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).