Organization Structure Intermediate Exam (3-8)

The Environment-Structure Relationship

When an organization is too dependent on its environment then it creates vulnerabilities, which managers attempt to minimize. A dynamic environment has more of an impact on a structure than a stable one. A dynamic environment will push an organization towards an organic form.

Size and Vertical Differentiation

increased size leads to increased vertical differentiation... the same is the case for horizontal differentiation, but it is not as evident.

Three Environmental Dimensions

- Capacity - Volatility - Complexity

Critics of the Size Imperative:

- Chris Argyris - Mayhew - Hall - Aldrich

Mechanistic structures

- High complexity, formalisation and centralisation. - High specialisation, which each worker only making a small contribution to the final end product. - Efforts are concentrated on improving technical processes rather than the final produc - Power and knowledge reside in the management hierarchy, which decides how work will be done. - Most flow of information and communication is vertical, up and down the hierarchy. Emphasis is placed upon knowledge of internal processes rather than general knowledge of environment.

Three main perspectives on the environment - organisation relationship

- Population ecology - Institutional theory - Resource-dependence theory

Organic structure

- Relatively flexible and adaptive, with emphasis on knowledge - Emphasis on lateral communication (well handled with IT) that is, between individuals wherever they are located, rather than communication up and down the hierarchy - Tasks are continuously redefined through interaction with others - Commitment to the firm is valued more highly than obedience and adherence to established procedures - Power and influence derives from knowledge and expertise, rather than position in the hierarchy - Top managers are not considered to be the repository of all knowledge - Problems are not passed up the hierarchy or passed onto others, but are addressed by the person experiencing the problem - The content of communication consists mainly of information and advice rather than instructions and decisions

Supporters of the Size Imperative

-Peter Blau -Aston -Meyer

Role of Boundary Spanner

Boundary Spanners may be seen to be making a number of contributions to managing the environmental uncertainty. First, they have expertise in understanding and interpreting the environmental segment which they are concerned with. Second, they filter and process environmental information into a form which is useful to the organisation and then transmit this information through established channels. Third, they protect the core form undue disruption by removing the need for it to interact directly with the environment. And finally, they represent the organisation to the environment.

Burns and Stalker's Conclusion on Environment and Structure

Burns and Stalker believed that the most effective structure is one that adjusts to the requirements of the environment, which means using a mechanistic design in a stable, certain environment and an organic form in a turbulent environment. They acknowledged that mechanistic and organic forms were two ends of a continuum. No organisation is purely organic but rather tends towards one or the other.

Information Efficiencies

Cost and time savings due to technology usage.

Robert Duncan

Duncan classified environments along two dimensions Classified environments along two dimensions - the rate of change of environments and the environmental complexity. The greater the number of elements in an environment, the more complex the environment. The interaction of environmental complexity and stability form a two by two matrix, where levels of uncertainty may be identified. Each of these levels of uncertainty leads to the adoption of different structural responses.

Edward Harvey

Harvey is an advocate of Woodward ́s theory and his findings are based on the rate of product changes in different companies: Organisations with specialized technologies had more specialized subunits, more authority levels and higher ratios of managers to total personnel than those with diffuse technologies. - Technically diffuse (as unit production) - Technically intermediate (as mass production) - Technically specific (as process production)

Business level strategy

How should we compete in each of our businesses? For small organisations in only one line of activity or the large organisation that has avoided diversification, business-level strategy is typically the same as corporate strategy.

IT and Size

IT has facilitated the emergence of organizations of immense size. Because of the use of IT, large size Is no longer seen to be accompanied by diseconomies of scale.

