
product determine the performance measure, conduct and
organization type, or the other way around?
When we think about world problems, wee see that taking

measure achieves productive efficiency.

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advantage and allocative efficiency even when each performance

Keywords – productive efficiency, allocative efficiency;

comparative advantage; organization theory, graduate school
exams; hierarchy; polyarchy; teamwork; principle – agent
problem; complete – incomplete information; performance
measures; educator roles; success criteria.
I. INTRODUCTION
In the world, where individuals, companies and nations are
searching for policies that will bring them “comparative
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advantage” in order to survive in this global competitive
environment, there is also a need for organizations to
restructure so that all the resources will be utilized in their best
uses. The economic term for the use of resources without any
waste is productive efficiency. Allocative efficiency, however,
is relative depending on the success criteria chosen. Two
different systems may both be productively efficient within
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measures to prevent “Global Warming - GW” that concerns all
people are above “National Concerns”, as well as eliminating
“Poverty and Hunger”, or improving “Health and Education
Level”. In this regard, the analysis presented in this paper
may also have implications for tackling worldwide
problems that affects the future of all people, by suggesting
Teamwork as a good candidate for proper type of
organization structure.
B. Releted Literature
As far as organization theory is concerned, there are two
fundamental structures. The first one is one in which the
decision making authority is centralized, and once taken, they
are dictated down to the lower levels, which is represented by
“hierarchy - H”. The second one is where decision authority is
delegated, empowering the lower levels, as in “polyarchy - P”.
Actually, these two organizational types resemble “series” and
“parallel” connections in electrical circuits. In order for the
electrical current to pass 2 serially connected resistances for

themselves with two different goals to be achieved. Therefore,
it is the choice of “proper goals” that would create
“comparative advantage” and differences in the “allocatively
efficient” output, even when both alternatives may be
“productively efficient”.
A. Resource Allocation and Organizational Structure
In this paper, we analyze 3 types of exams in Graduate
School, namely entrance exam, course exam and qualifying
exam in order to reach a better design of organization. In the
analysis, we propose a different performance evaluation
system based on “potential oriented – PO” rather than
“comparative downgrading – CD” based on our recent paper
[6] and show why the new performance evaluation system is
example, it needs to pass through both of them. However, if
the 2 resistances are connected in a parallel circuit, it only
needs to pass one of them for the current to reach the end of
the circuit.
These two types of organizations have been analyzed in
different platforms like “organization theory in management
and economics”, or “reliability theory in electrical
engineering”. Sah and Stiglitz [1] have pioneered the work in
this area with their several papers, trying to establish a
framework for performance comparison of these two types of
organizations. Other authors [2], [3], [4] followed the work of
Sah and Stiglitz, and searched for performance evaluations of
these two types of organizations, by looking at the problem of
performance comparisons from different perspectives. In the

