Understanding the drivers of effective organization design is a managerial imperative and has been the subject of decades of scholarship. In work taking the Carnegie perspective, the focus is on the implications of organizational design for the efficacy of learning and adaptation. We examine what we call the vertical learning problem in organization design — a manager supervising a subordinate by periodically intervening to guide their learning. This type of supervisory relationship is increasingly common in modern firms, where the task that must be undertaken can be novel — the task is that of learning how a particular objective can be accomplished. Organizational design, in this context, involves determining how the manager should intervene to guide the subordinate’s learning when neither has full knowledge about how to perform the task. We highlight how the design of solutions for this problem is qualitatively different from those needed to solve the coordination and incentive problems highlighted by prior research. Our computational model predicts what we call learning failures that occur when an inappropriate organizational design leads to instances in which a subordinate rejects managerial guidance that may be performance-enhancing in the long run. Moreover, we find that effective managerial interventions in subordinate learning are not necessarily premised on the manager having superior knowledge than the subordinate. The act of intervening, rather than the content of the intervention, can be the critical factor for improving subordinate outcomes.