Technology and Structure

IT reinforce the existing structure, as well as allows new structures to evolve Complexity: - Routine technology is positively associated with low complexity - the greater the routineness, the fewer the number of occupational groups and the less training possessed by professionals - Non-routine technology is likely to lead to high complexity - as the work becomes more sophisticated and customised, the span of control narrows and vertical differentiation increases. Teamwork and intensive communication and coordination become more common Formalisation: - Routine technology is positively related to formalisation - routineness was significantly associated with the presence of a rules manual and job descriptions and the degree to which job descriptions were specified - Non-routine technology requires control systems that permit greater discretion and flexibility Centralisation: - Routine technologies can be associated with centralised structure - The non-routine technology would be characterised by delegated decision authority (decentralisation) The technology-centralisation relationship is moderated by the degree of formalisation. Routine technologies should be associated with centralised control if there is a minimum of rules and regulations. However, if formalisation is high, routine technology can be accompanied by decentralisation. We would, therefore, predict routine technology to lead to centralisation, but only if formalisation is low.

How does industry affect structure?

Industry can affect an organizations structure. To start, two variables that tend to differ by industry category are capital requirements and product-innovation rates. There are many similarities within industry categories. These similarities lead to strategies that tend to have largely common elements and, in turn, these results in structural characteristics that are very similar

Institutional theory

Integrates and organisation's past actions and the social and environmental pressures on it to explain organisational practices. Organisations are not only influenced by internal processes but also by the need to adopt to the institutional pressures in the external environment. This need for adaption then leads to behaviours being repeated and becoming institutionalised. Two broad types of institutional demands: - Economic and technical demands: profit seeking organizations show a profit, innovate, and respond to change. Management must develop organizational structure to meet these demands. - Social demands: reward organisations for conforming to societal values norms and expectations. These are basically cultured expectations. Implication: explanation of the way in which social, economic and legal pressures influence organisational structures and practices.

Key Point to Remember about Increased Size

Large in size = high in complexity and formalization and maybe decentralization.

Lawrence and Lorsch Conclusion

Lawrence and Lorsch proposed that the more turbulent or complex the external environment, the greater the degree of differentiation among its subparts. If the external environment was very diverse and the internal environment was highly differentiated, there would be a need for an elaborate internal integration mechanism to avoid having units going in different directions. Demonstrate that organisations are likely to differentiate themselves to meet each environmental threat.

Michael Porter

Leadership must select a strategy that will give its organization a competitive advantage. Management can choose from 3 strategies: - Cost-leadership: ALDI, Ryanair - Differentiation: The Body Shop - Focus: Range Rover

Both the unit and process technologies

More Flexible - Less vertical differentiation - Less division of labour - More group activities - More widely defined role responsibilities - Decentralised decision making

Paul Lawrence and Jay Lorsch

Sought to align the internal and external environment of firms. They hypothesised that the more successful firms within each industry would have better alignments than the less successful firms. Their measure of the external environment sought to tap the degree of uncertainty. This measurement included: Rate of product innovation, the clarity of information that management had about the environment, the length of time it took for management to get feedback from the environment on actions taken by the organisation. They looked at two separate dimensions that constituted an organisation's internal environment: differentiation and integration. Differentiation Integration

Tom Burns and G.M Stalker

Studied 20 industrial firms to determine how their organizational structure and managerial practice might differ depending on different environmental conditions. Found that type of structure that existed in rapidly changing and dynamic environments was significantly different from that in organisations with stable environments. Burns and Stalker proposed two structures - mechanistic and organic. Routine technologies operate in relative certainty, whereas non-routine technologies imply relative uncertainty. High environmental uncertainty and technology of non-routine nature both require organic-type structures. Similarly, low environmental uncertainty and routine technology can be managed more effectively in mechanistic structures.

Technology

Technology refers to the information, equipment, techniques and processes required to transform inputs into outputs in an organisation. Technology looks at how the inputs are converted into outputs.

Technology's Impact on Decision Making

There is evidence that IT is assisting lower level decision making rather than executive decision making. IT is used more by the operating levels rather than the executive levels. Because of this IT may be seen as permitting the decentralization of some deiceioan making.

Corporate-level strategy

This strategy seeks to answer the question: 'In what set of businesses should we be?' It determines the roles each business in the organisation will play, which will receive funds: MNE corporate level strategy might be: In which country to invest?

Information Synergies

When two or more individuals or subunits use IT to collaborate across organisational boundaries...Innovativeness + organisational learning

Technology's Impact on Middle Managers

Where both computing decisions and organizational decisions are centralized, top management tends to use IT to reduce middle management. However where both decisions regarding the use of IT and decisions made by middle managers are decentralized, then typically middle management numbers increase.

