Transaction costs, flat firms, and K-Logs. There is a concept in economics called transaction costs. These costs are mainly associated with information discovery (I don't know what is in your head, and you don't know what is in mine). The impact of transaction costs on corporate structure was developed by the economist Ronald Coase in 1937 (see a synopsis of his book: The Nature of the Firm).
Transaction costs specifically relate to corporate structure when it comes to hiring and bargaining for employees and the enforcement of employee contracts. Firms are basically structures that minimize these transaction costs. For example: it costs a lot less to hire, bargain with, and manage an employee over the long term rather than hire employees in an ad-hoc manner for short periods of time. Generally, in Coase's theory, the main role of corporate management is to enforce employee contracts.
The upshot of this theory, and why it applies to K-Logs, is that a firm that can reduce information transfer costs is very flat. Good information transfer allows a company to self organize with a high degree of transparency. People can see what everyone else is doing. Management can easily see who is doing the right thing and who isn't. Directives from management are easily distributed and enforced.
Right now, information within an enterprise isn't transparent. It's locked in information silos: e-mail inboxes, desktop directories of office docs, and in the minds of employees. This information asymmetry makes internal coordination and oversight tricky, soft, and prone to error, which leads to the following relationship: current tools = lots of management oversight = high transaction costs.
K-Logs can change that. By having employees post their status, needs, points of view, resources, success stories, and other info to a personal corporate Weblog transaction costs go down. How low? Depends on the quality of the posts and the amount of usage the system gets. Think flat. Think K-Logs. [John Robb's Radio Weblog]