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Real Options and Flexibility in Organizational Design

Conference Paper · May 2007

DOI: 10.1109/SYSTEMS.2007.374655 · Source: IEEE Xplore

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 Paper #023
“Real Options and Flexibility in Organizational Design”
John W. Dahlgren
The MITRE Corporation
903 Gateway Boulevard, Suite 200, Hampton, VA 23666
dahlgren@mitre.org
Abstract
This paper applies the concept of Real
Options (RO) to the design of a flexible
organization adaptable to changing team
members and evolving requirements. While
management theory is often used to develop
an organization and later align it with specific
goals, this author contends that applying
systems engineering principles will prove
more valuable to an organization’s success.
This paper provides a comparison of the
traditional hierarchical organization to how an
organization really functions - through
interpersonal connectivity. The author relates
the connectivity of the organization to recent
laws for valuing a network, and shows where
these laws both demonstrate the potential RO
in a networked organization and how using
connectivity to measure the quality of good
organizational design provides a misleading
evaluation of organizational health. This
research includes a review of historical
organizational structures that enhanced
organizational flexibility and organizational
performance.
Organizational Connectivity
Organizational structure greatly impacts
the flow of information and the ability to
exercise an option on using the talents of
defined tasks, were well trained in their tasks,
and the industrial world was somewhat
predictable, allowing for an accurate
CSER 2007, Stevens Institute of Technology, ISBN - 0-9787122-1-8
PROCEEDINGS CSER 2007, March 14-16, Hoboken, NJ , USA
every member of the team. Organizations
have traditionally followed some form of a
hierarchical structure. This form of structure
was easy to understand, thus easy to follow.
While the hierarchy existed in some form
throughout much of history, this
organizational structure truly blossomed in
post-World War II America. WWII
represented a significant historical event in
20th Century America, bringing 10 million
people under arms and mobilizing the entire
nation. As the military used a command and
control organizational construct, post-war US
industry was quick to follow. This enabled
industry to leverage the skills of all of those
soldiers returning home and looking for jobs.
Since soldiers understood the basic Command
and Control (C2) concept of the Corp,
Division, Brigade, Battalion, Company, and
Platoon, they could easily understand who
they were expected to follow.
Figure 1. Standard Hierarchical
Organizational Structure
This hierarchy depicted in Figure 1
worked well when everyone had clearly
requirements definition for this system/team.
A key factor that must not go unstated is the
reliance of this structure on trust and
1
discipline. Each group needed to be able to
trust the other group to do their job to the level
of competency needed. Discipline at each
level was expected so as to not subvert the
chosen leaders of their group and above them.
Additionally, in an era where the most modern
communications device was the hard wired
telephone, and businesses did not have many
of them, most workers were geographically
close to their supervisors. This structure
allowed for clear requirements definition and
management by one person for the team.
Modern Day Organizational Constructs:
While the above hierarchical construct worked
well for many decades, its existence was
facilitated by the lack of communications
devices and by the discipline of society at that
time. A number of influencing factors have
changed the world in the past 25 years that
have made the hierarchical organization a relic
of the past, at least in practice. The first major
change was the break up of AT&T into the
seven Baby Bells. This division brought
competition to the telecommunications
industry and started the trend of phone lines
and high speed data lines as a commodity
item. Users could suddenly send a multi-page
facsimile across the country instead of waiting
days for the postal service to deliver a letter.
As computers gained a foothold the idea of
networking also took off, giving people e-mail
connectivity that made the facsimile suddenly
look outdated. Increased modem speeds
meant that attaching files to e-mails made
communications even easier. Then came the
Internet and the World Wide Web. Suddenly
information was readily available and the cost
of obtaining the information became almost
negligible. This combination of events
coupled with society’s move away from strict
organizational discipline, as the baby boomer
generation took over from the WWII
generation, provided a series of events that
have changed how people interact, earn
money, and have influence.
PROCEEDINGS CSER 2007, March 14-16, Hoboken, NJ , USA
Networking Constructs
Computer networks have developed a
variety of topologies to connect nodes.
Coincidentally, organizations have developed
similar topologies for their own connectivity.
The following subparagraphs discuss various
topologies that both computer networks and
organizations have used to connect
nodes/people.
Star. A common networking structure
used very early in the telecommunications
renaissance was the star. As shown in Figure
2, all connections flow into and out of one
node, and thus a single point of failure is
designed into the network. Whereas modern
day computer networks are usually designed
to avoid this construct, some managers still
insist on this type of construct. A manager
using the star construct ensures that they are
the center of information flow, are as up to
date as possible on all information, and can
likely take credit for everyone else’s work.
Star oriented managers often want all of their
people sitting near them. Basics risk
management indicates this type of network
and organization will suffer from a single
point of failure. Additionally, the value of this
network is limited to the one-to-one
transactions that the Star manager can form
with each worker, and eliminates the possible
options to exercise through interactions
between the workers, much less interactions
with the outside world. Trust is not often
found in organizations that use the star
construct.
Worker
Worker Worker
Worker
The
Star
Worker
Worker Worker
Worker
Figure 2. Star Organizational Structure
 Small World Network. A Small World
Network is distinguished by a network that
consists of a large number of nodes separated
into clusters of sub-networks that are then
loosely connected in a manner facilitating
connectivity between any two nodes by a
minimum number of hops. These lose
connections, or shortcuts across the major
network, shorten the average distance (# of
hops) between any two nodes. This distance
is often called the path length between two
nodes. A Small World Network is
characterized by a high clustering coefficient
and relatively short average path lengths
between any two nodes (Atkinson, 2005).
While Figure 3 shows a theoretical version of
a Small World Network, a real world example
of a complex version exists in rural
communities that form distant clusters
connected by the Interstate Highway System
(long path lengths). While not a subject of
discussion for this paper, it is possible that the
Interstate Highway System was a key factor in
the United States’ move from a large number
of separate communities to a Small World
Network.
Worker
Worker Worker Worker
The
Star
Worker Worker Worker
Figure 3. Simplified Small World
Organizational Structure
Random Networks. Random Networks
are just that, random. The topology of these
networks is similar to what would result if the
connectivity between two nodes were
determined by the results of rolling a dice or
using a random number generator. While a
random network is not easy to illustrate,
statistics can be used to predict whether two
nodes are connected, or how many steps are
required to link the two. A Random Network
can be shown to have a normal distribution of
PROCEEDINGS CSER 2007, March 14-16, Hoboken, NJ , USA
the number of links between two nodes to be
randomly distributed around a mean degree of
distribution.
Scale Free Networks. While Random
Networks exhibit a topology that can be
described by a normal distribution, other types
of networks exhibit a totally different
distribution. To describe a Scale Free
Network, imagine that a random network
already exists, and that you represent a new
node that wants to join the network (Barabasi,
2002). Would you choose to connect to a
node that has almost no connectivity, or would
you connect to a node that has a large number
of other connections? Most nodes will choose
to join a node with many other connections
that they can leverage. As the Random
Network grows, similar to how the Internet
grew, more and more new members will
choose to link to already highly connected
nodes. Therefore the distribution of
connectivity will evolve from a normal
distribution to one where a few nodes have a
large number of connections, and a large
number of nodes have only a few connections.
This can be described by what is called the
Worker
Power Law (Barabasi, 2002). Studies on the
Internet have shown a very different
Worker distribution on the number of connections for
The
Star each Internet site. The Power Law
Distribution, as shown in the right hand side
Worker
of Figure 4, shows that most Internet nodes
have a few active links. Those nodes with
many links tend to be the Internet Service
Providers (ISP) or web sites for large search
engines.
Figure 4. Bell Curve and Power Law
Distribution (Barabasi, 2002)
3