ISSN: 2230-7818 @ 2011 http://www.ijaest.iserp.org. All rights Reserved. Page 10

 Asst. Prof. Dr. Akin Seber / (IJAEST) INTERNATIONAL JOURNAL OF ADVANCED ENGINEERING SCIENCES AND TECHNOLOGIES
Reference section, we only give one of the papers written by
the authors and leave it to the interested reader to refer to
others.
We also have a paper in this area [5], which compares
performance of the mentioned two types of organizations in an
“incomplete information” setting, when “principle – agent
problems” arise. Principle–agent problems arise when the
agents who are assigned to do the task in the name of the
principle, have conflicting interests with the principle. In
economic theory, there are different instruments like
“monitoring” and “incentive system design” to bring the
interest of the two parties into alignment. Principle – agent
problems (also named moral hazard) are one aspect of
incomplete information problem, which is ex post; whereas
the other important one is adverse selection, where the types
of the agents are unknown before a contract is signed, an ex
ante incomplete information problem [8].
We have to note that hierarchy and polyarchy resemble the
market structures of monopoly and perfect competition in
economics. “monopoly - M” is a market structure where
production of the good is done by a single firm. On the other
hand, in “perfect competition - PC”, many firms compete in
the market to sell their products. M and PC are endpoints in a
continuum of market structures such that in between, there are
others like “monopolistic competition - MC” or “oligopoly –
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O”. Similarly, “hierarchy – H” is an organization type where
the decision making authority is centralized in a single person,
resembling M. On the other hand, “polyarchy – P” resembles
PC in that decision authority is totally delegated to lower
levels. There might be other cases in between, where decision-
making authority is partially delegated to lower levels.
Thinking in economic terms, Adam Smith [7] proposed
total delegation of decision rights to the individuals. In his
view of “invisible hand and markets”, when everyone acts in
their own best interest, only those goods mostly valued by the
society will be produced, which is allocative efficiency. His
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model is closer to polyarchy as decisions are decentralized and
delegated to lower levels. John Nash [8] criticized Adam
Smith by proposing that strategic actions by individuals and
firms will lead to better outcomes and introduced “game
theory” as the appropriate way to approach problems.
However, even with “cooperative” rather than “non-
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cooperative” version, the product is made separately by each
individual or firm and the decisions are made to optimize the
return for both parties. The work of John Meynard Keynes [9]
may also be worth mentioning with his view of government
taking an active role in markets. This seems to be similar to
more centralized decision making and resembles hierarchy.
There is also another organizational structure, Teamwork,
which is different in the sense that there is a single product
being produced by the unique and valuable joint efforts of the
team members. Therefore, teamwork differentiates itself from
the others where everyone is working together to produce a
product, which is the common goal.
In the following, we analyze success criteria used, the
performance measures, conduct types, and organizational
ISSN: 2230-7818 @ 2011 http://www.ijaest.iserp.org. All rights Reserved.
Vol No. 4, Issue No. 2, 010 - 013
structure in section II, give our examples of graduate school
exams and analyze the effect of using different performance
measures and educator roles in section III, and give our
conclusions and further implications of the analysis in section
IV.
II. METHOD
A. Product, Perfromance Measure, Conduct and
Organization Structure Framework
The exams used in education systems are both an
outcome of the current organizational structure as well as they
determine the “success” or “failure” of the students in
education. Actually it is possible to have different views about
success or failure in education like “learning and applying
knowledge – LAK” rather than getting a “good-passing grade
– GPG”. In the light of the new performance measure
“potential oriented – PO”, the current performance evaluation
system “comparative downgrading – CD” appears to have
negative implications on student learning. For example, we
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hear many criticisms from our students about the education
system mainly based on 4 factors:
1- The education system is too much dependent on the
performance in exams.
2- Studying material is organized around exam times
leading to unequal distribution of study time
throughout the semester with its stressful effects.
3- Memorizing material to get a good grade is more
important than learning and owning the knowledge for
future use with appropriate thinking skills.
4- The knowledge acquired before the exams is forgotten
in a short time after the exam, further diminishing the
importance of “knowledge” whereas getting a “good
grade” becomes the “success” criteria.
With the above arguments, the education system actually
appears to serve as a “signal for future employers – SFE” like
in an adverse selection problem, where the types of students
are unknown. In other words, the GPG system doesn’t give
any idea about the LAK potential of students, and it even
doesn’t encourage it.
TABLE 1. SUCCESS CRITERIA FOR DIFFERENT PERFORMANCE
OUTCOMES
Learning Not Learning
Good Grade GS, LS GS, LF
Bad Grade GF, LS GF, LF
In Table 1, we differentiate between the “success criteria”
based on the application of GPG and LAK performance
measures. Table 1 indicates that there is a need to differentiate
the term “success” labeling it as “grading success” and
“learning success” and similarly for “failure”. A performance
outcome like “bad grade” and “learning” would for example
be considered as “failure” in a GPG framework and “success”
in a LAK framework. The results of different performance
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 Asst. Prof. Dr. Akin Seber / (IJAEST) INTERNATIONAL JOURNAL OF ADVANCED ENGINEERING SCIENCES AND TECHNOLOGIES
outcome combinations are indicated in the table. The terms
GS, GF, LS, LF stand for grade success or failure and learning
success or failure, respectively.
It is also interesting to note that the success criteria chosen,
the performance measure used and conduct determine the
organizational structure. We show this relationship in Figure 1
below.
Success Criteria (Grade – Learning)
Performance Measures (Comparative - Potential)
Conduct (Superior Educator – Facilitator Encourager)
Organizational Structure (Hierarchy – Teams)
Figure 1. The effect of having different success criteria, performance
measures, conduct on organizational structure
The following are the two types of combinations of these
three dimensions that are correct:
 Grade Success Criteria – Comparative Performance
Measure – Superior Educator Role - Hierarchy

