Scale

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The point where the scale opportunities are large enough to require active management: that is, “passive” scale benefits, that flow from the simple fact of size (e.g., adding another user to a flat fee all-you-can-eat software licence automatically reduces the per-user cost of the licence, without anyone having to do anything) run off at the point where one needs to divert the firm’s resources and personnel towards managing these efficiencies or manufacturing scale efficiencies that don’t arise by themselves (e.g., negotiating law firm panel arrangements, outsourcing, offshoring). It may engage management consultants, middle managers and eventually a chief operating officer whose only job is to extract efficiencies. As long as the efficiencies wrought are greater than the marginal cost of that person, team, or fiefdom, then the fiefdom can be justified on hard economic data.

But O, Paradox: the COO unit itself can become so complex that it presents opportunities to lever its scale. Beyond a point, it becomes so complex, so inefficient, that one should appoint a chief operating officer for the chief operating officer’s office, tasked with consolidating all the diaspora of COO functions groups, initiatives and change managers into a single function.

See also

• Redundancy
• Scale paradox