17 May 2009

Size Matters: Inefficiencies of Scale

NPR Analysis about Foreclosure Rates in 2009
As discussed in the context of U.S. mortgage loan servicers, bigger firms proved less able to adapt to the new way of operating after the collapse of credit markets and inflated real estate values.

In one analysis of inefficiencies of scale in physician practices, it was shown that efficiencies of scope are possible, but efficiencies of scale did not result.

Scale efficiencies should be contrasted with scale elasticity.

Investopedia refers to scale inefficiencies as "Diseconomies of Scale," clarified in a Wikipedia entry.

Inefficiencies of scale affect government, IT, media -- all shapes and sizes of organizations. Supply chain considerations may drive size up, but quality objectives may at times exert an opposite effect.