Luca Ottinetti’s company blog identifies the drivers of organizational costs and explains why they add significant complexity to the administration of the business.
The costs associated with organizational alignment deal with two functions: coordination and administration. Coordination costs include resources dedicated to facilitating information sharing, knowledge transfer, and communication. These resources may comprise teams, committees, or formal lateral units depending on the complexity of the organization. Administrative costs include the top management functions for executive control and direction over all personnel, departments, facilities, and activities such as human resources, accounting, finance, public relations, contract administration, and legal. Over time, organizational costs increase if for no other reason than business growth and to compensate for cost of living adjustments. In some cases, however, organizational costs increase well above the expected norm. The question is why.
Areas covered in this article include:
- Product line expansion
- New market expansion
- Vertical integration
- Merger integration
Read the full article, Do You Know Why Your Organizational Costs Are Rising?, on the Great Prairie Group website.