Substitutes or Complements? How Interpersonal Cultural Alignment Relates to the Evolution of Formal Structure in Organizations

Abstract

What factors shape the evolution of formal structure in organizations? Applying a “microstructural” lens to this question, we examine how one of the most emergent and fluid properties of an organization’s internal workings—the culture and various sub- cultures that develop through the interactions of its members—shapes the evolution of local structure in the form of a supervisory unit. Prior work points to compet- ing expectations about the relationship between culture and formal structure: One perspective argues that they are substitutes, while another implies that they function more as complements. We propose that this tension can be resolved by considering the role of coordinative complexity. Consistent with prevailing intuitions, we propose that, when coordinative complexity is low, culture and structure will tend to operate as sub- stitutes. As coordinative complexity increases, however, we argue that they function more as complements. As a result, coordinative complexity affects whether culturally aligned colleagues become connected to, or disconnected from, each other through a common reporting relationship. We find support for our theory using archival data on the evolving formal structure and internal employee communications from two dis- parate organizations. We discuss implications for research on organizational structure, organizational culture, and the interrelationships between the two.