Organizational Change

a three-stage process - Recognizes variations within and between organizations - The selection of those variations - Retention mechanism that sustains and reproduces those variations.

Focus Strategy

aims at a cost advantage or differentiation advantage in a narrow segment. Management will select a segment or group of segments in an industry (e.g. product variety, type or end buyer) and tailor the strategy to serve this segment to the exclusion of others. Goal is to exploit a narrow segment of a market.

Mayhew

also used a computer program to disprove Blau's claims.

Chris Argyris

argues against Blau's data. He acknowledges the role of managerial discretion and argues that civil-service organizations are unique. He says size may be related to structure, but one cannot say that it causes it.

Raymond Miles and Charles Snow

classified organizations into one of four strategic types based on the rate at which they change their products or markets. -Defenders -Prospectors -Analysers -Reactors (bad)

International strategy

cost pressure: low + local responsiveness pressure: low requires firms to transfer valuable skills and product knowledge to overseas markets. Some customization may take place for local markets. R&D centralized in home market, but manufacturing, distribution and marketing is carried out locally. Head office maintains tight control.

Resource-dependence theory

dependence on resources increases uncertainty... draws on the concept of the open system: Organisation depends on the environment for its resources. However, resource dependence brings with it the capacity of suppliers having power on the organisations = they become vulnerable.

Environment and Complexity

environmental uncertainty and complexity are directly related; high environmental uncertainty tends to lead to greater complexity.

Population ecology

focuses on groups or populations of organisations, not individual organisations. Argues that environment selects certain types of organizations to survive and other to perish on the basis of the fit between their structural characteristics and the characteristics of their environment. 4 Assumptions: - Defines organisational effectiveness as simply survival: Organisations are effective because they are among the survivors - Assume that the environment is totally determining: Management has little impact on organisation's survival - Carrying capacity of environment is limited: Only so many hospitals that a given community can absorb - Assumes that the existence of a three-stage process that explains how organizations operating in similar environmental niches often have common structural dimensions. The richer the environment, the more organisations will survive. Implication: - It explains why organizations in common populations tend to have common structural characteristics and why certain types of organizations survive while others die. - Survival will be significantly influenced by the capacity and stability of the organizations environment (the richer the environment the more organizations will survive.

Organization Size

generally accepted as the totally number of employees. The measurement isn't perfect for many reasons one being some large companies hire many part time employees while others instead hire fewer full time employees, but in general it is a pretty accurate way to measure the size of a company.

Chandler

he concluded that changes in corporate strategy preceded and led to changes in an organization's structure. A new strategy requires a new structure if the enlarged enterprise was to be operated efficiently... unless structure follows strategy, inefficiency follows. BUT he looked only at large, profit-making organizations and looks at growth as a measure of effectiveness rather than profitability. 1. organisations start with centralised structures and single product. (similar to simple structure or machine bureaucracy) 2. As demand grew, the companies expanded: they developed different structures to cope with their changing strategies: they often integrated vertically: buying many of their own sources of supply-> increasing independence. 3. When firm moves to multi-product strategy, it adopts divisionalized structure. 4. Growth proceeds further into product diversification -> structural form that permits efficient allocation of resources, accountability for performance and coordination between units.

The degree of instability (Volatility)

in an environment is captured in the stability dimension. High change = dynamic. Cement maker exists in a stable environment: only uncertainty is the level of demand for the final product <-> Financial markets: dynamic, unpredictably.

Integration (Lawrence and Lorsch)

is the quality of collaboration among interdependent units or departments that are required to achieve unity of effort. Integration devices that organisations typically use include rules and procedures, formal plans. They perceived both the organisation and the environment as having subsets: that is, the parts of the organisation deal with parts of the environment. They were proposing that an organisation's internal structure could be expected to differ from department to department, reflecting characteristics of the sub environment with which it interacts.

Domain

it identifies an organizations niche

Size and Formalization

it is debatable but most data shows that there is a relationship between size and formalization. Management seeks to control the behavior of employees, thus as the number of employees increases, formalization will increase as well.