Risks of Various Networking
Topologies
The risks of the various network
topologies to a technological network are
similar to those of an organization designed
(or evolved) to use them. A Star topology has
an inherent single point of failure, and has the
additional risk that it inhibits leveraging the
full capabilities of each node or the sum of the
nodes. An organization with a Star topology
not only does not achieve synergy of the
capabilities of the nodes/people, but rather
inhibits the use of those capabilities. The
Random Network has inherent risk in that it
fails to optimize the connectivity by
minimizing the average distance between all
of the nodes, thus inhibiting the use of all of
the capabilities of the nodes. On the other
hand, the Random Network is much more
difficult to disrupt/attack since the probability
of an attacker disrupting a key node is very
distance connection is re-established. The
main advantage of the Small World Network
is that it is highly clustered. The figure below
shows a hypothetical Small World Network
for a systems engineering project. Figure 5
was developed from the Design Structure
Matrix (DSM) shown in Figure 6. The
thickness of the lines connecting nodes
indicates the strength of the connection. All
of the individual tasks are tightly linked to
contributors on their respective task.
Additionally, in some cases contributors on
different tasks are somewhat connected.
Therefore, even if the Project Leader (PL)
were removed from the topology, the overall
project would still have significant
connectivity.
T3 TL
T=Task
C1 4 TL=Task Leader
PL=Project Leader
PL C = Contributor
T2
C1
&TL T1
C1
TL2 TL1

