Misfits in Organization Design: Information Processing as a Compensatory Mechanism

Abstract

abstract:We propose a compensatory misfits theory which holds that an "over-fitting" organization structure can compensate for an "under-fitting" structure, thereby reducing the total misfit. In organizations, over-fit occurs when structural features misfit the core contingencies because the structural level is too high to fit the contingencies. An under-fit occurs when structural features misfit the contingencies because the structural level is too low. When an under-fit is compensated by an over-fit, the combination can produce performance outcomes that approximate those from fit. The reason inheres in information processing being a higher level factor that cuts across different contingencies and structural features that are mis-fitted to each other, so that compensation is possible. We identify the specific conditions that must be fulfilled for compensation to occur, and we discuss implications for organization design theory and practice.Keywords: Over-fit; under-fit; misfit; fit; compensatory misfits; compensatory effect; contingency theory; information processing Organization design follows the idea that the best design for an organization is one that fits its situation (Donaldson, 2001). Achieving fit means aligning organizational features to contingency factors such as uncertainty (Burns & Stalker, 1961;Lawrence & Lorsch, 1967), strategy (Miles & Snow, 1978; Rumelt, 1974), and size (Child, 1975). The resulting design will be the best in the sense that it will allow the organization to meet its goals, including that of high performance. The emphasis in organization design, therefore, is on identifying misfits and changing them into fits. We suggest, however, that sometimes misfits may produce outcomes that begin to approach the same positive outcomes as fits. Furthermore, it may be better to retain misfits rather than change them into fits because changing the organization's design may incur substantial costs. Such "beneficial" misfits only occur in certain situations, and we identify them in this conceptual article.Our compensatory misfits theory is based on the information processing perspective which has long served as the theoretical foundation of organization design (Galbraith, 1974). Contingencies are viewed as the information-processing requirement, while organization structure is viewed as the information-processing capacity to meet that requirement (Burton, Lauridsen, & Obel, 2002Egelhoff, 1991;Keller, 1994;Tushman & Nadler, 1978). When information-processing capacity matches the information-processing requirement, there is a fit. Otherwise, if information-processing capacity is not equal to the informationprocessing requirement, there is a misfit. Under-fit occurs when information-processing capacity provided by the structure is lower than the information-processing requirement of the contingency. In contrast, over-fit occurs when information-processing capacity exceeds the information-processing requirement. Our compensatory misfits theory adopts the information processing perspective in identif...

Pengaruh Misfit antara Strategi Prospektor dan Sistem Pengendalian Manajemen terhadap Kinerja Perusahaan

“…Senada dengan penelitian sektor perbankan mistfit yang dibuktikan pada perubahan strategi yang dibutuhkan tidak sesuai dan tidak memadai dengan riilnya sehingga menurunkan kinerja (Auster et al, 2016). Pernyataan Burton et al (2002) dalam Luo & Donaldsen (2013) juga berkesimpulan sama bahwa misfit pada strategi dan faktor kontijensi baik internal (teknologi, struktur organisasikepemilikan, gaya manajemen) maupun eksternal (lingkungan) dapat menurunkan nilai ROA (Luo & Donaldsen, 2013).…”

Family governance systems: the complementary role of constitutions and councils

“…In terms of information processing theory, the family regulatory framework and the family governance structure are complementary but non-substitutive structural solutions to deal with family complexity. A family regulatory framework provides adequate structural mechanisms to manage limited uncertainty and routine challenges (Luo & Donaldsen, 2013). It works on the premise that there is an agreement about core issuesor at least an acceptance of a basic set of shared beliefs, values and principlesbetween key family members to deal with a set of possible future events.…”

“…It works on the premise that there is an agreement about core issuesor at least an acceptance of a basic set of shared beliefs, values and principlesbetween key family members to deal with a set of possible future events. In parallel, the family governance structure is based on an institutional framework suitable for managing high uncertainty and non-routine challenges (Luo & Donaldsen, 2013). Therefore, it is a necessary structural capability to build basic agreements and develop a set of core beliefs, values and principles that the family group must adhere to, or at least accept, to achieve a unity of purpose.…”

A Functional Elaboration Theory Perspective on Management Accounting in Small Firms

“…Misfit in the other direction, overfit, exists when, for instance, the MAS is excessively elaborated relative to contingencies, such that inefficient redundancies and unnecessary control activities occur or aspects of the MAS lapse and stand idle (Wilkerson & Seers, 2019). Luo and Donaldson (2013) and Klaas et al (2006) described underfit in terms of firm structuration yielding deficient information processing that cannot accommodate contingencies such as firm size, strategy, and uncertainty. We see this as particularly applicable to the question of whether qualitative functional elaboration enables management accounting that delivers the type, nature, accuracy, and speed of financial information the small firm's owners and managers need to make good business decisions and to control firm resources.…”