Organizational Structure;
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Learning Success Criteria – Potential Performance
Measure – Facilitator Encourager Educator Role -
Team Organizational Structure.
Other combinations would probably have no performance
improving effects. For example, to have PO performance
measure when the success criteria is “grade” and
organizational structure is “hierarchy” would have no
improvements in “grade success”. Similarly, having CD
performance measures when the success criteria is “learning”
and the organizational structure is “teams” would again have
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no performance improving effect on “learning success”.
Therefore, each performance outcome (good grade or
learning) has to be analyzes with its performance measure
(GPG or LAK), with appropriate conduct (SE or FE) and
within its organizational setting (hierarchy or teams).
Actually, in the “information age”, where the amount of
information is increasing with ever greater speeds, one can not
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expect students to learn everything about a subject and it is not
wise to expect such a thing from them. Maybe, “learning to
learn – (LL)” would be a better measure in this respect, where
students gain the ability to search for knowledge in any area
that they would encounter in the future. However, GPG type
of education success criteria still appears to be much inferior
even when compared to LL policy rather than LAK policy.
B. Conduct Analysis and Organizational Structure
In the section below, we examine the three different exam
types used in graduate school. Even though we choose the
graduate school exams, the ideas are equally applicable to all
types of exams in the education system. In our analysis, we
use the following two different frameworks for performance
evaluations:
ISSN: 2230-7818 @ 2011 http://www.ijaest.iserp.org. All rights Reserved.
Vol No. 4, Issue No. 2, 010 - 013
1- The first policy is based on the current conduct types
used in the education system of “superior educator –
SE” principle; considering the student to be lower in
status than the educator; widening the gap between
the student and the educator who is shown to be an
ideal to be reached rather than a normal real person;
by means of using comparative performance measures
like the “comparative downgrading – CD”; denying
the “uniqueness and valuableness – UV” of the
student.
2- The second one is using absolute performance
measures – like “potential oriented PO” policy; giving
the educator a “facilitator and encourager – FE”
conduct role; considering the student as a “unique and
valuable – UV” being; making conditions convenient
for him to reach his potential.
Actually, the SE principle may only serve to satisfy the
educator’s ego needs rather than helping the student reach his
potential and be successful. In this system, even though the
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student obtains “success” in a GPG framework, he actually is
a “failure” in either an LL or LAK framework. The SE
framework creates and maintains the educator a position above
the student with a distance between him and the student in a
superiority context. In an organizational setting, this would
imply formation of a ―Hierarchy” structure and ―superiority
and command - control” systems.
On the other hand, the FE conduct framework considers the
student as a different, unique, and valuable human being and
focuses on helping him reach his unique potential. There is no
consideration of a gap between the educator and the student
having respect for the differences between the two, which is
their “separateness and individuality - SI”. Actually, if you
asked a psychologist about the differences between these two
approaches, he would probably diagnose the first one as a
person who has had difficulty in the separation and
individuation stage of pre-school childhood development,
and would consider it as problematic and unhealthy (any
childhood development book may be referred to in this
regard). In an organizational setting, the FE framework would
imply working together as a ― Team‖, in which the educator
and the student act as “equal colleagues in the same team”
towards the new “success criteria” of helping the student reach
his potential.
III. APPLICATION
In this section, we analyze three different examples of exam
types that we see in graduate school and the consequences of
using different performance measures and educator roles.
Example 1- The entrance exam for graduate school is the
first exam held in graduate school. As an example, we will
consider the situation of a student who already has a Masters
degree in a different field and wants to pursue a Ph.D. degree
in your program. The person, however, is told by the
evaluation committee, within a CD framework, that she is only
eligible for the Masters program with her qualifications. In
order for her to continue with the Ph.D. program she needs to
have a minimum of at least 3.5 out of 4 in the Masters courses,
putting an uncertainty and a lot of stress about the future on
her shoulders. An alternative PO strategy would be to accept
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 Asst. Prof. Dr. Akin Seber / (IJAEST) INTERNATIONAL JOURNAL OF ADVANCED ENGINEERING SCIENCES AND TECHNOLOGIES
her to the Ph.D. program, for which she is willing, and
promise that the educators will guide and encourage her to get
good grades. But, in this case, she will only get a Masters
degree and may not continue the Ph.D. program if her grades
fall below 3.5 out of 4.0.
Example 2- During the program students take exams in
each of the classes like Midterm and Final. Consider the
situation of an educator who gives the student a bad grade
