Hierarchical Structure and Search in Complex Organizations

Organizations engage in search whenever they perform nonroutine tasks, such as the definition and validation of a new strategy, the acquisition of new capabilities, or new product development. Previous work on search and organizational hierarchy has discovered that a hierarchy with a central decision maker at the top can speed up problem solving, but possibly at the cost of solution quality compared with results of a decentralized search. Our study uses a formal model and simulations to explore the effect of an organizational hierarchy on solution stability, solution quality, and search speed. Three insights arise on how a hierarchy can improve organizational search: (1) assigning a lead function that “anchors” a solution speeds up problem solving; (2) local solution choice should be delegated to the lowest level; and (3) structure matters little at the middle management level, but it matters at the front line; front-line groups should be kept small. These results highlight the importance for every organization of adapting its hierarchical structure to its search requirements.

[1]  I. Janis.  Victims Of Groupthink , 1972 .

[2]  B A Huberman,et al.  Evolutionary games and computer simulations. , 1993, Proceedings of the National Academy of Sciences of the United States of America.

[3]  Thorbjørn Knudsen,et al.  Two Faces of Search: Alternative Generation and Alternative Evaluation , 2007, Organ. Sci..

[4]  E. Johnsen.  Richard M. Cyert & James G. March, A Behavioral Theory of The Firm, Prentice-Hall, Inc., Englewood Cliffs, New Jersey, 1963, 332 s. , 1964 .

[5]  R. Lewontin.  The Genetic Basis of Evolutionary Change , 1974 .

[6]  Christoph H. Loch,et al.  Problem - Solving Oscillations in Complex Engineering Projects , 2003, Manag. Sci..

[7]  Stefan H. Thomke,et al.  THE CRASH IN THE MACHINE , 1999 .

[8]  Jan W. Rivkin.  Imitation of Complex Strategies , 2000 .

[9]  Mihnea C. Moldoveanu,et al.  On the Relationship Between Organizational Complexity and Organizational Structuration , 2004, Organ. Sci..

[10]  J. Child.  Organizational Structure, Environment and Performance: The Role of Strategic Choice , 1972 .

[11]  Stuart A. Kauffman,et al.  The origins of order , 1993 .

[12]  W. Ewens.  Mathematical Population Genetics , 1980 .

[13]  P. Bolton,et al.  The firm as a communication network , 1994 .

[14]  Timothy Van Zandt,et al.  Decentralized Information Processing in the Theory of Organizations , 1999 .

[15]  Glenn R. Carroll,et al.  The Fog of Change: Opacity and Asperity in Organizations , 2003 .

[16]  Daniel A. Levinthal,et al.  Looking Forward and Looking Backward: Cognitive and Experiential Search , 2000 .

[17]  Jan W. Rivkin,et al.  Balancing Search and Stability: Interdependencies Among Elements of Organizational Design , 2003, Manag. Sci..

[18]  Gino Cattani,et al.  The Value of Moderate Obsession: Insights from a New Model of Organizational Search , 2007, Organ. Sci..

[19]  G. Carroll,et al.  On the Historical Efficiency of Competition Between Organizational Populations , 1994, American Journal of Sociology.

[20]  T. Allen.  Managing the flow of technology , 1977 .

[21]  Bernardo A. Huberman,et al.  Performance Variability and Project Dynamics , 2005, Comput. Math. Organ. Theory.

[22]  O. Williamson.  Comparative Economic Organization: The Analysis of Discrete Structural Alternatives , 1994 .

[23]  B. Huberman,et al.  The stability of ecosystems , 1989, Proceedings of the Royal Society of London. B. Biological Sciences.

[24]  Daniel A. Levinthal.  Adaptation on rugged landscapes , 1997 .

[25]  K. Eisenhardt.  Agency- and Institutional-Theory Explanations: The Case of Retail Sales Compensation , 1988 .

[26]  Erhard Bruderer,et al.  Organizational Evolution, Learning, and Selection: A Genetic-Algorithm-Based Model , 1996 .

[27]  S. Winter,et al.  An evolutionary theory of economic change , 1983 .

[28]  William H. Glick,et al.  Fit, Equifinality, and Organizational Effectiveness: A Test of Two Configurational Theories , 1993 .

[29]  Michael Keren,et al.  The Internal Organization of the Firm and the Shape of Average Costs , 1983 .

[30]  Giovanni Gavetti,et al.  Cognition and Hierarchy: Rethinking the Microfoundations of Capabilities' Development , 2005, Organ. Sci..

[31]  Stefan H. Thomke,et al.  The Role of Flexibility in the Development of New Products , 1997 .

[32]  O. Sorenson,et al.  Technology as a complex adaptive system: evidence from patent data , 2001 .

[33]  Jan W. Rivkin,et al.  Speed and Search: Designing Organizations for Turbulence and Complexity , 2005, Organ. Sci..

[34]  James G. March,et al.  Adaptive Coordination of a Learning Team , 1987 .

[35]  Daniel A. Levinthal,et al.  Modularity and Innovation in Complex Systems , 2002, Manag. Sci..

[36]  Herbert A. Simon,et al.  The Sciences of the Artificial , 1970 .

[37]  K. Eisenhardt,et al.  Accelerating Adaptive Processes: Product Innovation in the Global Computer Industry , 1995 .

[38]  J. March,et al.  A Behavioral Theory of the Firm , 1964 .

[39]  J. Child.  Organization: A Guide to Problems and Practice , 1977 .

[40]  Steven D. Eppinger,et al.  The Misalignment of Product Architecture and Organizational Structure in Complex Product Development , 2004, Manag. Sci..

[41]  Christoph H. Loch,et al.  Chapter 12 – Coordination and information exchange , 2008 .

[42]  Michael L. Tushman,et al.  Competing by design: the power of organizational architecture , 1998 .

[43]  Glenn R. Carroll,et al.  Cascading Organizational Change , 2003, Organ. Sci..

[44]  A. V. D. Ven,et al.  The Concept of Fit in Contingency Theory. , 1984 .

[45]  Christoph H. Loch,et al.  Exchanging Preliminary Information in Concurrent Engineering: Alternative Coordination Strategies , 2002, Organ. Sci..

[46]  Ali Yassine,et al.  Information hiding in product development: the design churn effect , 2003 .

[47]  R. Radner.  The organization of decentralized information processing , 1993 .

[48]  Robert Drazin,et al.  Equifinality: Functional Equivalence in Organization Design , 1997 .

[49]  C. Terwiesch,et al.  Managing the Process of Engineering Change Orders: The Case of the Climate Control System in Automobile Development , 1999 .