Transaction Cost in Organizations


I do not have much experience being in organizations, or at least in organizations that are smaller in size to see the structure within. I did not participate in much social activities or join student registered organization after I entered college. I have always been a person who experience extreme fears stepping out of comfort zone, so I found hard to voluntarily show up to recruiting events just to meet people. In high school, forming social circle came natural to me, or for everyone. Because the class sizes are not so big and much group activities are in place to build the bond between students. Because that was not the case in college, I had a hard time figuring out where I should belong.

While taking classes over the summer on campus, I wanted to try out becoming a student worker at the Union bookstore. I luckily was able to find an application and apply for a data and e-commerce department within it and got hired. The data team was of 3 members who were new hires like me and one student supervisor. My job was mainly to enter the new products received and track the sales from time to time. For couple weeks, I enjoyed being in the basement sitting at the corner with a computer and manually import the data we had in hand which was not so bad compared to the pay. I naturally got in contact with people and had a chance to make new friends.

Few more weeks later, the student supervisor graduated and left the job. He did inform the members of what will happen and who to report to. Unfortunately, no one in the team was experienced enough to lead a team, leaving the team “unsupervised”. I had to look for a full time employees at the bookstore to see if there were any work that I could work on during my shift. When I had to change my schedule for work due to my class schedule, I had to ask around 3 to 4 people just to find out the person in charge is out of town.

I then had a chance to talk to a full-time staff supervisor about my situation, since he clearly also noticed that there was a lot of time where I had nothing being assigned or can do. After the talk, out data and e-commerce team was under the textbook department’s supervision. I frequently found myself shelving textbooks, printing shipping labels, and loading boxes of books, and slowly moved away from the job I was hired for and what I enjoyed doing.

Eventually I left. In retrospect, I believe there were quite some transaction costs that led me to decide what was more efficient. Firstly, I believe the travel time can be accounted for as a transaction cost. In order to carry out my shift on time without causing burden on any other people’s, I had to leave extra early. Also, because I was relatively new to data retrieving, I spent my own time studying how SQL works, which involved my own time so that I can do the work right away at work. Lastly, as I mentioned, I had to look for appropriate staff members and talk to them in order to find a task to do each day, which was another huge transaction cost.

Comments

  1. Professor ArvanSeptember 13, 2019 at 4:44 AM

    Thank you for that post. Jobs around campus where many of the employees are students are different from jobs elsewhere in the private sector. Having a student graduate is a natural end to the employment relationship here. That makes succession planning difficult, unless you have it built into the structure. When I used to teach a large section of intermediate microeconomics, where I used undergraduate peer-mentors who previously took the course, typically in the spring semester, I would try to have at least one senior, some juniors, and possibly a sophomore or two. That way the next year I'd have some experienced peer-mentors and I could then bring in a new cohort. But it is hard to get that for summer jobs, especially if the entire staff for the job is small.

    So your story is quite understandable. I wonder, however, if your choices might be reconsidered along the following lines. Would the work you were initially hired for eventually have to be done again in the future? And would you have been in a good position to being assigned to that work had you stayed at the bookstore, even if shelving books in the interim wasn't what you wanted to do?

    My experience is that no job is perfect this way. Some parts of the job are grunt work that you do because it's required of the job. Others parts are enjoyable and you have more control of the work. Perhaps you needed some guarantee that you'd return to the enjoyable part. I'm kind of surprised that the organization as a whole could leave that work neglected. But it shows that sometimes nobody sees the whole picture.

    The items you identified as transaction costs - leaving early to get there on time and learning SQL - I think are actually production costs. It sounds like you'd have to do that even if your former manager never left. It is true in this country that commuting to work is time that goes uncompensated. The commute is typically not viewed as a transaction cost. Now studying SQL on your own time might be one or the other. When you were hired did they expect that you knew SQL already? If so, how did they get that impression. If they were aware that you didn't know it, but expected you to learn it, should they have compensated you for the time doing that? If they did compensate, I'd call it a production cost. So it would help to elaborate here, to better understand the full situation.

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    Replies
    1. Joan Robinson Econ 490 fall 2019September 17, 2019 at 8:20 PM

      Yes, the work I was originally hired for had to be done in the future too. But because there were so many people in my position, after our supervisor distributed the work for us, we could have finished our works within 20 minutes, when our shift lasts for 4 hours, meaning I will still have to work on shelvings and other tasks.

      Actually, I believe I did not have a thorough understanding of what the difference between transaction cost and production cost is. In fact, learning SQL was part of the working process where my supervisor taught me a little, but left without teaching me the rest.

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