This past summer 2013, I interned at the headquarters for Marriott International, Inc. in Bethesda, MD. Marriott is a large organization, mainly known for their thousands of lodging properties both in the United States and internationally as well. This company operates, franchises, and manages 19 brands, some of which include The Ritz-Carlton, JW Marriott, and Renaissance Hotels.
As a Fortune 200 company, the organizational structure was bureaucratic. Everyone had a specific job function, meaning their roles and responsibilities were defined and followed. There was also a clear hierarchal structure. I was part of a large overall team, the department of Public Relations and Global Communications. And within that overall team, there were several different branches dividing our roles.
I was a part of Multicultural Markets and Alliances, while the other intern I worked with was a part of Social Media. Of course, there were several other branches, including Internal and External Communication, Branding, PR, Government Affairs, and Corporate Social Responsibility. As the Multicultural Markets and Alliances Intern, my Manager was my direct report. The Vice President of Multicultural Markets and Alliances was my Mangers' direct report. And the Senior Vice President of PR and Global Communications was the Vice President of MMA's direct report.
According to Ronald Coase (1937), "every company will expand as long as the company's activities can be performed cheaper within the company, than by e.g. outsourcing the activities to external providers in the market." I was in-sourced by my manager into the company because it was more economic to contract an Intern, rather than to contract a third-party and utilize unnecessary resources to do what I already specialized in. The benefits of hiring me were high enough to cover the company's transaction costs. Had they outsourced, the transaction costs of that service would have been much higher than the benefits.
Interning may serve quite a different function than the one you allude to. Economic search is a costly activity and sometimes with things that are "experience goods" you can't really learn the attributes until you consume it. So it may be with new employees.
ReplyDeleteThus an internship may be a way for the company to experience the potential employee and for the potential employee to experience the company, and at relatively low cost.
If that explanation make sense, then the productivity of the intern matters more as an indicator of future productivity as an employee than in itself. It might be that focusing on just the work you did last summer, that a contract hire would have been more productive. It still could make a lot of sense to have the internship instead because of the potential for long term benefit.
So, while I don't want to take issue with Coase, interpreting his claim well requires some subtlety in the analysis.
I was also an intern this summer at a bureaucratic organization. I understand the strict organizational structure where you report to your manager who reports to their boss, etc.
ReplyDeleteI am a little confused about your comment on outsourcing. Wouldn't you have been brought in from outside of the company because you were not originally part of the company? There are transaction costs associated with hiring new employees (or interns) that would need to be weighed with outsourcing to another company. In this instance, it seems that the Marriott felt it more beneficial to hire an intern with potential employment opportunities than to outsource.