Governance and complex performance: the dynamic interplay of governance (dys)functions

This paper examines how organizations coordinate the often conflicting demands for high performance delivered over long periods and involving complex environments. Using two longitudinal cases of defense contracts for supporting new warships we explore not only the roles of formal and informal governance mechanisms, but the dynamic interplay of functions and dysfunctions over time in complex inter-organisational relationships. We argue although varying degrees of formalization is important when managing long-term relationships, organisations should not just learn to contract or build up trusting relations, but consider both together in terms of the effect such interplay has on overall performance. In each case we find where both organizations do not always agree on the governance mechanisms to use, the result is a negative impact on performance. We find that formal governance functions of coordination and control substitute these functions in informal governance mechanisms, while dysfunctional governance tends to dominate the relationship until resolution is achieved. Functions such as learning span across both governance mechanisms and complement each other. Ultimately, the findings show that it is the governance interplay of (dys)functions that drive performance implications.