Unstable environments with high complexity (Duncan)

leads to high uncertainty - Decentralised - Structures have many different departments and are organic - Extensive and expensive coordination and integration devices: including project managers - Extensive use of scenario planning and forecasting

Stable environment with high complexity (Duncan)

leads to low to moderate uncertainty. - Centralized - High degree of formalisation - Operations are mechanistic in nature - Differentiated into many departments to match environmental subelement - Large number of boundary spanners, both individuals and departments, whose role is to monitor the environment.

Unstable environments with low complexity (Duncan)

leads to moderate to high uncertainty - Decentralised - Teamwork is emphasised to facilitate communication - Extensive use of boundary spanners intensive coordination devices to enable respond to environmental pressures - Production processes are more stable and tend to towards being mechanistic

Mediating Technology (Pooled Independence)

low complexity and high formalization coordination through rules and procedures links clients on both input and output side of organizations. E.g. Banks, post offices. Perform interchange function, linking units that are otherwise independent. Reduce risk through number of customers. Pooled interdependence

Stable Environment and Low Complexity (Duncan)

low uncertainty for organisations. This means that organizations would: - Centralise their operations: low need to gather and process information - High levels of formalisation - Have production processes highly formalised - Coordination would be by program and planning, with few roles for coordinators - Mechanistic structure in operation

Strategy Imperative

meaning strategy is a dictating structure

Coordination

process of integrating the objectives and activities of the separate units of an organization in order to achieve organizational goals efficiently.

Capacity

refers to the degree to which it can support growth. E.g. the availability of finance.

Differentiation (Lawrence and Lorsch)

similar to horizontal differentiation, but managers in various departments can be expected to have different attitudes and behave differently in terms of their goal perspective time frame and interpersonal orientation. The degree of differentiation becomes a measure of complexity.

Size and Complexity

size has an impact on complexity but at a decreasing rate. The strongest case can be made for size's effect on vertical differentiation (number of levels of management). The larger the organization, the more pronounced the division of labor within it. It is very difficult to separate size as an independent variable from other organizational dimension.

Environmental Uncertainty

stable environments and those that are easier to predict create significantly less uncertainty for managers than do dynamic ones, and as uncertainty is a threat to an organization's effectiveness, management will try to minimize it.

James Thompson

technology determines the selection of a strategy for reducing uncertainty and that specific structural arrangements can facilitate uncertainty reduction. Three types of technology, each creating a type of interdependence. May be viewed more an environmental theory than one associated with technology. Thompson sought to create a classification scheme that was sufficiently general to deal with the race of technologies found in complex organizations. He proposed three types that are differentiated by the tasks an organizational unit performs: -Long-linked Technology -Mediating Technology -Intensive Technology

Environment and Centralization

the more complex the environment, the more decentralized the structure. Disparities in environment are responded to through decentralization. Extreme hostility in an environment leads organizations to centralize their structure.

Downsizing

the planned elimination of positions or jobs. It differs from retrenchments, redundancies, and layoffs, which arrive from downturns in the trade cycle. In this case, when demand recovers, people are rehired to replace those who have lost their jobs. Downsizing is used to describe layoffs arising from technical change.

Environment

there are many different definitions for environment but they all consist of factors outside the organization itself. Environment is split into specific and general environments. - General environment includes everything political conditions, legal structure, cultural conditions etc. It includes conditions that may have an impact but their relevance is not particularly clear. -Specific environment part of the environment that is directly relevant to the organisation in achieving goals - made up of the critical constituencies includes: Clients or customers, suppliers of inputs, competitors, government, unions, trade association and public pressure groups. An organisations specific environment will vary depending on the domain it has chosen. It is important because the domain of an organisation determines the points at which it is dependent on its specific environment.

Added Value

transformation input to output should leave surplus: the larger the more successful the company. Commercial organisation that does not add value cannot justify its existence in long run.

The Enacted Environment

uncertainty and the environment exist simultaneously within the decision maker's head. Then there is a cycle of searching for information to decrease uncertainty.

