Organizational Response: The Cost Performance Tradeoff

Abstract

Organizations constantly face a dynamic environment where they must respond both quickly and accurately in order to survive. In this paper, we examine the issue: do organizations need to employ costly designs in order to exhibit high performance in a dynamic situation. In the context of a computational framework we derive a set of logically consistent propositions about the interrelationship among task, opportunities for review, training, and cost and their relative impact on organizational performance. Our analyses indicate that complex organizational designs have drawbacks and design is often not the dominant factor affecting performance. The relationship between organizational complexity (hence cost) and performance is complex and depends on the level of time pressure, training, and the task environment. Within the context of the computational framework, we find that the benefits of re-thinking decisions and of matching the organizational design to the task environment are questionable. Further, these results suggest that applying scarce resources to mitigate the adverse impact of time pressure may have more impact on performance than using those resources to support a more complex organizational design.

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