What the research says about coordination cost
Most organisational research on complexity starts from a common observation: coordination, not planning, is where execution actually breaks down. A multi-year study by Donald Sull and Rebecca Homkes, published in Harvard Business Review, examined more than 250 companies and several thousand managers and found that only 9% said they could rely on colleagues in other functions and units all of the time — while roughly half said they could most of the time. The more striking finding was not the low-reliability figure itself but what it displaced: the researchers concluded that cross-unit coordination, not vertical alignment between strategy and execution, is where most firms’ real execution problem sits. Alignment processes, in their sample, were largely sound.
That distinction matters for understanding a Swiss organisation, because Switzerland’s institutional environment is unusually well-adapted to the coordination problem specifically, rather than the alignment problem. Ronald Coase’s foundational 1937 argument — that firms exist because internal coordination is sometimes cheaper than repeated market transactions, but that internal coordination itself carries a cost that rises with dispersion and complexity — offers one lens on why. A federal country with 26 cantons, four national languages and a long tradition of subsidiarity (decisions made at the lowest workable level) has effectively been solving the coordination-cost problem at a societal level for longer than most of its organisations have existed. Firms operating inside that environment inherit habits of explicit coordination — clear decision boundaries, written process, formal sign-off — that in other markets would read as unusually bureaucratic for the firm’s size.
Jay Galbraith’s information-processing view of organisation design supplies the mechanism. Galbraith’s 1974 argument, building on Herbert Simon’s work on cognitive limits, holds that task uncertainty drives organisational form: the more uncertain the task, the more information-processing capacity an organisation needs, and the more it must invest in self-contained units, formal reporting systems or lateral coordination to cope. Swiss firms operating across cantonal, linguistic and regulatory boundaries face a structurally higher coordination load than a comparably sized firm operating in a single-language, single-regulatory-regime market — and the evidence suggests the response has been to formalise coordination earlier, rather than later, in an organisation’s growth.
Larry Greiner’s model of organisational growth stages adds a fourth line of evidence, and it is where the four bodies of research start to converge rather than simply run in parallel. Greiner’s argument — that the practices which resolve one growth phase’s problem become the source of the next phase’s crisis — describes a transition that most organisations experience as a rupture: informal coordination that worked collapses, often without much warning, once the organisation crosses a threshold of size or complexity it wasn’t designed for. What the Swiss institutional environment appears to do, consistent with Coase’s and Galbraith’s arguments above, is compress that rupture into something closer to a continuous adjustment. Because the coordination load is already elevated by cantonal and linguistic variation from a comparatively early stage, Swiss organisations are, in effect, practising Galbraith’s information-processing discipline before Greiner’s crisis points would otherwise force it on them elsewhere.
Why Swiss organisational culture treats precision as a coordination strategy
The word most commonly attached to Swiss business culture — precision — is often read as an aesthetic preference: a taste for order, punctuality, thoroughness. The research suggests a more functional reading. Precision, in Galbraith’s terms, is a lateral coordination mechanism. Detailed process documentation, exhaustive sign-off chains and conservative decision cycles reduce the ambiguity that would otherwise have to be resolved through improvisation — which is expensive in an organisation that has to coordinate across cantonal regulatory variation and multiple working languages as a matter of course, not as an occasional cross-border project.
This has a governance dimension as well as an operational one. Switzerland’s business landscape remains, in structural business statistics terms, one where family ownership and long-tenured private ownership are common at the mid-market and SME level — a pattern the Swiss Federal Statistical Office’s STATENT structural business register exists specifically to track at the national level. Michael Jensen and William Meckling’s 1976 analysis of agency costs is relevant here: when ownership and control are closely held rather than widely dispersed, the agency costs that typically drive external governance requirements — board oversight, disclosure obligations, investor reporting — are lower. Swiss organisations with concentrated, long-term ownership often carry less of that external governance apparatus, but they compensate for it internally, through exactly the precision-as-coordination habits described above. The formality is doing governance work as well as operational work.
Edith Penrose’s 1959 argument about managerial capacity as a growth constraint adds a third layer. Penrose held that a firm’s growth rate is limited less by market opportunity than by the capacity of existing management to absorb and direct that growth. In an environment where coordination is already formalised and precision-oriented, the managerial capacity to absorb additional complexity without degrading the coordination system that already works is a genuinely scarce resource — which is one reason Swiss organisations are often observed to grow more deliberately, and more cautiously, than comparably resourced firms in less coordination-intensive markets.
This produces a specific organisational manifestation worth naming directly: what looks, from outside, like conservatism in decision-making is frequently a rational response to a genuinely higher coordination load, not a cultural aversion to risk in the abstract. A Swiss organisation that appears slow to enter a new market, launch a new product line, or restructure a reporting relationship is often not underestimating the opportunity — it is correctly pricing in a coordination cost that a comparable organisation in a less federally structured, less multilingual market would not face at all. Leaders unfamiliar with this distinction sometimes misdiagnose the caution as a talent or ambition problem, when the more accurate diagnosis is that the organisation’s coordination system, which is doing real and mostly invisible work, has a throughput limit that the proposed change would strain.
Where the pattern varies, and what it doesn’t explain
None of this is uniform. The pattern is strongest in sectors — precision manufacturing, private banking, pharmaceuticals, professional services — where regulatory density and reputational risk are already high, and where Swiss firms have competed internationally on reliability rather than speed for decades. It is weaker in newer, internationally-staffed sectors (fintech, biotech spin-outs, parts of the Zurich-based technology scene) where the workforce and the funding base are less rooted in the domestic institutional pattern, and where the coordination habits described above are still being formed rather than inherited.
The pattern also varies by ownership structure in a way that is worth separating from the sector effect. A long-established, family- or founder-controlled mid-market manufacturer in a German-speaking canton and a venture-funded, internationally staffed Zurich technology company are both “Swiss organisations” in a geographic sense, but the coordination pattern described above applies far more strongly to the former than the latter — the technology company’s ownership, funding sources and much of its workforce are frequently not rooted in the domestic institutional environment at all, which is precisely why it does not inherit the same coordination habits by default.
It is also worth being precise about what the research does not establish. None of the sources above claim that formal coordination mechanisms are cost-free, or that Swiss organisations are immune to the coordination failures Sull and Homkes describe. Coase’s own argument is symmetric: internal coordination has a cost that rises with complexity, and an organisation can over-invest in formal process just as easily as it can under-invest. A near-term consequence of over-investment is decision latency that compounds: each additional layer of sign-off does not simply slow the decision it was added for, it slows every subsequent decision that has to pass through the same layer, which is a cost the research on Swiss precision-as-coordination doesn’t fully capture on its own. The evidence explains why the Swiss default sits where it does — not that the default is optimal for every organisation operating inside it, and not that it is immune to being pushed too far.
Where this shows up
Written for organisations in Zurich. See the Zurich market page for related reading, or browse the other hubs on the Markets page.
Related advisory: family office consulting.
Questions worth considering
- Where in the organisation is formal process compensating for genuine coordination complexity, and where has it outlived the complexity it was built to manage?
- If ownership is concentrated and long-term, is internal coordination discipline substituting for external governance in a way that is well understood, or simply assumed?
- Is managerial capacity — not market opportunity — the actual constraint on the organisation’s next phase of growth?
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