1. Lecture 12 – ECON.S-1620 Prof. Charles Moran Copyright 2015 1 The Design and Dynamics of Organizations Lecture 12

2. Lecture 12 – ECON.S-1620 Prof. Charles Moran Copyright 2015 2 Considerations For Evaluating Structure Consider alternatives (i.e. technology, location) to initial firm model Consider economics – Scale, location, engineering, organization, strategic alliances… Consider outsourcing (strategic)

3. Lecture 12 – ECON.S-1620 Prof. Charles Moran Copyright 2015 3 Considerations For Evaluating Structure (cont’d) Testing the resulting firm Fluid/flexible/fun? – satisfaction Built around loyalty/commitment to core values With: –portfolio of expertise –Learning Individual Organizational –Customization (ultimate customer service) –Special contracts Outsourcing Supplier/distributor efficiency maximization Employee – opportunity if you add value or facilitate learning

4. Lecture 12 – ECON.S-1620 Prof. Charles Moran Copyright 2015 4 Organizations and Size As an objective – Incentive and compensation systems have historically rewarded size. Why? Size v. Efficiency Strategy to outsource Commodity of non-strategic functions –Franchising –Becoming a marketing company

5. Lecture 12 – ECON.S-1620 Prof. Charles Moran Copyright 2015 5 Organizations and Size (cont’d) Wal-Mart.com BarnesandNobel.com ProctorandGamble.com Dell model of customization and IT production Eliminate all manufacturing and distribution – download music and video Sears and catalog - What went wrong? Amazon.com and distribution Center issue! Efficient download from publisher Ultimate efficiency is to eliminate Ex. Source reduction v. recycle

6. Lecture 12 – ECON.S-1620 Prof. Charles Moran Copyright 2015 Group 3 – They’re Not Employees, They’re People – Drucker Knowledge Worker Independent Contractor A life uncoupled from the corporate model of work, compensation and benefits 6