Citation
Hierarchical Control and Optimum Firm Size
TL;DR
Information degrades as it passes through hierarchical layers
Williamson's economic analysis showed that hierarchical organizations face diminishing returns to scale due to information loss and control problems across layers. This work established that there are optimal limits to organizational hierarchy depth.
For fractal design, this provides economic foundations for why over-branching creates dysfunction - information distorts as it passes through hierarchical layers, eventually overwhelming the benefits of fractal distribution.
Key Findings from Williamson (1967)
- Information degrades as it passes through hierarchical layers
- Control loss increases with hierarchy depth
- Optimal firm size is constrained by hierarchical coordination costs