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Connecting the dots

After a few weeks of reading prompts, brainstorming, and writing blog posts, I now have a better understanding of organizational structures and managemental aspect of maintaining a company ordered. The topic of the first-week blog post was about the efficiency of management according to our past experiences as an intern. The concept of transaction cost was also introduced. Transaction cost is basically every cost in an economic (or in real life, even a non-economic) activity. With respect to an organization, the goal is to maximize the efficiency with as least transaction cost as possible. Transaction cost also appeared In the week of discussion on team structures. Different team structures are suitable for different organizations, and they aim at improving the efficiency of management among the groups. The discussion of last week about  Illinibucks also has something to do with transaction cost, with respect to U of I staff and students this time. Illinibucks are created to make sure all students could have some sort of privilege at different events and time throughout the school year. With such a limited amount of “currency”, student can save their time waiting in lines at the Bookstore at the beginning of the semester, or select courses for the next semester in advance. All discussions of these three weeks are about transaction costs, especially for maintaining efficiency. 

The connections among the posts are now more salient than the time I composing them at first. Before I got the chance to look at this week’s prompt, I did not notice the connection among the posts at all. Each post makes sense independently already. When efficiency is low, it is no way for a company to complete tasks and work in good quality within a short time; simple team structure is less organized and efficient than having hierarchies of leaders and boss; coupons and “currency” save everyone’s time. However, now I realize that all of them are aiming to improve the efficiency of the organizations when it comes to looking at the posts as a whole. All topics and management strategy in the posts can improve efficiency (reduce the transaction cost) from different aspects.

My process for writing these posts has evolved from the first week of doing so. At the very beginning, I wrote posts just to complete it as a task, as homework. I barely thought the discussion problems beyond the classroom. I failed to spend time reflecting on my own experience. Now after writing posts for a couple of weeks, I got more used to think of my past experience applying the idea of transaction cost. After I realized every move and improvement in the management of an organization is aiming at improving efficiency and reducing transaction cost, I started to understand some of the change and improvement my former boss made.

If I’m in the position of writing the prompt, I would like my class to discuss transaction costs in decision making in the RSOs they involved in, since RSOs are run by students and most of them are non-profitable. There must be some similarity and commonality of running an actual company, or a profitable organization, and some differentia. What are some ways and strategies to improve the efficiency and outcome of RSOs? What are some good ways to recruit members?

Comments

  1. Professor ArvanOctober 13, 2019 at 2:00 PM

    I hope this is beginning to make sense to you, but I'm not sure, so let me ask some exploratory questions.

    When you offer up a definition regarding a term in the class, such as transaction cost, where is this coming from? It's good for you to put such a definition into your own terms, but in so doing you still need to preserve the meaning. What you wrote didn't do that. Somewhere during the semester I said that if transaction costs are not incurred the transaction will get screwed up. In saying that, there are other costs that will still happen, even if the transaction goes perfectly well. Those other costs we've called production costs. In what you wrote, there was no attempt to separate out the two, so I'm not sure whether you've gotten the concept or not.

    Then you used efficiency as as unifying theme in the posts. Did you define efficiency here? We had some Excel homework on efficiency. Did you try to connect the blog posts to the Excel homework? That would have been helpful.

    What I'm saying is that you need to both zoom in and zoom out. The concepts are quite general. Understanding them, you need specific examples. When you use the general concepts, it's good to give your point of reference. Connecting this together will make the blogging better.

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    Replies
    1. Alice RivlinOctober 14, 2019 at 6:21 PM

      Thank you for your feedback.

      Transaction cost is inevitable whenever there is an economic exchange taking place. The cost has two components: coordination cost and motivation cost. Coordination cost is whatever the organization should do with respect to strategies to make profit. Motivation cost is what the organization should invest to maintain its employees' satisfaction. Production cost will exist even if the transaction cost is minimized, since production can exist without the existence of exchange. Linking it to the topic of Illinibucks, production cost can be labor and input of producing the Illinibucks.

      When talking about maximizing the efficiency (by minimizing the transaction cost), it is necessary for all the parties involved to articulate and implement its needs with efficient communication to the other parties. In the case of Illibucks, the University and the students are the two different parties. The university wants to bring convenience to the students with minimum cost, and the students want to reduce the time of waiting in lines of getting the service they need. The outcome can be maximized with relative less resource and time by both party defending their own interests and communicating clearly.

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