What is an Organization? Why do Organizations Exist?

In tackling the issue of organizational control, William G. Ouchi goes to the heart of the matter by asking the above questions.

In constructing his response, Ouchi argues that organizations exist because they are more efficient in terms of transactions costs than their alternatives. And, according to Ouchi, an organization is simply "any stable pattern of transactions between individuals or aggregations of individuals".

Based on this definiton of an organization, Ouchi demonstrates why most organizations possess a combination of one of three control (mediation) mechanisms: Market (price), bureaucracy (logic-rational, rules-based), clan (tradition, values-based).

Hence, in terms of optimal organization structure, the central point would simply be to design a structure with the lowest transactions costs in the given circumstances.

How useful is Ouchi's approach in your opinion?