1 From Hierarchies to Heterarchies : Application of Network Optimization to Design of Organizational Structures *

Hierarchical organization structures, in which the authority to resolve the most frequent types of exceptions is retained by supervising DMs, can function effectively for routine tasks with little mutual interdependence among tasks. However, if tasks to be performed by the organization are complex, unpredictable, and highly interdependent, the supervising DMs will be overloaded with coordination overhead associated with the processing of frequent exceptions. In this paper, we propose a methodology to design networked organizational structures, which allow the lateral delegation of authority and inter-level flow of communication and control, as well as resource sharing. The approach is based on extending our 3-phase design process to include optimal information flow routing and topological network design subproblems within the design process.