What are organizational costs? Updated for 2024

Morning.

many large corporates are since the beginning of Covid-19 in great financial trouble. One of the manin problems they face is that their organisational costs are much too high. But what are ‘organisational costs’?

Organizational costs are the costs or expenses of creating an organization and running an organization measured in money, time and energy. 

There are actually two types of organizational costs looking at it from a revenue model perspective: necessary costs and unnecessary costs. Especially if you want to succesfully manage a crisis like the Covid-19 pandemic.

More: What is the digital economy?, What are organizational economics?, What is the virtual organization? & ‘What is The Law Of Diminishing Firms?’

A great example of that last category is the possession during Covid-19 of physical assets like expensive office space in the centre of very expensive towns or many layers of unnecessary senior management and middele managers. Many C-level executives and senior and middle managers ‘discovered’ that everybody could actually work and collaborate very well working from home and using tools like Zoom, Skype and Teams in a ‘virtual organization’.

Something many startups, scale-ups and other new companies using the virtual organisation as a basic organizational design, already discovered a long time ago. And that is why they have much lower organisational costs than large corporates and public institutions. And that explains why they are much faster than large traditional organisations.

Contact me today.

If you have any question or request on how you can use ICT to lower your organizational costs using ICT, how to define the best corporate survival strategy for your company and how to redesign your corporate company using ICT fast, please do not hesitate to call me on Skype on tony.de.bree, on 0031634387806 or email me here.

Kind regards,
Tony de Bree

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