Measuring Cost of Management as a Set of Objective and Mismanagement Expenses

The paper suggests a tool for measuring management costs including both objective expenses that can be found in the accounting data and expenses provoked by mismanagement. By using multiple case study method, peer-to-peer interviews and information sustainability testing, a set of formulas to estimate total cost of enterprise management is developed. A new tool, managerial entropy level is introduced to measure management costs. The suggested tools are used to measure total cost of management in case of sample enterprises, and the research reveals that at a certain level of managerial entropy management-related costs exceed production costs of the companies.