Quality and structure of organizational decision-making

In this paper organizational quality is defined in terms of the decision criterion the organization applies. This quality determines the decisional skills of the individual decision makers and, in turn, the optimal structure of decision making. The assumption that individual decisional skills are determined endogenously is the distinctive and novel characteristic of our framework. Our analysis focuses on the relationship between quality and structure of decision making in organizations. In particular, we study the following issues: How are organizational quality, individual decision-making skills and the structure of the organization related? How does the size of the organization affect its optimal quality? Our results imply that evaluation of organizational performance and comparison of organizations solely on the basis of their quality can be misleading. This is true because the performance of organizations is determined by their quality as well as by their structure and size.