There are many dimensions to this question .  Let me focus on just one – collective decision-making.

Say there are two well-defined groups, A and B, in the division doing related but different work.  Group A cannot judge collective decisions on hiring, investment etc that impinge on Group B and vice-versa.  But the members of Group A certainly have opinions on how they should hire, fire and invest in their own group and so does Group B.  Suppose the two groups vote together on all decisions within the division even if they mainly concern one group and not the other.  There are two polar cases.

The members of each group have near common values and want pretty much the same thing.  Then voting by each group on its own decisions aggregates information.  The uninformed group should abstain.  And if there are collective decisions that must be made at the division level, there is no need to break the group up.

At the other extreme, suppose for instance there is serious disagreement in Group A – there are significant private values.  The members of Group B also get weak signals of the best decision for Group A.  There is also a seniority ranking over the members of Group A.  If the members of Group B continue to abstain on all Group A decisions, then information is still aggregated.

But there is another possibility.  Members of Group B want to curry favor with senior members of Group A.  These senior members are involved in lots of firm level decisions and it is important to have them on board.  Then, another equilibrium can develop.  When Group B member think the senior members of Group A are wrong, they abstain.  They think their signals are too weak to overrule Group A members.  But if they think the senior members of Group A are right, they vote enthusiastically along with them.  Career concerns screw up voting in the division.  This division should be broken up.

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