Reactors

unstable and inconsistent patterns, react slowly. Similar structure as defenders

Environment and Formalization

we predict that stable environments should lead to high formalization, but it doesn't really fit vice versa. A dynamic environment is likely to lead to low formalization of boundary activities and high formalization with other functions.

Engineering technologies

well defined - many exceptions large number of exceptions, but can be handled in a rational and systematic manner (e.g. work of accountants, construction of office building) decisions centralized because it has many exceptions but analysable search processes but should maintain flexibility through low formalization.

Routine technologies

well defined and few exceptions are those which have few exceptions and easy-to-analyse problems (e.g. mass production of cars) Most routine technology can be accomplished best through 1. standardized coordination and control 2. high formalization 3. high centralization 4. Wide span of control 5. Coordination and control through planning: rigid

Complexity

whether an environment is concentrated on just a few elements. Simple environment have a few concentrated elements.

Reasons for decentralization

- Decentralization stands for faster decision making which allows for more flexibility - Can provide more detailed input into the decision - if those most familiar with an issue make it, they probably have more information - Can act as motivator for employees by allowing participation in decision-making process.

Size and Structure

- Different measures of size are not interchangeable - Number of employees is closely related to other popular gauges of size - Size influence decreases as the number of employees increase - Relationship between size and structure is not clear - The larger the organization, the more behaviours repeat themselves - Organisation considered large when it has >2000 employees

Solutions to the problems of large organizations

- Dividing the organisation into manageable parts - divisionalisation. Each division operates as autonomous company - Finding a balance between what decisions to centralise and decentralise - Structuring to facilitate change - managers should reduce tendency towards bureaucracy, reduce power distances, nurture communication, find new ways to solve problems and reward actions that promote flexibility - Ensuring that important tasks have someone responsible for them - Physically separate those areas of the organization which undertake different types of work - The advantage is that management may apply different management styles appropriate to the task at each location

Problems associated with managing large organisations:

- Growth and bureaucracy - high formalization of bureaucracy, such as rules and regulations, tend to increase inertia. Environment changes faster than rules and regulations -> misfit with environment - Need to gather and process information and turn it into knowledge - must find way to process data into useful format - Need to adapt to changing technologies and product life cycles - Challenge is to adopt and innovate in order not to be overtaken - Extended frames of action - high latency due to size: 'live off its fat': run down assets while maintaining its activities. Once action have been taken, it takes time until the become noticeable - Difficulty in managing over a wide geographic area - employing people. adapting to local preferences. maintaining control over operations that are located far away from HQ. - Bounded rationality - impossible for one person to grasp all of what is going on.

The mass-production technology firms

- Highly differentiated - Relied on extensive formalization - Did relatively little to delegate authority = centralised

Reasons for Downsizing

- Increased competition: All in an industry must strive to match the lowest cost producer - Computerisation and automation: fewer people can do same amount of work. long time lag between introduction of labour-saving devices and layoff - Technological obsolescence: New processes and inventions reduce the need for those associated and redundant technologies. - Declining profitability: Rarely meet outcomes of Downsizing the expectations - Information technology and middle management: Many of the roles of middle management such as controlling, coordination and decision making are being pushed down the organisation structure by increasing use of IT. As a result, many middle management layers have no meaningful work - The realization that size itself does not bring advantage: some of the largest companies have experienced low growth. - Changes in strategy: Rather than diversifying companies are now reducing thei business to a few core skills. less diverse = fewer managers needed - Changes in structure - The rise of outsourcing

Networks of companies

- Industrial networks: Dominant company which clearly leads a group of subcontractors - Clusters: No leading company - networks are generally coordinated by market force - Strategic alliances: Two or more companies cooperate in a venture by each contributing their distinctive skills while maintaining their independence

The Influence of IT on Structure

- Intensive use of IT tends to have decentralised decision making, a great reliance on workforce skills, dynamic and less routine work - IT facilitates formalisation and reduces the drudge - Top managers of centralised organisation use IT to reduce middle managers, while in decentralised organisations the number of middle managers tends to increase - Low level routine decision making is supported by IT - IT facilitates wider geographic spread of organisation activities, IT reduces costs of communication, IT led to more fluid relationships between subsidiaries as well as different units - IT facilitates the emergence of extremely large and complex organisations, but also smaller organisation which work together as networks - IT departments often reflect the organisation ́s structure

