Effects of modularity on the organizational performance in presence of conformity

Purpose This research seeks to explore the intersection between modularity and conformity in organizational contexts. Modularity, a cornerstone of organizational design, pertains to the decomposability of tasks within an organization into subtasks with internal interdependence and external independence. Conformity, on the other hand, is the adjustment of an individual’s behavior to match that of others, often driven by a desire to adhere to social norms. Design/methodology/approach We employ agent-based modeling and simulation as a technique to model organizations as complex systems. This approach allows us to delve into the effects of modularity in organizational structures on organizational performance, with a particular emphasis on the role of conformity in this relationship. We treat conformity as exogenously given, which allows us to focus on its effects rather than its emergence. Findings The results demonstrate that a concentration of interdependent tasks within fewer departments can boost overall performance. Conformity decreases performance in all organizational structures except for cases when the departments work on highly similar tasks. This decline in performance can also explain why functional organizational structures are still being used in practice even though they are less modular than divisional structures — they feature lower levels of conformity and, thus, face smaller decline. Finally, we find that in highly complex settings, organizational performance can, surprisingly, be improved as complexity within departments increases. Originality/value To the best of our knowledge, this study is the first to explore the modularity in organizational structures in presence of conformity. Distinctively, we adapt the NKCS model from evolutionary biology to our study, and perform an exhaustive analysis by examining all possible combinations of parameters that refer to the task allocation within organizations. We thereby contribute a unique perspective to the discourse on organizational theory and behavior.