Decision support for managing organizational design dynamics

Abstract Changes in the business environment and the advent of new Information Technologies (IT) create new challenges and opportunities for redesigning the organization. Organizational design encompasses a large number of factors including IT, incentives, business processes, and the scope of decision authority. Further, a design configuration based on a given business and technological environment may have to be modified with changes in the environment. We suggest using an approach called business value complementarity [8] as a systematic basis to ensure that design decisions contribute maximally to bottom-line performance measures such as profitability. It is based on the notion of creating a business value model showing relationships between key performance measures and design decision variables involving IT, incentives, etc. Complementarity between the variables in the business value model provides a basis for choosing the levels of design variables. We derive some results which specify conditions under which the overall performance measure(s) are complementary in the design variables. We suggest that a Decision Support System (DSS) would be appropriate for helping senior management in the complex process of developing and maintaining a business value model and in choosing a suitable organizational design. We also enumerate high level functional requirements of such a DSS.