Measuring organizational flexibility: An exploration and general model

An organization is flexible if it is capable of multiple responses to its e nvironment. Because changing over from one response to another involves "se t-up costs," flexibility can be regarded as detrimental to efficiency. But in a time of globalization and rapid change in business, companies must att end to agile response (flexibility) as much as to efficiency. Efficiency ca n be measured by several techniques, including Data Envelopment Analysis (D EA). There is, however, no accepted, operational, and useful measure of org anizational flexibility. This article characterizes the properties such a m easure would have. Following some scene-setting discussion of the roles of efficiency and flexibility in theories of economics, evolution, and general systems, a general model of (relative) flexibility is proposed, building o n Ashby's [1] definition of the variety that must be generated by a sustain able system. A special case of this model is applied to 10 years of financi al data on 44 computer and computer-related companies. Results show that co mpanies scoring high on a flexibility measure achieve more consistent effic iency over the time span studied. Discussion indicates how a flexibility mo del can complement DEA studies to round out the characterization of corpora te performance. (C) 2000 Elsevier Science Inc.