low (Barabasi, 2002). The Scale Free T2 T1

C2 T1 C2
Network topology appears to exhibit the same C3

statistical robustness as the Random Network. Figure 5.

While from a statistical standpoint this might Value of an Organization is not Determined
be accurate, statistics fail to take into account by the Number of Nodes
the fact that the organization’s enemies may
expend significant resources to identify those
PL & TL3

T3 C1

T2 C1

T2 C2

T1 C1

T1 C2

T1 C3
key nodes and develop plans for the
TL2

TL1

TL4
systematic disruption of them and the entire PL & TL3 H H H M H H
network. The Scale Free Network has more T3 C1 H M H M
robustness than the Star against attack, or TL2 H M H H
disruption due to any event that impacts the T2 C1 H H
T2 C2 H H
key nodes. Yet, the Scale Free Network is not
TL1 H H H H H
extremely robust. T1 C1 M M H L H H
The Small World topology may provide T1 C2 H L H
the most robust topology. This topology T1 C3 H H H H
allows communities to be richly connected as TL4 H H

needed, and also includes the long distance Figure 6. Organizational DSM
connections to minimize the average path
length between any two nodes in the network.
Additionally, if a long distance connection is Network Valuation and Concepts that Add
lost, most of the communities can operate Value
effectively for some time before the long
4

