System Dynamics '95 — Volume II
Computer Aided Organizational design
Masaharu USHJIMA Koichi HORI Setsuo OHSUGA
Research Center for Advanced Science and Technology(RCAST)
The University of Tokyo
4-6-1 Komaba, Meguro-ku,Tokyo JAPAN 153
e-mail: ushi@ai.rcast.u-tokyo.ac. jp
hori@ai.rcast.u-tokyo.ac.jp
ohsuga@ai.rcast.u-tokyo.ac. jp
Phone : +81-3-3481-4486
+81-3-3481-4484
+81-3-3481-4483
Abstract
This paper discusses about computer aided organizational design by
reinforcement learning. In the past days, organizational design is done by the
experience and some intuition of corporate planning department staff or other
similar functional department staff. This means there is no expert or specialist for
organizational design in the corporation. We propose "Computer Aided
Organizational design" ,here. This organizational design system is build on the basis
of the Enterprise Model and Corporate Information Structure Model.
Organizational design is implementing through computer simulation that is
done by using actual markets data. This system uses banking business as an
example. After implementing dealing for 1 month, the system start to make
several monthly financial reports ,that is, B/S, Income statement, and Risk Analysis.
Organization will be redesigned its initial structure by performance which is
indicated in above mentiond reports of each functional team and player's
dealing.
According to this designing process, organization(=corporation) gain robust
structure, in another word, organization adapts environment change through this
process,
Keyword
reinforcement learning, organizational design, enterprise model
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1.Introduction
This paper discusses about computer aided organizational design by
reinforcement learning. In the past days, organizational design is done by the
experience and some intuition of corporate planning department staff or other
similar functional department staff. This means there is no expert or specialist for
organizational design in the corporation. In the activity of airplane design, we can
find out designer as a specialist who has educational background of its field,
usually. However, in the case of organizational design, we never find out such a
person in the corporation. Certainly, we know some specialist for it who is called
Management consultants, but they are mere adviser or temporary staff of the
corporation. Accordingly, we propose computer aided organizational design
system here.
2. Organizational Design System by reinforcement leaming
This organizational design system is built on the basis of the enterprise model(EM)
and corporate information structure model(CISM). And principle of the
organizational design is based on reinforcement learning. Organization will be
redesigned its structure through evaluating each team and player's financial
and risks data getting through autonomous dealing by expert system in this
system. The dealing is doing by using actual financial markets data.
2.1 Enterprise Model
Enterprise model(fig.1) provides whole structure of this design system and also
overall scope of the enterprise. This model can divide 2 parts. First one is market
as environment of the enterprise which include other enterprise as competitor,
customer and so on. Another one is enterprise itself. Enterprise part of this model
is consisted of 4 parts. First part is Management, second one is employee(=staff),
third one is organization, last one is information Technology.
At first, function of the Management is to create idea and vision as basic
concepts for corporate strategy . Idea and vision function to indicate direction
of behavior for each member in the enterprise. Corporate strategy presents
domain of enterprise and scope of diversification strategy which is according to
above idea and vision. Business strategy is to brake down the corporate strategy
to each business group, and present competitive strategy and functional
strategy. Each actual business activity in enterprise is done on the basis of this
business strategy. These strategies sophisticate through learning by doing
processes. Secondly, function of the employee is to actualize the strategy
through their daily business action.
Financial data as result of business action register to data-base of Information
systems. Thirdly, organization is designed to.be based on the strategy. If the
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System Dynamics '95 — Volume II
strategy are replanned by causes of circumstances change etc., organization
must redesign to be based on new strategy at the same time. Last is Information
technology, this includes 2 type of technology.
Market / Customer Environment
( (request) } —— Se
human-onvionment
MANAGEMENT ertace
= (oa (Create Order) Enterprise
[Corporate] (Organization)
Strategy
t
Business
Strategy
z (Accept Order) it ia
Enter ‘Action
(Business)
Requirement ( iat
(Worker)
Y7 meee
Ke | ra
(e} o56 Information Technology
Aictaton Since
ii Create a Create
Detail List of ‘Business Risk
x “create ‘Management
Pros an tonsa
‘Salen
fig.1 Enterprise Model
One is MiS(Management Information System) which is written in procedural
language, second one is DSS(Decision Support System) which is written in
declarative language. Business expert system play business which is dealing /
trading / investment etc., instead of human being, autonomously. MIS includes
financial accounting system, detail list of transactions management system,
personnel management system . This enterprise model describes the structure of
enterprise and also framework of Organizational Design System itself.
