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The Six Sigma Handbook
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First, a basic question: just what are organizations anyway? Why do they
exist? Some experts believe that the reason organizations exist is because of the
high cost of executing transactions in the marketplace. Within an organization
we can reallocate resources without the need to negotiate contracts, formally
transfer ownership of assets, and so on. No need for lawyers, the managers do
things on their own authority. The question is: how should they do this? In the
free market prices tell us how to allocate resources, but prices don’t exist inside
of an organization. We must come up with some alternative.
Transaction costs aside, organizations exist to serve constituencies.
Businesses have shareholders or private owners. The equivalent for non-profits
are contributors. Organizations also serve ‘‘customer’’ constituencies. In other
words, they produce things that other people want. Businesses must produce
things that people are willing and able to buy for their own benefit. Non-profits
must produce things that contributors are willing and able to buy for the benefit
of others. Both types of organizations must do one thing: create value. The output
must be of greater value than the inputs needed to produce it. If the output
serves the constituencies well, the organization is effective. If it creates added
value with a minimum of resources, it is efficient. (It is a common misconception
that non-profits don’t need to be efficient. But the only difference between
a for-profit and a not-for-profit is that the ‘‘surplus’’ created by adding value is
used for different purposes. A not-for-profit that produces negative value (i.e.,
spends more for its output than contributors are willing to pay) will not survive
any more than a business posting continuous losses.) Boards of directors evaluate
the effectiveness and efficiency of management and have the authority and
duty to direct and replace inefficient or ineffective managers.
THOMAS PYZDEK - Personal Name
NONE
The Six Sigma Handbook
Management
English
The McGraw-Hill Companies, Inc.,
2003
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