ORGANIZATION CHART
Research/ Economics
MIN Error of Forecast
ORGANIZATION CHART
Research/ Economics
MIN Error of Forecast
MAX SALES?
Responsible for
Customer.
ORGANIZATION CHART
Research/ Economics
MIN Error of Forecast
MARKETING DEPARTMENT
MAX SALES
MINIMIZE COST?
Responsible for
resource providers
ORGANIZATION CHART
Research/ Economics
MIN Error of Forecast
MARKETING DEPARTMENT
MAX SALES
ENGINEERING, PRODUCTION, PURCHASING, PERSONNEL:
MIN COSTS or MAX PRODUCTIVITY or MAX OUTPUT
ORGANIZATION CHART
Research/ Economics
MIN Error of Forecast
MINIMIZE ERROR OF REPORTING?
Responsible to SEC & Professional Org.
MARKETING DEPARTMENT
MAX SALES
ENGINEERING, PRODUCTION, PURCHASING, PERSONNEL:
MIN COSTS or MAX PRODUCTIVITY or MAX OUTPUT
ORGANIZATION CHART
Research/ Economics
MIN Error of Forecast
Accounting
MIN Reporting Error
MARKETING DEPARTMENT
MAX SALES
ENGINEERING, PRODUCTION, PURCHASING, PERSONNEL:
MIN COSTS or MAX PRODUCTIVITY or MAX OUTPUT
ORGANIZATION CHART
MAXIMIZE NET PRESENT VALUE?
Responsible to Stockholders
Research/ Economics
MIN Error of Forecast
Accounting
MIN Reporting Error
MARKETING DEPARTMENT
MAX SALES
ENGINEERING, PRODUCTION, PURCHASING, PERSONNEL:
MIN COSTS or MAX PRODUCTIVITY or MAX OUTPUT
ORGANIZATION CHART
MANAGEMENT/ FINANCE
MAX Net Present Value
Research/ Economics
MIN Error of Forecast
Accounting
MIN Reporting Error
MARKETING DEPARTMENT
MAX SALES
ENGINEERING, PRODUCTION, PURCHASING, PERSONNEL:
MIN COSTS or MAX PRODUCTIVITY or MAX OUTPUT
ORGANIZATION CHART
MANAGEMENT/ FINANCE
MAX Net Present Value
Research/ Economics
MIN Error of Forecast
Accounting
MIN Reporting Error
MINIMIZE LOSS OF
MARKETING DEPARTMENT
GOODWILL?
MAX SALES
Responsible for mainTaining customer goodwill
ENGINEERING, PRODUCTION, PURCHASING, PERSONNEL:
MIN COSTS or MAX PRODUCTIVITY or MAX OUTPUT
ORGANIZATION CHART
MANAGEMENT/ FINANCE
MAX Net Present Value
Research/ Economics
MIN Error of Forecast
Accounting
MIN Reporting Error
MARKETING DEPARTMENT
MAX SALES
CUSTOMER RELATIONS
MIN Loss of Goodwill
MIN Cost per customer
ENGINEERING, PRODUCTION, PURCHASING, PERSONNEL:
MIN COSTS or MAX PRODUCTIVITY or MAX OUTPUT
ORGANIZATION CHART
MANAGEMENT/ FINANCE
MAX Net Present Value
WHO MAXIMIZES
CORPORATE
VISIBILITY?
Responsible for
Goodwill in the long
run
Research/ Economics
MIN Error of Forecast
Accounting
MIN Reporting Error
MARKETING DEPARTMENT
MAX SALES
CUSTOMER RELATIONS
MIN Loss of Goodwill
MIN Cost per customer
ENGINEERING, PRODUCTION, PURCHASING, PERSONNEL:
MIN COSTS or MAX PRODUCTIVITY or MAX OUTPUT
ORGANIZATION CHART
MANAGEMENT/ FINANCE
MAX Net Present Value
Research/ Economics
MIN Error of Forecast
Accounting
MIN Reporting Error
PUBLIC RELATIONS MARKETING DEPARTMENT
MAX Goodwill visibility MAX SALES
CUSTOMER RELATIONS
MIN Loss of Goodwill
MIN Cost per customer
ENGINEERING, PRODUCTION, PURCHASING, PERSONNEL:
MIN COSTS or MAX PRODUCTIVITY or MAX OUTPUT
ORGANIZATION CHART
MANAGEMENT/ FINANCE
MAX Net Present Value
Research/ Economics
MINIMIZE UNDESIRABLE
VISIBILITY? Responsible
For Enforcement Authorities
MIN Error of Forecast
Accounting
MIN Reporting Error
PUBLIC RELATIONS MARKETING DEPARTMENT
MAX Goodwill visibility MAX SALES
CUSTOMER RELATIONS
MIN Loss of Goodwill
MIN Cost per customer
ENGINEERING, PRODUCTION, PURCHASING, PERSONNEL:
MIN COSTS or MAX PRODUCTIVITY or MAX OUTPUT
ORGANIZATION CHART
MANAGEMENT/ FINANCE
MAX Net Present Value
Research/ Economics
MIN Error of Forecast
LEGAL COUNSEL
Accounting
MIN Reporting Error
MIN Undesirable Visibility
MIN Legal Costs (?)