PROCEEDINGS CSER 2007, March 14-16, Hoboken, NJ , USA

 Over recent years, a number of methods
have been hypothesized to determine the value
of a network. Initially David Sarnoff
developed a law to value a radio or television
network, saying Value = N (number of
network participants) (Reed, 2001). Metcalfe
later focused on networks that support one-to-
one connections, such as telephone networks.
Metcalfe’s Law stated that Value = N2. David
Reed later developed a law that acknowledged
the benefits of both Sarnoff and Metcalfe, but
then said that Value = 2N, with the value
growing much faster than in the case of
Sarnoff’s Law or Reed’s Law (Reed, 2001).
Reed acknowledged that every connection
may not be used, but that the network
represents the options on connections that can
be used in the future. Some organization
leaders have chosen to use this metric to value
their people. Essentially these leaders are
saying the person with more connections is
more valuable than the person with fewer
connections. This choice of such an easy
metric to measure may indicate intellectual
laziness.
Unfortunately few organizations or
individuals will establish connections without
an initial need for the connection. This led to
the development of the Dahlgren and Evans
Law for valuing a network (Dahlgren &
Evans, 2006). This law states:
VN = f (V (COIs), t (joining a COI), C
(joining a COI), C (distance), C
(complexity)
VN = ∑ V(COI)i, 1<i<20
By not linking network value to the total
number of COIs, the network value then
increases or decreases according to the value
of the sum of the COIs. While this law was
originally developed to relate to the value of
an airborne network, it can also relate to
organizational networks. A key item in this
law is that each node is valued at different
levels, just as connections to different people
have different values. Most organizations will
PROCEEDINGS CSER 2007, March 14-16, Hoboken, NJ , USA
have people with the same number of
connections. This author’s experience has
shown that some people are very valuable
connections to have. On the other hand, some
people spend a great deal of time exchanging
information that is often inaccurate, taking up
a tremendous amount of other network
participants’ time. These people are
essentially the human equivalent of a network
virus. Thus, individuals in an organization
should not be valued merely according to the
number of connections they keep active. A
robust organization will focus on connections
and the quality of the information exchanged.
For instance, some people are introverts and
others are extroverts. Valuing people based
on the number of connections will likely lead
to an organization of extroverts. Yet, an
organization needs thinkers as well as
information exchange nodes. Leaders should
evaluate their organization and the individuals
according to the quality of information they
develop, and the quality of their connections.
In this way the leader of an organization can
optimize performance by teaming information
developers with highly connected individuals
to ensure dissemination of high quality
information. The ideal contributor develops
high quality information and also has high
quality connectivity to ensure the
dissemination of this information. Developing
an organization to team information
developers with information disseminators
provides the organization with many options
to share high quality information with the
greatest number and highest quality of nodes.
The contributor that can develop and
disseminate information represents a person
that provides the organization with many
options for their participation.
Clustering. This concept, and the below
equation, discuss how well connected the
nodes are that are immediately adjacent to a
given node (Barabasi, 2002). A large
Clustering Coefficient (CC) means that people
who work immediately together are well
connected to each other. This can work well
for individual tasks in a project. While
5
clusters often serve a task very well, clusters
need long distance connections between each
other to leverage the value of all of the nodes
and clusters. These long distance connections
are the RO that can be exercised as needed,
whereas all tight connections limit the
person’s options. As an example, the Star
represented in Fig 2 has a CC = 0.22, whereas
the Small-World shown in Fig 5 has a CC =
0.4. Research is still ongoing to determine the
optimal CC.
CC= # Tight Connections
# Possible Connections
Hop Count. The average number of hops
between team members, and the average
number of hops for an individual can be used
in concert with the CC to look at how closely
an organization and each individual is
connected. The Star in Fig 1 has an average
hop count of 1.422, while the Small World in
Fig 5 has an average hop count of 1.89. This
indicates that while the members of the Small
World are connected, they have not exhausted
their connections all on their own team and
have the RO to reach out to other networks.
The relative closeness of the two hop counts
indicates that this does not offer a single
measure to evaluate the robustness of the
network.
Loose Coupling. Often forces are self-
synchronized under a leader in order to
achieve a higher level goal. This type of self-
synchronization relies on a sufficient level of
networked connectivity (networked does not
imply Internet Protocol). A system can be
described as loosely coupled if the units in the
organization have the freedom to act in a
manner that supports the overall intent and
within the constraints as dictated by the
leadership. A loosely coupled team must have
