Analysis of information flow in hierarchical organizations

It is commonly accepted today that competitive, service-oriented or manufacturing organizations are overloaded with information to an extent not experienced before. Moreover, technical employees as well as managers at all levels of an organization devote increasing resources to handling this flow of information. While the inundation of information may be useful in an organization, it reduces the productive time of all the members of the organization. This paper presents a model that links the productivity of hierarchical organizations with the amount of information processed and generated in the organization. This model is used to find the optimal conditions and optimal amount of information that needs to flow in three types of hierarchical organizations: homogeneous, semi-homogenous and non-homogenous organizations. The model defines the information processing parameters that lead to optimal productivity at each level and each type of organization. Dynamic programming is used to solve the model. The paper provides a pioneering effort in linking the amount of information processed in an organization to the productivity of the organization. In addition, the paper provides a new approach to linking the productivity of the individual functions to the overall productivity of the organization.