Organization Design and Complexity

Complexity is not a design parameter in organization design nor is it an administrative instrument in itself. In situations with new complexities, in which the causal patterns are unknown and are difficult to know by induction, the design thinking as defined by Dorst applies. The unknown is addressed through open abduction design thinking in which it is acknowledged that neither the what nor the how is known to achieve value for the user. In line with the authentic abstract thinking and reconceptualization to master complexity, in this abductive thinking reframing, seeing options detached from experience, conventions, and other routines is the way to go forward. In practical terms organization design to achieve a defined customer value proposition now follows the rule “process follows proposition” which replaces the old Chandlerian rule “structure follows strategy,” consistent with the shift from logic of structure to logic of flow. The design of such a complex process may be bottom-up, following the Logik der Sache. But especially in complex products the complexity in design is to be mastered through architecture and modularity. The conventional organization structures often remain in place, but by function change into an infrastructure (platform) supporting the processes. The resulting matrix-type organization is not a problem as its working is ensured by a redesign of the resource allocation process following Herbert Simon’s theorem of simplicity: “in the simplicity of process we maintain the complexity of state.” This solves the limitations of the Bowerian bottom-up resource allocation process and explains the new concepts of management control. In addition of the upward causality defined by the Logik der Sache, in organization design the downward causality of corporate governance needs to be addressed as well, including the regulatory/institutional requirements imposed on a business. These conflicting logics are to be solved by a proper definition and organization of information. Along these lines the concept of the information-based organization, in which the salient role of intangible assets is acknowledged.