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Well you could say it never works optimally, but it depends on what you are optimizing for. A lot of people think that because business need to make money that

Well you could say it never works optimally, but it depends on what you are optimizing for. A lot of people think that because business need to make money that they should optimize for making the most amount of money and therefore try to maximize productivity. They look at organizations and what they see is very much at odds with that. In reality they don't try to maximize employee productivity, they try to maximize employee fungibility. If all the company is trying to do is survive then I'd say it definitely works.

_glass 7y ago
so this would confirm system theory's point of view, that exactly states that just this can be the goal of a system, where companies are just an instance of precisely that.
sgt101 7y ago
In the short term; the twin problems - things change (more so now than in the past) and much corporate activity is necessary but unacknowledged in the org chart and balance sheet. Ripping out "inefficiencies" leaves businesses without capability. Reacquiring corporate capabilities (or acquiring them) is a long and risky road. Business schools and investors need to think about diversity of capability and expertise and ability to respond and change as measures of long (even medium term) corporate value.
wwweston 7y ago
Two other considerations: (1) what does it mean to optimize within limits of average managerial perception? while some management knows the domain well enough they can identify issues and talent that add additional levels of productivity... many can't. Or as some say, A players hire A players, B players hire C players, etc. (2) predictable + control-able levels of productivity may well be more valuable in meeting managerial goals than exceptional levels of productivity. this is a generalization of the fungibility optimization; fungibility is one aspect of predictability and control.
- james_s_tayler 7y ago
  I liken it to an organism. An organism is trying to stay in homeostasis. It's also either growing or decaying, though it mostly appears static. It's exactly as you say. Many aren't capable of identifying opportunities for optimization. Re: the organism metaphor - an organism can be relatively unhealthy and still survive. Some people are ultra-fit. Most are not. Some people really are quite unhealthy. The bar for survival is fairly low. Project that on to companies you can imagine the ultra fit being those companies whose managers can work together to identify opportunities for all the things they are aiming to optimize for and are able to optimize for more than just staying alive.

_glass 7y ago

so this would confirm system theory's point of view, that exactly states that just this can be the goal of a system, where companies are just an instance of precisely that.

sgt101 7y ago

In the short term; the twin problems - things change (more so now than in the past) and much corporate activity is necessary but unacknowledged in the org chart and balance sheet. Ripping out "inefficiencies" leaves businesses without capability. Reacquiring corporate capabilities (or acquiring them) is a long and risky road. Business schools and investors need to think about diversity of capability and expertise and ability to respond and change as measures of long (even medium term) corporate value.

wwweston 7y ago

Two other considerations: (1) what does it mean to optimize within limits of average managerial perception? while some management knows the domain well enough they can identify issues and talent that add additional levels of productivity... many can't. Or as some say, A players hire A players, B players hire C players, etc. (2) predictable + control-able levels of productivity may well be more valuable in meeting managerial goals than exceptional levels of productivity. this is a generalization of the fungibility optimization; fungibility is one aspect of predictability and control.

james_s_tayler 7y ago
I liken it to an organism. An organism is trying to stay in homeostasis. It's also either growing or decaying, though it mostly appears static. It's exactly as you say. Many aren't capable of identifying opportunities for optimization. Re: the organism metaphor - an organism can be relatively unhealthy and still survive. Some people are ultra-fit. Most are not. Some people really are quite unhealthy. The bar for survival is fairly low. Project that on to companies you can imagine the ultra fit being those companies whose managers can work together to identify opportunities for all the things they are aiming to optimize for and are able to optimize for more than just staying alive.