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Abstract:
Businesses facing complex environments use varying organizational structures to respond to demand disturbances for their products. The management and organization literature has emphasized the quantity of interactions within complex systems as necessitating decentralized organizational structures. We show that the fragility of decisions and the existence of multiple-optima in a complex system, separate from the quantity of interactions, should be the primary rationale for selecting an organization's design.
Using a simulation model that nests the often used NK model, we are able to rationalize fragility and multiple-optima as phenomona that arise from consistency in the complementary nature of contextual interactions, rather than the total quantity of interactions. We develop simple heuristics to aid practitioners in identifying the circumstances that would lead to fragility and multiple-optima in complex systems and how it is likely to impact the efficacy of an organization's design in responding to demand disturbances.