PUBLIC RELATIONS MARKETING DEPARTMENT
MAX Goodwill visibility MAX SALES
CUSTOMER RELATIONS
MIN Loss of Goodwill
MIN Cost per customer
ENGINEERING, PRODUCTION, PURCHASING, PERSONNEL:
MIN COSTS or MAX PRODUCTIVITY or MAX OUTPUT
ORGANIZATION CHART
MANAGEMENT/ FINANCE
MAX Net Present Value
MAXIMIZE WINDFALLS FROM
GOVERNMENT? Responsible for
Top decision makers in government
LEGAL COUNSEL
Research/ Economics
MIN Error of Forecast
Accounting
MIN Reporting Error
MIN Undesirable Visibility
MIN Legal Costs (?)
PUBLIC RELATIONS MARKETING DEPARTMENT
MAX Goodwill visibility MAX SALES
CUSTOMER RELATIONS
MIN Loss of Goodwill
MIN Cost per customer
ENGINEERING, PRODUCTION, PURCHASING, PERSONNEL:
MIN COSTS or MAX PRODUCTIVITY or MAX OUTPUT
ORGANIZATION CHART
MANAGEMENT/ FINANCE
MAX Net Present Value
LOBBYISTS
MAX Government Windfalls
MIN Compliance Costs
Research/ Economics
MIN Error of Forecast
LEGAL COUNSEL
Accounting
MIN Undesirable Visibility
MIN Legal Costs (?)
MIN Reporting Error
PUBLIC RELATIONS MARKETING DEPARTMENT
MAX Goodwill visibility MAX SALES
CUSTOMER RELATIONS
MIN Loss of Goodwill
MIN Cost per customer
ENGINEERING, PRODUCTION, PURCHASING, PERSONNEL:
MIN COSTS or MAX PRODUCTIVITY or MAX OUTPUT
ORGANIZATION CHART
MANAGEMENT/ FINANCE
MAX Net Present Value
LOBBYISTS
Research/ Economics
MAX Government Windfalls
MIN Compliance Costs
MIN Error of Forecast
LEGAL COUNSEL
Accounting
MIN Undesirable Visibility
MIN Legal Costs (?)
MIN Reporting Error
PUBLIC RELATIONS MARKETING DEPARTMENT
MAX Goodwill visibility MAX SALES
CUSTOMER RELATIONS
MIN Loss of Goodwill
MIN Cost per customer
MINIMIZE REPORTING ERROR FOR
FIRM’S PAST? Responsible for posterity
ENGINEERING, PRODUCTION, PURCHASING, PERSONNEL:
MIN COSTS or MAX PRODUCTIVITY or MAX OUTPUT
ORGANIZATION CHART
MANAGEMENT/ FINANCE
MAX Net Present Value
LOBBYISTS
MAX Government Windfalls
MIN Compliance Costs
Research/ Economics
MIN Error of Forecast
LEGAL COUNSEL
Accounting
MIN Undesirable Visibility
MIN Legal Costs (?)
MIN Reporting Error
PUBLIC RELATIONS MARKETING DEPARTMENT
MAX Goodwill visibility MAX SALES
CUSTOMER RELATIONS
MIN Loss of Goodwill
MIN Cost per customer
Historian
MIN Reporting Error of
Firm’s Past
ENGINEERING, PRODUCTION, PURCHASING, PERSONNEL:
MIN COSTS or MAX PRODUCTIVITY or MAX OUTPUT
Studies Used in Private Organizations
Objectives Choices
Type of Study
Department
Min Error
Statistical technique
Forecast, Scenarios,
Simulations, Sensitivity
Analysis
Economics, Finance,
Planning, Research
Max Sales
Advertising, pricing
Advertising, Demand
Marketing
Max Ouptut,
Min Cost, Max
Productivity
Inputs, technologies
Engineering, Production,
Cost Effectiveness,
Feasibility
Engineering,
Production,
Personnel
Max Profit
Planning, method of
reporting
Income Statements, Business
Plan
Accounting, Finance
Max Net
Present Value
Real estate, plant,
equipment
Capital Budgeting
Finance, Planning
Max net Benefit Public projects, taxes,
regulation
Cost-benefit Analysis
Lawyers, Lobbyists,
Trade Associations,
Management
Max Social
Welfare
Govt. Studies
(same)
Other govt regulation
AGENCY PROBLEM
Principals = Owners
Agents = Managers and other employees
who are not owners
Individual Agents compromise an
organization’s goals by
achieving goals of their own.
ORGANIZATION CHART
MANAGEMENT/ FINANCE
MAX Net Present Value
AP: poison pills, greenmail
LOBBYISTS
MAX Government Windfalls
MIN Compliance Costs
LEGAL COUNSEL
MIN Undesirable Visibility
MIN Legal Costs (?)
