Although
I don’t have a large amount of experiences within organizations, when I read
the prompt, I immediately thought of one specific experience. This past summer
I was an intern at a large consulting firm, and as part of the internship I
worked on a team implementing an HR software for an insurance company. Over the
summer, I experienced transaction costs firsthand and saw how they can affect
an entire team or organization.
The
team I was assigned to was solely focused on implementing an HR software, WorkDay,
and worked in a separate office than the rest of the company. About two years
ago, the company I was working for purchased a smaller consulting firm and as
part of the acquisition they acquired their office space. Although I didn’t
witness this merge firsthand, the effects of it were obvious to me from the
coffee cups with the old company’s logo to the fact that I’ve heard my
coworkers talk about it several times over the summer. Acquiring an extra
unneeded office is a clear example of a transaction cost; however, although it
may be the most obvious from my experience it is not the most costly. A
multibillion-dollar company should have no problems covering a few years of
rent on a small office, but making sure there is still a positive work environment
after a merger or acquisition is far more difficult. Suddenly adding dozens of
new team members is going to make it difficult to maintain strong team chemistry.
According to several of my coworkers, briefly after the merger things were
awkward because the office seemed to be divided between the new and old team
members. Even though the acquisition went smoothly and two years later
I saw no negatives from it. I can easily see how such a drastic change can
negatively affect team chemistry and ultimately be very costly to an
organization if it is not handled correctly.
A
decently sized portion of consulting involves travelling to a client site;
however, for my internship I didn’t have to, but the rest of my team did. This
meant many of the days in the office I did not see anyone I worked with. Most
of my communication was done through email, instant message, and the occasional
phone call. Although these types of communication work fine, when compared to
in person communication they have more transaction costs. Most people respond
to emails fairly quickly, but almost everyone occasionally misses an email or
is busy and can’t respond immediately. For me this summer, this meant that
there were a few periods where I had no work to complete. Even though I was
just an intern and didn’t have a huge salary, every hour that I didn’t have
work to do was a cost to the organization with no return. When considering how
much money I was paid during those periods, its less than pennies compared to
how much profit the business makes, but none the less it is an extra cost. And considering
the thousands of people that work there, it seems to be unreasonable that I was
the only one who did not have anything to do for a few hours. This problem is
mostly limited to entry level people who rely solely on managers for work, but
none the less I’m fairly certain someone else was in a similar position to me
at some point.
These
are the two examples that first came to mind when reflecting on my experience
in organizations and with transaction costs. Although these aren’t the largest
transaction costs imaginable, having firsthand experience with them makes it
more relatable and understandable how businesses incur transaction costs.
While I appreciate that you indent your paragraphs, in future posts please put a line space between paragraphs as well.
ReplyDeleteRegarding the substance of what you wrote - for the economics perspective a large issue is whether the acquired firm was in the same line of business as the parent company or not. Horizontal mergers (same line of business) are done so the merged company has more market power than the the two companies prior to merger. Conglomerate merger (different lines of business) is done for other reasons. I couldn't tell which this was based on what you wrote.
If you were in class last Thursday, I briefly articulated the idea in Herbert Simon's Nobel lecture that labor is a buffer - deployed to where it is needed as those needs arise. This does not preclude that labor might sometime go idle. While it may seem like a waste to you to not be always working, I would ask whether at other times you were quite busy and then if you were doing productive work. If so, you might think of your pay as partly an option (in a financial sense) that you get so you can be deployed when needed.
Organizations don't have to be centrally located, with all the staff in the same building. Sometimes organizations have staff distributed either out of functional reasons our out of historical reasons, as you have suggested in your piece. The functional story suggests that maybe the staff will remain distributed indefinitely. The historical story suggests that there may be lags in moving remote staff to central locations because certain accommodations must be made first. I don't know which makes sense in the situation you described, but I do want to note you only reported the perspective of those in the acquired company. You may not know what the management of the acquiring company was thinking in this regard, but if there were any documents written up about the purpose of the merger, those might have shed some light on the issue.
I also want to note that when new management comes in, even when there is no merger, it takes a while for staff to adjust and there may be trepidation about it until they do. There is fear of - possible loss of job, a change of ethos in the workplace, and also that co-workers who are friends do poorly after the fact. So what you report in this regard seems normal to me. The circumstances under which the merger occurred would either accentuate or mute these effects. If you knew something about that, it would have been good to include in your essay.