Although employers traditionally have maintained existing real wages in the face of a declining market-clearing (equilibrium) wage (the “sticky wages” phenomenon), it has recently been observed that some firms reduce real wages in this situation. In order to understand the varied ways in which employers respond to a decline in the clearing wage, this article develops a framework integrating perspectives from efficiency wage theory with perspectives from human resource management, institutional economics, and strategic management. The framework suggests that such varied responses result from variation in factors likely to inhibit reductions, even when reductions would be efficient and variation in factors likely to affect the efficiency of reducing wages. The implications of the framework for research and practice are also discussed.

The authors outline an approach for optimally designing an organization and report on a case where the approach was effectively implemented on a large scale.They examine what the concept of optimum organization design is and discuss several examples. They examine the design variables that are incorporated into the design process. They identify design variables as the structural and technological aspects of an organization such as the span of control the organization will have and the degree of task specialization that will be required within the organization. In an optimum organization design these variables will be established in an balance that is aimed at maximizing the achievement of the organization's goals.