Size and Administrative Intensity in Organizational Divisions

Abstract

This paper investigates the relationship between the size of an organization and the number of its administrative personnel drawing upon information from 46 local electricity distribution divisions. Traditionally size has been treated as a uni-dimensional concept, and various single measures/indicators have been used to represent it. In contrast to this view the present study considers size as multi-dimensional. An array of indicators is used and factor analysis is employed to uncover underlying distinct dimensions. In a further step the relationship between the administrative component, i.e., the number of administrative personnel, and the revealed distinct dimensions of size is examined. Results show that the administrative component increases less than proportionately with output-related dimensions of size, thus suggesting that here there are economies of scale. On the other hand the administrative component appears to be weakly related or unrelated to other dimensions expressing fixed assets, market characteristics and growth. Theoretical and practical implications of the analysis are discussed.

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