Formalization Techniques

- Selection - job will usually be given to the person whose values and attitudes best reflect the values and the mission of the organization - Role requirements - some have freedom can react to situations in unique ways - Rules, procedures and policies: enable standardisation of work processes: are guidelines that set constraints on decisions that employees make - leave greater discretion for decision makers than rules. - Socialisation - employees absorb values, norms and expected behaviour patterns

Technology's Impact on Communication Technologies

- The ability to transmit info and communicate with people across the world obviously have an impact on the structure and management of organizations. It also changes the relationships between organizations. - Communication technology also facilitates the wider geographic spread of organizations, which has led to decentralizing functions.

Conclusions on Technology

- The larger the organisation, the smaller the influence of technology <-> the smaller the organisation the the more likely it is that the whole organisation will be influenced by the production work flow or operating core - The influence of technology is greatest on the units closest to the operating core - Size moderates influence on whole organisation, size is correlated with routinization of work. - Industry restricts technology options: mass markets must use mass production - Organisations need to reach a particular size before advantages can be reached offered by the more complex technologies: the decision is unlikely to be made until the organisation has reached a large enough size to benefit from economies of scale - So size determines technology, but it can also be vice versa, mass production technology may lead to the decision to increase the organisation's size to utilize the technology more efficiently

Computer-integrated manufacturing

- applies to computerisation of manufacturing tasks - permits linking of design, production systems, inventory control, planning, scheduling, and distribution into virtually one function - speeding up of product innovation - reduced time for product testing - simultaneous development of manufacturing processes and tooling as a product is being designed - economies of scope

Work-unit level versus organisational level

- large organisations and many moderate size having multiple technologies due to differentiation - both view technology as the means by which tasks are accomplished - work-unit levels support technology imperative -> fewer conceptual and methodological problems -> simpler concept of technology, and similarity of work patterns -> most evident closest to operating core - organisational levels do not - greatest impact on small organisations or mid-sized organisations which are dominated by one technological type

Service Characteristics

- simultaneous production and consumption - Customer is part of the production process and the output is customised to the customer ́s needs - the output of the service industries is often intangible; that is, it cannot be stored - many services are labour-intensive - Service providers must stress interpersonal skill - Decision-making is decentralized

Key Aspects of Structure that Could be Modified to the Technology

- the amount of discretion that can be exercised for completing tasks - the power of groups of control the unit ́s goals and basic strategies - the extent of interdependence between these groups - the extent to which these groups engage in coordination of their work, using either feedback or planning of others

Six benefits companies seek from downsizing:

1. Lowered Overheads: cost need to be reduced by a certain amount this cost is divided the cost of each employee, leading to the reduction in the headcount of a certain number. 2. Less bureaucracy: As the number of employees is reduced, there should be fewer complications from paper processing and general overheads 3. Faster decision making: Fewer management layers should mean = decisions made by a smaller number of people -> leading to faster decisions 4. Smoother communication: possible barriers are removed due to fewer employees 5. Greater entrepreneurship: downsizing should lead to greater decentralisation of functions 6. Increased productivity: downsizing rarely leads to less work being undertaken. those who are left are expected to do much the same amount of work with fewer people

Organization Design Options

1. Operating Core - the employees who perform the basic work related to the production of products and services 2. Strategic apex - the top-level managers who are charged with overall responsibility 3. Middle line - managers that connect operation core to strategic apex 4. Techno structure - analysts who have the responsibility for implementing forms of standardization in the organization 5. Support staff - people who fill the staff units that provide indirect support services for the organization

Information technologies (IT)

