Opportunism

Being an accounting student, I am very familiar with opportunism in the workplace, and more specifically looking at areas where opportunism may exist too easily within an office.  Instituting controls and testing controls that prevent the possibility of fraud or material mistakes from occurring is a crucial part of the job of an accountant.  Fraud is an example of opportunistic behavior, albeit a very extreme one.  While the occurrence of fraud is much rarer than most people believe, when it occurs it can be absolutely devastating to an organization.

However, with that said, there are many companies that simply cannot afford all of the necessary control measures to ensure that fraudulent behavior cannot take place.  This presents a situation for an opportunistic individual to act in his or her own favor by committing fraud if he or she feels that the act can be perpetrated without getting caught.  Fraud investigators are taught that in order for fraud to occur the three components of the Fraud Triangle must be present. One of the components, along with motivation and rationalization, is opportunity.  People commit fraudulent acts because they are acting opportunistically in their own favor.

This past summer, I worked at an accounting firm and one of the engagements I was assigned to was determining how much money an employee had stolen from a company fraudulently, and how the employee was able to keep his act going, undetected, for so long.  The company was not very big and as a result did not have the financial resources that would allow them to put in place all of the necessary controls for preventing fraud.  An opportunistic employee took advantage of these lack of controls, certainly to a much more extreme level than commonly found, and acted very beneficially in his favor with no regard for the well-being of the company.

While this was an example of one person acting very opportunistically, there were also many engagements we worked on where it was clear that people were in situations where was opportunism was readily available but they chose not to behave that way for what could have been a number of reasons, whether it be strong moral compass, loyalty to their employer, and so on.  These companies lacked many of the appropriate controls for preventing, due to lack of financial resources, manpower, or various other resources, yet the employees did not act opportunistically and exploit the weaknesses of their own company.  Some of the employees even knew where the company was most at risk as they highlighted in our discussion yet still chose to not act opportunistically.

I think most of the reasons why people would not act opportunistically ultimately amount to the same thing: doing the right thing.  There are situations where acting opportunistically is the right thing to do and in those cases people generally take advantage of the opportunity, but if people feel uncomfortable about the opportunity that is presented, that is when they hold off.

Organizations

While I have not had much experience in dealing with major changes in the organizations I have been apart of, I have been fortunate enough to be a part of organizations with various different structures and sizes.  So far in my professional career, I have worked at a law firm that contained just 2 practicing attorneys, a small accounting firm, and then recently, one of the biggest accounting firms in the entire world. These experiences have allowed me the opportunity to compare the similarities and differences between how big and small organizations operate.

The law firm I worked at provided a great insight into the very basic economics of an organization.  As a professional services firm, there were no production costs in the traditional sense. It really was a way to understand the basic economics of an organization with very few fixed costs, outside of basics like rent, supplies, and a few administrative salaries. The compensation of the two attorneys was determined solely by the amount of work they were able to bring in, and due to the nature of the firm and their client base, there were very few transaction costs outside of licensing, filing, and legal fees.

The small accounting firm had a slightly more complex organizational economic structure.  This was again a professional services firm so there was no production or manufacturing, but now more employees had to be factored in to the mix. Things such as travel had to be factored into the budget as well, causing much higher overhead costs than the law firm I worked at.

The large accounting firm definitely had the most interesting and complex organizational economic structure of all the places I have worked. Employing hundreds of thousands of workers led to a much more complicated economic structure. As a massive international firm and market leader, the overhead costs were enormous.  Fixed costs were much higher as well. However the firm's size also allowed many economic advantages.  Having offices and employees all over the world allows the firm to handle engagements much more efficiently and effectively.  The firm also had many different service lines giving them the capability to handle many different needs for a client, greatly increasing their clients.  Not having to outsource certain tasks allowed the firm to save greatly on transaction costs, and prevented any competitors from chipping away at their market share.  

Christoper A. Pissarides is an economics professor at the London School of Economics in London.  Originally born in 1948 in Cyprus, Pissarides studied at the London School of Economics (LSE) where he earned his Ph.D in Economics in 1973.  Pissarides has been employed at LSE since 1976 where he is currently the Norman Sosnow Chair in Economics at the Economics Department, as well as the Director of the Research Programme on Macroeconomics at the Centre for Economic Performance.

Pissarides specializes in labor economics and in 2010, Pissarides, along with fellow economists Dale Mortensen and Peter A. Diamond, won the Nobel Prize in Economics for their work analyzing why buyers and sellers have trouble finding each other and applying it to the labor market.  He studied why the labor market does not always reflect the overall state of the economy, as even in good economies with jobs plentiful, unemployment can remain high.

I believe his work is very relevant to our class as it deals greatly with the structure of both organizations, as well as markets and economies as a whole.  He has written extensively about job creation and destruction in relation to overall unemployment, a topic that is very relevant to the material of this class.

Sources:

http://www.nytimes.com/2010/10/12/business/economy/12nobel.html?_r=2

http://www.nobelprize.org/nobel_prizes/economics/laureates/2010/pissarides.html

This is a test.