Organization and Transaction Costs

While I have not really been a part of RSOs on campus in my time at the University of Illinois, I have worked in an organization. In the spring, I began working at an NFL-centered website called cover32.

cover32 has a hierarchical structure just like any other sports writing site. The owner and the editor-in-chief are at the top of the structure. The editor-in-chief carries out the owner's wishes and vision for the website. Underneath the editor-in-chief sit two national co-editors. Basically, these editors take care of national stories (stories about the NFL in its entirety) and are in direct contact with the national writing team that they assembled. Directly under the national editors lie the managing editors of all 32 NFL teams. Each editor is responsible for the writers and contributors on their team staff, and getting posts out not only from themselves but from their team of writers as well. Obviously, last but not least, the writers sit under the editors and are in direct contact with them about their team's writing schedule.

This structure, while standard, had some issues involving transaction costs. The goal at cover32 is to efficiently provide information to NFL fans and readers and to raise some revenue in the process. Those goods and services are part of the transaction. However, the previous editor-in-chief struggled with the managing portion. In addition, motivation costs were one of the main issues with cover32.

Managing out and managing down are two important parts to success in this format. The previous owner and editor-in-chief struggled in managing down due to lack of communication with the team editors. He mainly stayed in contact with the national editors, but never really contacted the team editors. The ship was not a tight one, and that alone incurred these motivation costs. The heads of cover32 also struggled in managing out. There was no real formal recruiting process set up, which led to inefficient production of articles at the site.

Motivation costs, as described by Milton and Roberts, have two parts. Both parts played a part in the issues at cover32. Information incompleteness is one of those. That occurs when parties of an organization don't have all the relevant information. This occurred due to the heads of cover32 not keeping everyone in the loop. Most of the team editors often had no clue as to changes in direction.

The other type of motivation cost is imperfect commitment. Imperfect commitment occurs when parties fail to follow through on promises. Part of this fell on some of the team editors. With the standard being around 30 articles per month, some of the editors failed on keeping this promise. However, with many other commitments and life going on, it's hard to commit to this number. On top of that, payment had always been an issue. Editors were supposed to be compensated, but with traffic so low, none of the editors were compensated for their efforts. That lessens intrinsic motivation, and therefore contributes to imperfect commitment. This also comes down to the failure of managing out and recruiting.

However, things have changed at cover32. Recently, someone bought out cover32 from the old owners. He actually was once a part of this website before going big. He brought a new plan along that would fix some of the transaction costs. First, a formal application was put into place to add more writers. This inflow of workers helped lessen the burden on the managing editors. That part of managing out was stressed. As far as managing down goes, the plan is to be in contact with all of the editors at all times to stress efficiency. The new owner also wants to have a lead division editor, meaning that each division would have one guy managing the efficiency there. Plus, with information being more complete and motivation high (everyone is to be compensated now, even writers), transaction costs should lower, leading to more efficiency as an organization.