1. undertaking tasks associated with the day-to-day operations of the organisation. Examples are routine accounting tasks, inventory control. The effect of this application is to improve efficiency, particularly in resource usage. 2. technologies that improve communication. Examples include email, the Internet, intranets. -Reducing the restraints imposed by geography and time -Promotes coordination between individuals and subunits -Permits the wide dispersion of information throughout the organisation. 3. control systems. These monitor and evaluate the performance of the organisation. They undertake much of the routine work associated with control. Such tasks as stock management, monitoring bank balances are typical control functions. 4. decision support system. In this role it supports the intellectual processes of planning and decision making but cannot replace the intuitive insight of the decision maker. Functions such as calculating potential rates of return, generating spreadsheets are examples of this function 5. codifying the knowledge base. This facilitates the ability to apply past and current knowledge to organisational problems 6. promote innovation. No longer do those involved in such areas as research, design need to be located close to each other. They may now be dispersed often across continents and may communicate with each other using new technologies 7. The last grouping is that which supports interorganisational systems. This facilitates the movement of information from the boundary of one organisation to another. IT therefore may be seen as providing a boundary-spanning role. The external environment may also be scanned faster using IT

Organisation theory and small organisations

A small business can be more accurately defined as small as one where one person, generally the owner, makes all the major decision - Most small business fail because of shortcomings in management - The appropriate structure is not a scaled-down version of the design used by its industry's giants

Professional Bureaucracy

Decentralized configuration: highly trained specialists from operating core. E.g. Universities or management consultancies. Key staff has critical skill and autonomy provided through decentralisation. Support staff is focused on serving the operating core. Formalisation is internalised. Typically include machine bureaucracies. Best when the environment is complex but stable, the operations of the organisation require staff with skills that can only be learned in formal education or the problems are complex and need expertise of staff in various fields. (hospital: different doctors) Advantages: - Can perform specialized tasks with same relative efficiency as in the machine bureaucracy Disadvantages: - Tendency for subunit conflicts - Not easy to adopt to environment: Specialist standards of professional conduct and codes of ethical practices have been socialised: cannot be managed same way as employees in other configurations - Difficult to coordinate work of various professionals specializing in very diverse fields - No clear strategic apex: difficult to set strategic priorities

Adhocracy

Decentralized form characterized by:High horizontal but low vertical differentiation, Low formalization, Intensive coordination, Great flexibility and responsiveness...Staffed with professionals with high expertise. Vertical differentiation low because organisation needs to adapt quickly. Coordination is extensive: team members sometimes just coordinate groups. Few regulations and rules allow flexibility and autonomy. Techno structure practically non-existent. Line of hierarchy blurred power flows to anyone in adhocracy with expertise. Advantages: - Best structure for an organization which needs to be highly adaptable to changing environment, and when the organization needs to be innovative and creative - Effective when specialists from diverse disciplines are working towards same goal (movie production) - No other structure offers flexibility needed when tasks are highly-technical, non programmed and too complex Disadvantages: - Considered one of the most inefficient configurations - Authority and responsibilities are not clear: may result in conflicts - Activities cannot be easily separated into independent tasks

Evolutionary mode

Does not necessarily view strategy as a well though-out and systematic plan: Stream of significant decisions evolving over time due to bounded rationality. Decisions are made under number of psychological and external constraints that lead to a decision maker "satisficing": they will stop searching for an alternative as soon as the minimum requirement for a decision has been met. So one way of viewing the determination of strategy is that the overall direction of the organization is set by the planning mode but the evolutionary mode is often used in response to short-term opportunities and threats.

Limitations to the strategy imperative

Doubts: have managers got enough discretion to determine strategy? Influence of strategy upon structure is is greater in early development period: at this time the organisation has the greatest choice of strategy. Organisations cannot easily change their basic technologies. Capital-to-labour ratio in an organisation will affect the impact of strategy on structure. If ratio is low - labour intensive - managers have much more flexibility, and hence discretion, to influence structure. Cement manufactures have little alternative but to make cement. Lag factor = When management implements new strategy, there is often no immediate change in structure. The major factor affecting response is the degree of competitive pressure. The less competition and organisation faces, the less rapid its structural response. Strategy-structure relationship may only be valid for top layers of structure. Technology and environment have a greater influence at work group and unit level.