team members that can act as they feel they
need to act, and the looseness is inversely
correlated to the number and strengths of
constraints directed by their leadership
(Atkinson, 2005). This is analogous to
technological systems that may be tightly
PROCEEDINGS CSER 2007, March 14-16, Hoboken, NJ , USA
coupled due to the impacts of changes in one
system on other systems with which it
interfaces. Technological systems may lessen
degrees of coupling by converging on
common standards. Therefore, subsystems
that converge on common standards can
separately evolve within the minimum
standards of convergence. The organization
having a common understanding, or common
operational picture, is likely analogous to a
technological standard on which people can
converge.
Figure 7 relates the effectiveness of an
organization to the management styles used
and the external environment that is present.
This figure, originally presented in (Atkinson,
2005) offers an explanation of where and
when loose coupling for an organization can
be optimal, and where and when it can be
detrimental. As shown in the figure, an
organization that finds itself in a very stable
environment will often perform best when
organized in a manner that is tightly coupled,
such as a strict hierarchy. In a stable
environment contributors generally know
what is expected of them (subsystem
requirements) and procedures guide their
actions. On the contrary, a loosely coupled
organization, where people self-organize as
needed to accomplish emerging tasks, may
result in confusion and a lack of focus on the
task at hand when trying to operate in a stable
environment. On the other hand, a tightly
coupled organization will likely be very
unresponsive during turbulent times, whereas
a loosely coupled organization can be more
responsive during such times. This author
contends that the current management and
technological focus on loose coupling is in
direct proportion to the level of turbulence that
management perceives in the environment.
Just as technologies are rapidly changing, the
environment for an organization may also be
rapidly changing, driving the need for
organizations to move away, at least in
practice, from a hierarchical structure. Loose
coupling also has a relationship to RO in an
organization. Loosely coupled teams can
6
 enable an organization to make better use of
the capabilities of each individual, just as
networking a group of laptop computers
together can provide significant processing
power.
Loosely
Failure
Coupled Robust
To
Focus
Management Tightly Failure
Style Optimal To
Coupled
Respond
Stable Turbulent
External
Environment
Figure 7. Management Style & the External
Environment (Atkinson, 2005, P 93)
Self-Organization. A concept frequently
discussed as an alternative to the hierarchical
organization is the theory of self-organization.
The basic concept is that workers will
organize in a manner to accomplish the task at
hand, and then may or may not disband
depending on the capabilities required by the
team to accomplish the next task. The concept
of self-organization was not developed to
support management theory, but was instead
recognized in the field of biology during the
study of complex ecosystems. In this concept,
the parts of the system interact in a local, non-
linear manner. In a complex system the whole
of the system is believed to be greater than the
sum of the parts of the system (Atkinson,
2005). If the interactions are in a linear and
predictable manner, then the system is
considered to be complicated but not complex.
In a complex biological system the parts of the
system aid each other, fight, compete, and
ultimately coevolve.
The concept of self-organization can be
both positive and negative for a team in most
fields of endeavour. The idea that humans
will self-organize is not untrue, but this
author’s experience is that successful self-
organization depends on a variety of factors.
Teams consist of individuals all with different
PROCEEDINGS CSER 2007, March 14-16, Hoboken, NJ , USA
motivations, sometimes as basic as their own
career survival. The concept of self-
organizing to accomplish a task that supports a
higher principle than just keeping the boss
satisfied requires a tremendous maturity in
each team member. Once motivations are
aligned, trust must be of a sufficient level or
individuals will spend a significant amount of
time on survival issues. Team size can also be
a key constraint to successful self-
organization. Studies have shown that the
optimal size for a team is 4.6 people (Colvin
et al, 2006). This study contradicts a common
belief that teams should be very inclusive and
thus include as many people as possible. The
time in which to accomplish a task can have a
negative correlation to the success of a self-
organized team.
Much of the above mentioned concepts are
the result of this author’s experiences over 22
years in the Air Force and engineering
communities. A recent working group
included action officers from over 8
organizations working on an overarching task
that would take roughly 1 year to accomplish.
Common participants included 12 people from
5 organizations, all possessing a high level of
maturity and intelligence, and well connected
to each other. The short-term result was that
the team had a very difficult time organizing
to define goals and outline tasks. The net
result was that the team was accomplishing
very little and almost had a mutiny. Four
months later 1 action officer used “push”
leadership to get the group organized. The
action officer organized the meetings; another
action officer met with the people who were to