AP: Leaking
information
Research/ Economics
AP: Creating
legal problems
Accounting
MIN Error of Forecast
AP: Whistle
blowing
AP: larceny,
report delay
MIN Reporting Error
AP: unprofitable
deals
MARKETING DEPARTMENT
MAX SALES
PUBLIC RELATIONS AP: Grab own spotlight
Historian
MAX Goodwill visibility Unwanted visibility
MIN Reporting Error of
Firm’s Past
CUSTOMER RELATIONS
MIN Loss of Goodwill
MIN Cost per customer
AP: Brusque
treatment of customers
AP: Write EXPOSE
ENGINEERING, PRODUCTION, PURCHASING, PERSONNEL:
MIN COSTS or MAX PRODUCTIVITY or MAX OUTPUT
AP: Thievery, waste,
failing to report proble
How does your practice cover these
responsibilities? MANAGEMENT/ FINANCE
MAX Net Present Value
AP: poison pills, greenmail
LOBBYISTS
MAX Government Windfalls
MIN Compliance Costs
LEGAL COUNSEL
MIN Undesirable Visibility
MIN Legal Costs (?)
AP: Leaking
information
Research/ Economics
AP: Creating
legal problems
Accounting
MIN Error of Forecast
AP: Whistle
blowing
AP: larceny,
report delay
MIN Reporting Error
AP: unprofitable
deals
MARKETING DEPARTMENT
MAX SALES
PUBLIC RELATIONS AP: Grab own spotlight
Historian
MAX Goodwill visibility Unwanted visibility
MIN Reporting Error of
Firm’s Past
CUSTOMER RELATIONS
MIN Loss of Goodwill
MIN Cost per customer
AP: Brusque
treatment of customers
AP: Write EXPOSE
ENGINEERING, PRODUCTION, PURCHASING, PERSONNEL:
MIN COSTS or MAX PRODUCTIVITY or MAX OUTPUT
AP: Thievery, waste,
failing to report proble
Will You do these all yourself? Really?
MANAGEMENT/ FINANCE
MAX Net Present Value
AP: poison pills, greenmail
LOBBYISTS
MAX Government Windfalls
MIN Compliance Costs
LEGAL COUNSEL
MIN Undesirable Visibility
MIN Legal Costs (?)
AP: Leaking
information
Research/ Economics
AP: Creating
legal problems
Accounting
MIN Error of Forecast
AP: Whistle
blowing
AP: larceny,
report delay
MIN Reporting Error
AP: unprofitable
deals
MARKETING DEPARTMENT
MAX SALES
PUBLIC RELATIONS AP: Grab own spotlight
Historian
MAX Goodwill visibility Unwanted visibility
MIN Reporting Error of
Firm’s Past
CUSTOMER RELATIONS
MIN Loss of Goodwill
MIN Cost per customer
AP: Brusque
treatment of customers
AP: Write EXPOSE
ENGINEERING, PRODUCTION, PURCHASING, PERSONNEL:
MIN COSTS or MAX PRODUCTIVITY or MAX OUTPUT
AP: Thievery, waste,
failing to report proble
MARKET GOVERNMENT GOVERNMENT
FAILURE INTERVENTION FAILURE
EXTERNALITY PUBLIC ENTERPRISE
-PUBLIC GOODS-NATIONALIZATION
MARKET
-PRIVATIZATION
POWER
REGULATION
INEQUITIES
- OUTPUT
DYNAMIC
- PRICE
MKT. FAIL.
- STANDARDS
INDIVISIBILITY ANTITRUST
INFORMATION
-STRUCTURE
ASYMMETRY -CONDUCT
TAXES (SUBSIDIES)
PROVISION OF
INFORMATION
RATIONING (MONEY)
ADMINISTRATIVE
COST
COMPLIANCE
COST
EFFICIENCY COST
- NEGATIVE EXTER.
-PUBLIC BADS
- MKT POWER
- INEQUITIES
- DYNAMIC
- INDIVISIBILITY
- INFORMATION
GOVERNMENT STUDIES
Type of
Study
Objective of Study Definition and
Focus
Cost Benefit
Analysis
Net Social Benefit
Regulatory Impact
Analysis
Net Social Benefit
& other social
objectives
Economic Impact
Analysis
Describe all
regulatoryt impacts
Closure Analysis
Maximize
regulatory
objective
Cost Effectiveness
Analysis
Maximize pollution Avoids $ value on
abatement, etc.
benefits of
government
intervention
Up to decision
Focuses only on
makers
govt. unit
Fiscal Impact
Analysis
Implicit
Constraints
Benefits & costs
None
included to
whomever
occurring
Includes cost
Environmental &
benefit analysis and other constraints
other studies
Examines price,
output, financial, &
employment
impacts
Defines degree of
regulation that will
shut firms down
Assumes impacts
should be minimal
Implicitly, firms
are not to be shut
down
Budget or cost
constraint limits
amount of
intervention
Govt. revnue must
exceed cost
Problem
________
Comprehensive
measurement of
benefits & costs is
hard
Goes beyond costbenefit, but
becomes very
subjective
Regulation
discouraged.
Limited weighing
of costs/benefits
Overregulates
profitable,
underregulates
unprofitable
Comparisons
difficult across
different types of
intervention
Ignores costws &
benefits to society