2.2. Corporate Information Structure Model
This model(fig.2) shows relationship between organization and information
systems. Information systems are classified two part by written language ,namely,
procedural or declarative language. Upper layer in fig.2 shows business structure
that is built by declarative language as business expert system. This business
structure includes lending business, bonds trading, equities dealing etc., and they
make deal autonomously under supporting expert systems. Intermediate layer is
base layer of this model, it shows human structure that mean real organization of
the enterprise. Lower layer is information system structure that is built by
procedural language as business information system like MIS(Management
Information System) and/or SIS(Strategic Information System). This system includes
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Parallel Program
financial accounting system, providing Balance Sheet(B/S), Income Statement at
the end of every month. And analyzing various financial risks by ALM(Assets and
Liabilities Management) system at same timing.
Business
Structure
| Human
ee Structure
Bs Information
. System
Structure
fig. 2. Corporate Information Structure Model
Information
System
Layer
All player, in above mentioned each business, is evaluated their per formance
by using those financial and risk analysis data. It means each player has own B/S
and Income statement, and they are evaluate their payroll by using that data.
Farther more,each functional business team is also evaluated its monthly
performance by using team base B/S, Income statement, and ALM. The first and
second layer in this system is developed by using KAUS(Knowledge Acquisition
and Utilization System)(Yamauchi 1985;Ohsuga 1992) , third layer is built by spread
sheets macro, and it has been working on UNIX Work Station.
3.Organizational design by computer simulation
3.1 Initial Organization Model for simulation
We start the simulation by using initial team structure model(fig.3) as an example.
This team is consisted of 5 person - 1 team manager, 2 senior staff, and 3 junior
staff, Payroll amount and dealing upper amount make difference this hierrarchy.
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System Dynamics '95 — Volume II
We should use actual organizational structure as an initial mode! for rhe simution
to adapt real business world.
fig.3 Initial Team Structure
3.2 Simulation flow of organizational design
Organizational design is executing through computer simulation(fig.4) that is
based on actual market data. We use traditional baking business as examples,
i.g. loan business, securities investment, money dealing in this system, and those
are function of the expert system.
[Seli/Buy/Hoté
Decision
wary org. | aspect org. || aspect org. |} aspect org.
model model (1) ‘model (2) model (3)
fig. 4 simulation flow of organizational design
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After executing Imonth dealing(=20 times deal), system start to make B/S,
Income statement, and Risk Analysis. Organization is redesigned its initial structure
that is called primary model through evaluation on the basis of each functional
team and player's monthly performance. That redesigned organizational model is
called aspect model, the simulation will start to use this aspect model as primary
organization model in next month. Simulation repeats this cycle.
3.3 Organizational redesign by reinforcement learning
A reinforcement learning means agent as learner decides his behavior by
observing circumstance around himself, state of himself, or combined both
condition. Agent is provided reward or punishment because of his decision
making by circumstance. Main aim of learning is to maximize sum weight of
reward. Reward and punishment are called reinforcement. Reward is positive
reinforcement, and punishment is negative reinforcement(Unemi 1994; 40-41).
Organization structure changes by two way evaluation. First one is private
evaluation, second one is team evaluation. Private evaluation means if the Bonds
trader's performance is lower/higher than last month it, firstly his payroll amount is
teduced / increased some percentage from current payroll, secondly his dealing
upper limit amount is also reduced / increased some percentage from current
upper limit . When lower staff catch up the higher person's payroll amount, that
player up the hierarchy. Team evaluation means if the total amount of monthly
profits is lower / higher than last month, the number of team member quit / hire a
junior staff. Reinforcement in this system is to up/down the payroll, promotion,to
increase or decrease number of the team member and team itself. This process
According to this reinforcement leaning process, organization(=corporation)
adapts environment change, and gain the robust structure through reallocating
number of member in each team, and dealing/investment amount. And also
organization can get high profitability and low risks structure.
4. Conclusion
We discussed about organizational design which is aided by computer system.
This design system is built by using reinforcement learning approach as principle.
We could show you to get robust and emergent organizational structure and
adaptation for environment change through this system.
We believe this organizational design methodology is very useful for
developing virtual banking system especially, and have many possibilities to apply
various industries' organizational design problem.
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System Dynamics '95 — Volume II
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