Here comes everybody (clay shirky) p41-4
COASEAN CEILING - HIERARCHY DOESNT SCALE“…not only does managing resources take resources, but management challenges grow faster than organisational size”
- lower transaction cost by increasing managerial structure
- simplifies lines of responsibility and communications
- workers are agreed to be managed by pay and this is based on responsiveness to their managers request
“an organisation will tend to grow only when the advantages that can be gotten from directing the work of additional employees are less than the transaction costs of managing them”
“this hierarchical organisation reduces transaction costs, but it doesnt eliminate them”
- for workers to be closer to top management you need to reduce layers of management
- but then a manager will be responsible for more workers and cant commit time to them all
- this is where we start to proliforate informal networks as it takes time to get a hold of your manager and for communication to go up and back down the vertical channel
“when an organisation grows very large, it reaches the limit implicit in Coase’s theory; at some point an institution simply cannot grow anymore and still remain functional, because the cost of managing the business will destroy any profit margin…a Coasean ceiling, the point above which standard institutional forms dont work well”
