Organization Design for Complex Worlds

Abstract

I study the role of \emph{horizontal complexity} -- defined as the variation in actions that similar tasks require -- in organization design. A continuum of workers each choose an action to adapt to a local state that follows a Gaussian process across locations. Headquarters can group workers into \emph{teams}, simplifying the attention problem it faces in coordinating across the organization, at the cost of inhibiting adaptation. Tools from spectral theory identify how horizontal complexity affects team size: roughly speaking, variation left unresolved by headquarters expands teams, while variation concentrated along dimensions that headquarters absorbs through attention shrinks them.