Efficient Information Processing

Another reason for the emergence of organizations is it's superior capacity to manage flows of information (Scott p. 159). Hierarchy allows a centralized communication network. Bavelas (1951) showed in an experiment where people communicated via written messages that different patterns of interaction produced different capacities to solve problems. Groups with a more centralized communication flow (e.g., spokes on a wheel than circle arrangement) were able to do group tasks more quickly. Arrow (1974) and Williamson (1975) also note that a centralized organization can process information more efficiently.

But others have found that as tasks become more complex, decentralized structures are superior to centralized ones (Shaw, 1964). Blau and Scott also note that rigid, centralized hierarchies can inhibit free interaction that can hinder informal problem solving (Blau & Scott 1962). Scott suggests there is curvilinear relationship -- with little information needs (or highly complex flows) a decentralized structure is superior, which in the middle ranges a centralized structure may be superior. (Scott p. 161).