organizational slack

organizational slack

the tendency for bureaucratic ORGANIZATIONS to use more resources than are strictly necessary to perform the functions of the organization, with the result that resources are used inefficiently and costs rise. See NATIONALIZATION VERSUS PRIVATIZATION.

Collins Dictionary of Business, 3rd ed. © 2002, 2005 C Pass, B Lowes, A Pendleton, L Chadwick, D O’Reilly and M Afferson

organizational slack

any organizational resources devoted to the satisfaction of claims by managers of subunits within the business organization in excess of the resources that these subunits need to complete company tasks. Organizations tend to build up a degree of‘organizational slack’, or ‘managerial slack’, where they operate in less competitive, oligopolistic markets (see OLIGOPOLY) in the form of excess staffing, etc., and this slack provides a pool of emergency resources that the organization can draw upon during bad times. When confronted with a deterioration in the economic environment, the organization can exert pressure on subunits within the organization to trim organizational slack and allow the organization to continue to achieve its main goals. Faced with increasing market competition, the organization will increasingly be run as a ‘tight ship’ as slack is trimmed until, in the limiting case of PERFECT COMPETITION, organizational slack will be zero and PROFIT MAXIMIZATION becomes the rule.

The concept of organizational slack is a particular feature of the BEHAVIOURAL THEORY OF THE FIRM and is similar in many respects to the concept of X-INEFFICIENCY. See also PRODUCTIVITY.

Collins Dictionary of Economics, 4th ed. © C. Pass, B. Lowes, L. Davies 2005