The Price of Governance: A Middle Ground Solution to Coordination in Organizational Control

Abstract

Achieving coordination is crucial in organizational control. This paper investigates a middle ground solution between decentralized interactions and centralized administrations for coordinating agents beyond inefficient behavior. We first propose the price of governance (PoG) to evaluate how such a middle ground solution performs in terms of effectiveness and cost. We then propose a hierarchical supervision framework to explicitly model the PoG, and define step by step how to realize the core principle of the framework and compute the optimal PoG for a control problem. Two illustrative case studies are carried out to exemplify the applications of the proposed framework and its methodology. Results show that by properly formulating and implementing each step, the hierarchical supervision framework is capable of promoting coordination among agents while bounding administrative cost to a minimum in different kinds of organizational control problems.