365. The In’s and Out’s of Organizational Economics feat. John Roberts

Management oftentimes can be a difficult and precise artform. How does leadership at a company decide how the organization should be structured? What divisions should be created? And how will the inevitable problems that arise be handled? 

John Roberts, a Stanford Graduate School of Business professor, is one of the leading thinkers on organizational economics and has written numerous books on the subject like The Modern Firm: Organizational Design for Performance and Growth. 

John and Greg discuss how the discipline of organizational economics came to be, why some organizational structures are more effective than others, and why the transmission of knowledge from academic to management can be tricky. 

*unSILOed Podcast is produced by University FM.*

Episode Quotes:

Is it essential for leaders to step back from the daily grind and adopt a broader perspective to effectively formulate strategy?

38:43: Opportunities for senior managers to get away from things for a while are important and underdeveloped. My guess is that classroom education isn't the right way because the tendency is to prepare for the class. You've got more time than usual, but you don't really have a chance to sit back. But it might be an element of it. So, some combination of small group class activities where there are a bunch of your peers, and you're talking about big ideas, coaching where you have somebody who asks good questions.

Is culture the most important thing in an organization?

13:56: I've come to the position that probably the most important thing in an organization is the culture...If you have a strong culture that really determines the way people think, the way people interact, what things they'll do and what things they won't do, what they'll put up with, how much they focus on today versus tomorrow, and a whole range of things, that can be much more important than the formal architecture or the established routines.

Differentiating information and communication technology

29:16: People didn't see communication technology and information technology as separate things. They just saw them as the internet. One of them encourages centralization. The other encourages decentralization. But that was a big part of what was going on—that we weren't asking the right questions. We were just talking about technology. We weren't talking about the specific technologies that were involved.

Navigating the complexities of decentralized decision-making in a dynamic Environment

21:04: You can't run a centralized, top-down, hierarchic organization of any size. Even if the technology weren't changing on you, the environment is changing on you. Even with the best communication technology and the best information technology, you can't get the information from here to here. So you have to make a lot of decisions within the bowels of the business. And that means you have to make sure that the system is set up so that these decisions here are compatible with the other guy's making. That's a delicate thing to do. 

Show Links:

Recommended Resources:

• Ronald Coase
• John Browne of BP
• “Why Do Management Practices Differ across Firms and Countries?” by Nicholas Bloom and John Van Reenen
• Oliver E. Williamson
• “Does Management Matter? Evidence from India” by Nicholas Bloom, Benn Eifert, Aprajit Mahajan, David McKenzie & John Roberts

Guest Profile:

• Faculty Profile at Stanford University

His Work:

• Economics, Organization and Management
• The Modern Firm: Organizational Design for Performance and Growth

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