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The Inherent Limits of Organizational Structure and the Unfulfilled Role of Hierarchy: Lessons from a Near-War

London Business School, and Advanced Institute for Management Research, Sussex Place, Regent’s Park, London NW1 4SA, United Kingdom
mjacobides{at}london.edu

This paper examines how Greece nearly went to war with Turkey in 1996 over the uninhabited islets of Imia, to the detriment of the Greek decision makers involved. This escalation was driven by fragmented, piecemeal reactions resulting from the organizational structure of the Greek administration, which shaped identities, defined repertoires of action, sustained routines, and filtered and interpreted information. The division of labor inevitably imposed local responses that were not well calibrated. More importantly, the escalation was driven by a lack of hierarchical intervention, which was due to the conditions at the time. Drawing on this case as a natural experiment, the paper highlights the threefold role of hierarchy, which consists of devising means to structure attention and identify how problems are perceived and responded to; control and rein in routinized responses through exception management in the realm of actions; and helping to reframe problems by performing exception management at the level of cognition. In our case study, the hierarchy failed resulting in the issue being poorly framed, responses being local and disaggregated, and each partial reaction worsening the problem, leading to an escalation. This paper articulates a potential raison d’être for hierarchy, and considers the conditions that allow it to play its role to the full. Moving beyond the specifics of the case, the paper extends Cyert and March’s work by considering the role of organizational structure and hierarchy in shaping search behavior and defining how problems are framed, and by providing a dynamic conception of organizational design. Implications for theory and practice are discussed.

Key Words: organizational decision making; organizational structure; exception management; frames; divisionalization; hierarchy

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