Designing flexible organizations

In this paper the design of flexible organizations is explored in terms of the knowledge content of their constituent systems. It is argued that flexibility embraces every dimension of the organization, from its technical systems to its strategy and culture. Borrowing from ethnography, the ideas of thin and thick are adapted to explain the visible (or explicit) and hidden (or tacit) characteristics of systems. They are further used to help construct a framework that may be used to interrelate systems in terms of their relative explicit and tacit knowledge content. Illustrative examples show how organizations (e.g., Toyota) pursue flexibility by understanding and manipulating the interaction and knowledge content within and among systems. Inspired by the work of Herbert Simon on hierarchy theory, we develop the notion of an organization molecule, an architectural construct that may be used to design and interrelate contexts, such as process, strategy, and culture. Contract theory is extended and a new contract continuum is proposed as a means to specify organizational behavior in terms of its comparative explicit and tacit knowledge content. This combination of constructs constitutes the key concepts of organization modeling, our approach to designing flexibility in systems for the 21^st century organization.