comparing her performance with other students, in a CD
framework. While making comparisons, however, he doesn’t
make considerations for the unique situation each student is in.
For example, she is considering the situation of a Teaching
Assistant, who has ample time in the department to study, with
the performance of a banker, who only has time to study at
night and during weekends, even though they may have
similar capabilities to succeed in the course. A PO measure
would for example evaluate the performance of each student
within their given circumstances like in “Linear Programming
Problem with Constrains”, and even guide them during the
classes for easier learning methods.
Example 3- Another type of exam during graduate studies
is the qualifying exam - written and oral - that students take
after the completion of coursework and before they start their
Ph.D. thesis. For example, a student who answers questions in
a poor manner in front of the Exam Committee who also has a
poor performance in the written exam may be evaluated
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differently by the committee members with different
performance criteria. Within a CD framework, the committee
members would think that the student should have established
a reasonable knowledge of subjects in the exams even if they
do have research potential. They would fail the student with a
poor exam performance, giving him a second chance to take
the exam after 3 months. On the other hand, an evaluation
under a PO framework may allow the student to pass the exam
with the following considerations:
 The student has already established that he has good
technical abilities both before he joined the program
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and during the courses he has taken during his studies;
 He has taken his undergraduate degree in Engineering
from a good University in Europe, where teaching and
evaluation criteria are much stricter;
 He currently works as the general manager of an
automobile company and has lots of responsibilities
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due to the economic crisis;
 The person is already 50 years old and had lots of
responsibilities in different companies and taking the
exam again after 3 months with the associated
uncertainty and stress would mean a huge burden for
him, which may cause him to leave the program etc..
Within the PO framework, the committee members may
pass the student for the exam believing in his potential,
nevertheless, telling him that he should convince each
committee member within 3 months that he knows the
material.
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Vol No. 4, Issue No. 2, 010 - 013
The results of these two approaches are totally different. In
all of these three examples, the consequences of using a PO –
FE system rather than a CD - SE system are similar. For the
person who is taking the exam and with a PO - FE
performance evaluation – educator role system, the person
would be in a comparatively better condition to continue his
studies for the following reasons:
 The relief of anxiety about the future;
 The belief that committee members put in his potential;
 The sense of belonging;
 The knowledge that his previous efforts were not
useless.
IV. CONCLUSION
In this paper, by using different examples of exams in
graduate school, we do not encourage passing a person from
an exam even though he doesn’t deserve it, but show that
when different criteria are used for evaluating student
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performance and with different success criteria, a failing
student may be considered successful in the exams. Most
importantly, we argue that the student’s future work would be
encouraged by the educators with their belief in his potential,
rather than emphasizing the gap between the student and the
educators in a superiority context that idealizes the educators
and may only serve the ego needs of educators and their
organizational status.
Furthermore, we think that it is possible to get implications
from these examples for solving “Global Warming - GW”
problem. Based on our analysis, the proper way to tackle GW
may be ― teamwork‖ as the organizational structure, ―PO –
FE policy‖ as the performance measure and team member
role, and ―the good of all‖ as the success criteria.
REFERENCES
[1] Raaj K. Sah, Joseph E. Stiglitz, “The architecture of economic systems:
hierarchies and polyarchies,” American Economic Review, 1986, vol.
76, p. 716-727.
[2] Winston T. H. Koh, “Human fallibility and sequential decision making:
hierarchy versus polyarchy,” Journal of Economic Behavior and
Organization, 1992, vol. 18, p. 317-345.
[3] Ben-Yashar Ruth, Samuel I. Nitzan, “Quality and structure of
organizational decision making,” Journal of Economic Behavior and
Organization, 1998, vol. 36, p. 521-534.
[4] Bauke Visser, “Complexity, robustness and performance,” 2002,
Tinberger University Discussion Paper.
[5] A. Seber, Ho-Mou Wu, “Incentives and organizational design:
hierarchies and polyarchies,” working paper presented at Econometric
Society Meetings, Winter 1995, Washington D.C., USA.
[6] A. Seber, Ahmet H. Kaya, “Performance measures in education and
productive efficiency,” International Journal of Advanced Engineering
Sciences and Technologies, March 2011, vol. 4, no. 1, p. 22-25.
[7] Adam Smith, The Wealth of Nations – great minds series, Prometheus
Books, 1991.
[8] Andreu Mas-Collel, Michael D. Whinston, Jerry R. Green,
Microecnomic Theory, Oxford University Press, 1995.
[9] John M. Keynes, The General Theory of Employement, Interest and
Money – great minds series, Prometheus Books, 1997.
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