When Two Bosses Are Better Than One: Nearly Decomposable Systems and Organizational Adaptation

Abstract

Organizations, as is true with social systems more generally, tend to be nearly, not fully, decomposable. However, analyses of nearly decomposable systems have tended to be at a single level of analysis and have generally neglected the vertical element of nearly decomposable systems. Critical to the notion of nearly decomposable systems is the property that the details of a particular subproblem may be encapsulated and captured by more aggregate parameters and that those subproblems interact in an aggregate way. We explore these issues in reference to the role of three canonical organizational structures in facilitating adaptation in the presence of near decomposability: a traditional hierarchy in which a subordinate reports to a single boss, an autonomous form in which the subordinate does not have a direct reporting relationship, and a multiauthority structure in which the subordinate reports to multiple bosses. Despite the ubiquity and potential benefits of multiauthority structures in coordinating highly interdependent tasks, our understanding of the mechanisms that determine the performance of those structures is still relatively modest. Scholars have noted conflicting empirical findings and have called for a more rigorous approach to study these organizational forms. To help address these issues, we develop an agent-based computational model that compares the performance of these three canonical types of organizational forms in settings characterized by different degrees of complexity and near decomposability. The online appendix is available at https://doi.org/10.1287/orsc.2017.1177 .