References (114)



Designing for Complexity: Using Divisions and Hierarchy to Manage Complex Tasks

Yue Maggie Zhou

University of Michigan, Stephen M. Ross School of Business

January 17, 2012

Organization Science, Forthcoming

This paper studies the impact of task complexity and decomposability on the degree of organizational divisionalization and hierarchy within firms. Drawing upon the team theory and modularity literature, it argues that the degree of divisionalization is not only predicated on the extent of interdependence (complexity) amongst tasks, but also on the extent to which those interdependent relationships are decomposable. As such, the feasibility and benefits of modularization in organizational design may be overstated when the underlying tasks are not decomposable. In addition, the paper argues that organizational hierarchy serves to mitigate the tension between complexity and decomposability by facilitating a higher degree of divisionalization. These arguments are tested using data about the business activities and organization structures of U.S. equipment manufacturers in 1993-2003. Results show that divisionalization increases with task complexity, suggesting that complex task systems encourage more division of managerial responsibilities. However, divisionalization decreases as task systems become less decomposable. Meanwhile, organizational hierarchy increases with task complexity, and it increases as task systems become less decomposable. These findings highlight the constraints firms face in designing modular organization structures and the role of hierarchy in coordinating complex task systems that are not fully decomposable.

Number of Pages in PDF File: 38

Keywords: division, hierarchy, organization structure, complexity, decomposability, modularity

Accepted Paper Series

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Date posted: January 18, 2012  

Suggested Citation

Zhou, Yue Maggie, Designing for Complexity: Using Divisions and Hierarchy to Manage Complex Tasks (January 17, 2012). Organization Science, Forthcoming. Available at SSRN: http://ssrn.com/abstract=1987076

Contact Information

Yue Maggie Zhou (Contact Author)
University of Michigan, Stephen M. Ross School of Business ( email )
701 Tappan Street
Ann Arbor, MI MI 48109
United States
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