be the leaders and explained the situation.
During the next couple of meetings the group
outlined specific tasks and responsibilities.
This “push” leadership worked for the initial
draft of the product. At this point in time one
of the two main leaders has moved on, and
self-organization is again failing.
This experience, as well as other similar
experiences throughout this author’s career,
has led to the following hypothesis on the
relative success of self-organized teams. The
7
success of a self-organized team correlates to
maturity, intelligence, competence of the
people performing the task at hand, aligned
motivations between team members, and a
definition of the task at hand. Furthermore, the
success of a self-organized team is negatively
correlated to team size, time to complete the
task, number of different organizations that
pay the salaries of the team members, and
vagueness in task definition. Above
everything, team members must be able to
trust each other or self-organization will have
very limited success as the team will only
stick together so long as they have a common
enemy.
Trust. Throughout the study of agile
organizations and networks, a key item
appeared over and over. Without the ability to
trust some key factor in the enterprise, be that
the individuals or the rules that guide
behaviour, organizational performance
plummets. On smaller teams, no matter the
field of endeavour, trust between the
individuals to complete their specific tasks,
share information that can be trusted, and act
as a team player is required for the team to
function, much less to reach an optimal
performance level. In an enterprise, such as
the government of a country, the populace
must trust either in the leader or the legitimacy
of the government due to the governmental
structure and laws. For instance, when
George Washington set the example of the
principal military leader relinquishing power
at the end of the American Revolution, he
established a practice that the military exists to
serve the populace and not to overthrow the
government. In the case of the American
government, our populace trusts in the process
and the laws even when we may not trust in a
particular president or congress. One can
contrast this with a country ruled by a dictator.
When the dictator leaves office, via natural or
unnatural causes, the country often does not
have an organization they can trust, resulting
often in anarchy.
Moving back to the aforementioned small
team, without trust in each other the team
PROCEEDINGS CSER 2007, March 14-16, Hoboken, NJ , USA
must develop detailed procedures that they
trust. The development of such procedures
can come at a high cost in time and money.
This contrasts to a team where each individual
trusts each other and thus can be flexible with
how they handle given situations and choose
to attempt to solve new problems that might
be outside of any written procedure. Readers
should also note that trust in other people does
not indicate a personal friendliness for the
other team members (Colvin et al, 2006). In
fact, building teams of people who are linked
primarily by friendship (rather than
professional competence and respect) can
have a negative impact in that the team may
not be willing to provide constructive
feedback for fear of ruining the friendship. In
this manner, trust between team members
provides an option for the team to attempt to
solve problems not detailed in a governance
document, whereas a focus on friendship may
actually be a negative option in that it inhibits
team performance. A key item for network
performance is that a network built on trust
may last for many years (Atkinson, 2005,
p68).
Other Key Factors in Organizational
Flexibility and Success
The concept of optimizing team
performance has received significant emphasis
by management theorists in recent years. A
subset of those management theories relates to
flexibilities, options, and in some cases
destroying flexibility and options. The
following are a few theories of particular
noteworthiness.
Team Size. Previous theories claiming
that personal or organizational value(s)
increase(s) with the number of connections
have been proven false, and recent studies on
team size also demonstrate the mistake that
unabated inclusiveness does not add value to a
team. Studies going back as far as the 1970s
show that a team needs at least three
members; the optimal size is 4.6 people.
Furthermore more than six members on a team
8
leads to decreasing value of the team (Colvin
et al, 2006, p 122). Teams of 3 to 6 people
have the options to thoroughly discuss issues
and work closely together without spending a
significant amount of time gaining consensus.
As a team grows larger than 6 members, each
member represents a negative return and
possibly a put option on the future success of
the team.
Role Players. Organizations that include
role players, synonymous with unselfish
players, have the ability to adapt to changing
conditions. Organizations that consist of
selfish members that insist on performing
exactly how they choose lack the flexibility to
respond to changing conditions that demand
team members to perform tasks they perceive
to be less than glamorous. This is also a key
factor in why All-Star teams often fail (Colvin
et al, 2006). These types of teams do not
embrace processes that focus on a common
goal, but instead have individuals focused on
their own performance.
Inclusion of B-Players. Jack Welch,
former Chief Executive Officer of General
Electric (GE), was famous for wanting A-
players. At the time an A-player was a top
10% performer, a B-player fell within the next
