Relationship of Organizational Size to Complexity and Coordination.

Two models are presented to explain the relationship between the size of organizations and the percentage of staff personnel. In the first model, an interaction model, the effect of size is partially dependent on the level of functional differentiation or complexity in an organization. Product terms between size and complexity are therefore included in this model, in accordance with previous research and theory, suggesting that the effects of functional differentiation on the size-staff relationship may not be linear. The product terms are found to be significant and to increase significantly the amount of variance explained by an additive model, but the two independent variables are confounded, and a great deal of variance is not explained. This interaction model has the advantage of theoretical relevance, but is not simple to construct nor to interpret. In the second model, a simpler logarithmic model, size decreases the staff component at a decreasing rate, explaining slightly more variance than the interaction model. It is simple and parsimonious but has no theoretical basis, therefore it does not explain the social processes involved. In the absence of a theory that treats the rate of change in the staff component as a decreasing function of size, the interaction model is considered preferable.