Article ID: | iaor20104205 |
Volume: | 56 |
Issue: | 5 |
Start Page Number: | 831 |
End Page Number: | 848 |
Publication Date: | May 2010 |
Journal: | Management Science |
Authors: | Mihm Jrgen, Loch Christoph H, Wilkinson Dennis, Huberman Bernardo A |
Organizations engage in search whenever they perform nonroutine tasks, such as the definition and validation of a new strategy, the acquisition of new capabilities, or new product development. Previous work on search and organizational hierarchy has discovered that a hierarchy with a central decision maker at the top can speed up problem solving, but possibly at the cost of solution quality compared with results of a decentralized search. Our study uses a formal model and simulations to explore the effect of an organizational hierarchy on solution stability, solution quality, and search speed. Three insights arise on how a hierarchy can improve organizational search: (1) assigning a lead function that ‘anchors’ a solution speeds up problem solving; (2) local solution choice should be delegated to the lowest level; and (3) structure matters little at the middle management level, but it matters at the front line; front-line groups should be kept small. These results highlight the importance for every organization of adapting its hierarchical structure to its search requirements.