80%, and a C-player was a bottom 10%
performer. The focus on A-players, while
sounding glamorous, inherently omits a huge
talent base of B-players. Including B-players
on your team can open options provided by
having people willing to be role players who
still have significant talent to contribute to the
team, and who likely have a number of high
quality connections. All of these represent
options that can be exercised as needed to
accomplish the team’s tasks. Focusing on
only A-players reduces options by narrowing
the population from which members can be
drawn.
Team Isolation. Teams that are
attempting something difficult and totally
different often benefit from being removed
from the normal working environment and in
some ways being isolated from outside
influences. This concept flies in the face of
PROCEEDINGS CSER 2007, March 14-16, Hoboken, NJ , USA
the need for connectivity to ensure
organizational value. A team that is overseen
with frequent reviews, constant input from
others, and continued connections to others
means they risk the loss of reputation or the
need to satisfy other constituencies, detracting
from the work on the task at hand (Colvin et
al, 2006, p. 132). Isolating the team provides
a RO on the team’s ability to explore new
ideas, abandon some ideas, and progress
without the risk of loss of reputation or
continual interference from others.
Team Capacity. Team capacity is a
technical requirement derived from
operational requirements, and must be defined
as part of the requirements development
process so that organizations can be correctly
designed, and realistic work programs can be
developed and implemented. Failure to do so
will result in all contributors doing more tasks
than they can do in a quality manner. Often,
when a team has experienced success,
additional work is heaped onto the team until
the team essentially fails to perform, similar to
a technological system driven past its original
designed capacity.
Conclusion
Systems engineering principles such as
requirements development and management,
risk management, design, and metrics all
apply to organizational design as they do to
the design of a technical system. Real Options
can and should be included in organizational
design to facilitate reacting to changing
requirements for the system/team. While
modern management theory appears to
correlate increasing network connections with
individual and team value, this paper has
shown that connections alone do not make for
a flexible and successful organization.
Connections need to be teamed with quality
information to have real value. Applying
requirements development to team design will
aid in the team’s clearly understanding what
they are to accomplish and designing the team
according to the expected capacity of work.
9
 Risk management processes should also be
applied to evaluate the organization’s design
for robustness. While the Scale Free Network
represents how the Internet has developed, the
Small World Network, which allows for
continued operations even with the loss of any
single node, probably provides the highest
performing and most robust design for an
organizational network. The fitness of the
organization’s design needs to be measured
against a variety of metrics and
considerations. The coupling coefficient and
average number of hops between nodes do not
alone indicate the robustness and flexibility of
an organization. The advent of inexpensive
communications systems along with society’s
move towards a less rigid structure appears to
have led to organizations that can exercise RO
of increased connections between people and
away from a single point of failure network.
A significant factor in a flexible and
successful organization is trust. When trust is
present then an organization can exercise the
RO of having many people work relatively
unsupervised, and can adapt to changing
requirements, whereas when trust is not
present an organization needs to have detailed
rules that often impede an organization’s
ability to adapt to changing requirements.
Dahlgren, J.W. Real options and value driven
design in spiral development. Paper
presented at 2006 Command and Control
Research and Technology Symposium
(CCRTS), Coronado, Ca. 2006
Reed, David P. 2001. The law of the pack.
Harvard Business Review. (February): 23-
24.
Biography
John Dahlgren is the Project Leader of the
Air Combat Command Systems Engineering
project, working at the MITRE Corporation’s
Hampton, VA site. Dahlgren previously
provided systems engineering and project
management leadership on the Air and Space
Operations Center Weapon System program,
the MILSATCOM Advanced Concepts
Engineering project, and on multiple projects
during his Air Force career. Mr. Dahlgren has
a Bachelors of Science Degree in Electrical
Engineering from the University of Illinois, a
Masters of Science Degree in Systems
Management from the University of Southern
California, and an Advanced Project
Management Certificate from Stanford
University.

References
Atkinson, Simon Reay, and James Moffatt.
2005. The agile organization: From
informal networks to complex effects and
agility. Washington DC: The Command
and Control Research Program (CCRP).
Barabási, Albert-László. 2002. Linked: How
everything is connected to everything else
and what it means for business, science,
and everyday life. New York: Plume.
Colvin, G, Marc Gunther, Paul Hochman,
Josh Hyatt, Adam Lashinksy, Jerry
Useem, et al. Secrets of greatness:
Teamwork! (Second in a Series). Fortune
153, no. 11 (June 12, 2006): 64-152.

10

PROCEEDINGS CSER 2007, March 14-16, Hoboken, NJ , USA

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