Jeffrey W. Bennett, Thomas E. Pernsteiner, Paul F. Kocourek, and Steven B. Hedlund

It is part of management’s role to see that all the interactions that take place internally are performed more efficiently than they could be in an open market. That is, the savings in transaction costs must be greater than the increase in administrative costs and the potential decrease in motivation. Many companies find that applying this logic to their organizational models leads to a rethinking of their strategies, and rightly so. If integration and centralization of authority are not adding value, then shareholders would be better off with a different firm structure.