A Neglected Role for Organizational Design: Supporting the Credibility of Delegation in Organizations

Journal of Organization Design, Vol. 4, No. 3 (2015), p. 3-17

15 Pages Posted: 17 Jul 2019

See all articles by Diego Stea

Diego Stea

Copenhagen Business School - Department of Strategic Management and Globalization

Kirsten Foss

Norwegian School of Economics (NHH)

Nicolai J. Foss

Copenhagen Business School - Department of Strategy and Innovation

Date Written: October 28, 2015

Abstract

Managers delegate the right to make decisions to employees because delegation economizes on scarce managerial attention, fosters the use of local knowledge, and positively impacts employee motivation. This is particularly important in knowledge-intensive organizations that operate in uncertain environments, where employees have specialized knowledge and need to be responsive to local changes. Managers, however, often renege on delegation, particularly in high-uncertainty contexts, because they are tempted to adjust past decisions based on new information. We argue that employees’ knowledge that management may renege on delegated decision rights has negative motivational consequences that are costly in knowledge-intensive organizations. As a consequence, making delegation credible is essential for sustaining the advantages that flow from delegation. Organizational design can play a key role in making delegation credible, supporting the value creation caused by delegated discretion. Our theoretical argument sheds new light on relationships among organizational design, credible delegation, and firm-level value creation.

Keywords: Delegation, managerial decision-making, knowledge-intensive firms, organization design

Suggested Citation

Stea, Diego and Foss, Kirsten and Foss, Nicolai J., A Neglected Role for Organizational Design: Supporting the Credibility of Delegation in Organizations (October 28, 2015). Journal of Organization Design, Vol. 4, No. 3 (2015), p. 3-17, Available at SSRN: https://ssrn.com/abstract=3420945

Diego Stea (Contact Author)

Copenhagen Business School - Department of Strategic Management and Globalization ( email )

Porcelænshaven 24
Frederiksberg, 2000
Denmark

Kirsten Foss

Norwegian School of Economics (NHH) ( email )

Helleveien 30
Bergen, NO-5045
Norway

Nicolai J. Foss

Copenhagen Business School - Department of Strategy and Innovation ( email )

Kilen
Frederiksberg, 2000
Denmark

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