Cost estimation of enterprise’ organizational pathologies

Economy and management of enterprise and complexes

In modern conditions, changes in organizational management structures must be frequent, and the need for changes is growing. There is a renewed research interest in human behavior as a significant factor to be considered when managing an organization. In this context, the theory of organizational pathologies – violations in the functioning of organizations, occurring mainly due to the behavioral characteristics of employees – could receive a new application. Analysis of publications showed that there are practically no studies describing approaches and methods for cost estimation of organizational pathologies. Although there are works on expert assessment of the pathologies’ presence in the enterprise in general. Probably, this is because the results of the pathologies’ manifestation are mainly qualitative, not quantitative, making their estimation rather complex. The article includes an overview of context of functioning of modern organizational management structures, addresses approaches to the qualitative results’ cost estimation in various fields of activity. The research shows the importance of organizational pathologies estimation for improving organizational management structures. The article’s aim is to propose a method of organizational pathologies’ cost estimation that would help to identify the changes in the organizational management structures’ functionality. A new indicator of inefficient costs is proposed. The inefficient costs are the estimated losses of the enterprise due to the presence of pathologies. The calculation of the indicator is similar to monetization of non-monetary (qualitative) results taken from the methodology of the social return on investment calculation (SROI). The losses due to pathologies are assessed similar to transaction costs calculation, which includes determination of their share in the specific expenses of the enterprise. At the same time, it is assumed that each enterprise may have a certain amount of inefficient costs, allowing it to maintain sufficient functionality and achieve its goals. Since the inefficient costs are the result of human behavior it is impossible to eliminate them. Therefore, the decision whether to change the organizational structure of management or not is made by tracking the dynamics of inefficient costs and their share in the cost price. The growth or the decrease in these two indicators is a signal of the need for said change. As part of the further study, it is planned to improve the approach to assessing the organizational structure of management functionality by adding the analysis of external environment of enterprises. That would allow assessing both internal and external factors considering the enterprise an open system.