Suboptimization
When the goals of operating divisions are interdependent, optimization by one group may result in decreased goal attainment for other groups and organization. As an example, engineering may design a product very quickly and inexpensively, but the product is difficult, time consuming, and costly for the manufacturing department to produce. The financial group, by limiting hiring or overtime, may cut costs and optimize its objective, but other department and the organization may lose profits or customers to the extent that there is a net reduction in profits. This is called Suboptimization. Suboptimization occurs when a group optimize its own subgoals, but loses sight of the larger organization goals.