Complexity, Robustness, and Performance: Trade-Offs in Organizational Design
Tinbergen Institute Working Paper No. 2002-048/1
56 Pages Posted: 2 Sep 2002
Date Written: April 2002
This paper analyses the relationship between organizational complexity (the degree of detail of information necessary to correctly assign agents to positions), robustness (the relative loss of performance due to mis-allocated agents), and performance. More complex structures are not necessarily more profitable, but are less robust. One of the least complex structures always performs worst. Superior organizational performance may vanish completely due to mis-allocated agents. Organizational performance can be enhanced through training agents; re-assigning them when adequate knowledge about their characteristics is obtained through monitoring; simplifying the organizational structure; and influencing the environment. The trade-offs involved are analysed.
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