suboptimization

Dictionary of Accounting Terms for: suboptimization
suboptimization

optimization of the goals of different departments of the entire organization. Suboptimization occurs when different subunits each attempt to reach a solution that is optimal for that unit, but that may not be optimum for the organization as a whole.

For example, the quality control department of a factory may want to introduce a program that will guarantee that every bulb that is produced is perfect. However, the higher cost and the resulting high price would lead to a disaster for the overall company in the form of lower sales.

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