Strategic Constituencies Approach

Effective organisation = organisation that satisfies demands of constituencies in its environment that are important for survival...Managers pursue multiple goals: goals represent a response to those interest groups Advantages: - Constituencies have a powerful influence on the organisation, and the organisation has to respond Disadvantages: - Defining strategic constituencies is hard - Strategic constituencies can change rapidly - Like Goal attainment approach, managers must rank them - Assumes that organization's goal is survival (actually not in many cases)

Charles Perrow

Focused on knowledge technology instead of manufacturing technology... he viewed technology as best measured at the work-group or individual level. Overall there is a lot of support for his conclusions. Organizations and organizational subunits with routine technologies tend to have greater formalization and centralization than do their counterparts with non-routine technologies. The two underlying dimensions of knowledge technology are: - Task variability considers the number of exceptions encountered in one's work. These exceptions will be few in number if the job is high in predictability and vice versa. (motor vehicle assembly line, cook at mcDonald's vs. tom management jobs, consulting jobs) - Problem analysability the type of search procedures followed to find successful methods for adequately responding to task exceptions from well-defined and analysable to ill-defined and unanalysable (Car does not start: mechanic works through a series of well-defined procedures)

Machine Bureaucracy

Highly relies on routine operating tasks that are grouped into functional departments centralized authority and decision making which follows the chain of command: Rules and regulations... best for large and stable organizations or for safety. Advantages: - Standardized tasks are performed in a highly efficient manner - Permits generation and transfer of knowledge within specialist areas - No high costs for lower level managers, since they don't need talent Disadvantages: - Relative inflexibility and unresponsiveness to changes in environment - Obsessive concern with following the rules - 'Creating silos' units goals tend to take precedence over organisation goals - communication between units can cause problems

Technology's Impact on Communication and Coordination

IT has increased the capacity to improve coordination both within and between units. This has permitted an increase in complexity of the work they do and reduced the amount of time need to accomplish it. IT is associated with greater complexity. IT facilitates communication.

IT and formalization:

IT is suited to increase formalization

Is it possible to isolate technology as a contingency?

It is possible that technology is related to structure, although not in a manner which may be revealed as general principles. It is also said that Size is the critical determinant of structure not technology. If tech. Influences structure, it is like to affect those activities closest to the technology itself. Final conclusion of the Aston Group: in smaller organizations the structure of operations is likely to be dominated by the primary productions process of converting inputs into outputs, but in large organizations the impact of technology is not likely to be so powerful. - difficult to isolate the influence of technology from other variables such as size or strategy - in smaller organisations, the structure of operations is likely to be dominated by the primary production process of converting inputs into outputs, but in large organisations the impact of technology is not likely to be so powerful or concentrated - Technology has its greatest impact on those organisational units closest to the operating core. However, the decision to adopt a complex technology is unlikely to be made until the organisation has reached a large enough size to benefit from economies of scale, which clearly indicates that size determines technology.

Simple Structure

Low in complexity, little formalization, authority centralised in a single person Best described as flat organization: authority centralised in one person... it is best during formative years in a small business • Strengths: the strength lies in its simplicity because decision making is fast and its operations are flexible and require little cost to maintain. • Weaknesses: this structure is only applicable to small organizations. This structure rarely process countervailing forces to balance the chief executive's power. It can succumb to abuse of authority or lack of managerial skills or ability by the person in power.

Meyer

Meyer conducted a study to test wether the relationship between size and structural dimensions does not imply causation. His study was 5 years long. He concluded that one cannot underestimate the impact of size on other characteristics of organizations. He found that the effects of size showed everywhere; the relationship was unidirectional; and the impact of other variables that appeared to affect structure disappeared when size was controlled.

Issues of Increased and Reduced Importance in a Small Business

REDUCED: Small businesses tend to have a minimal degree of horizontal, vertical and spatial differentiation and most are characterized by low formalization and high centralisation. - stimulating innovation: low complexity and formalization enable high level of creativity - managing conflict say of history and traditions, therefore, less likely to require change, and if change should be required, it is - changing culture: small organisations tend to be young - change is easier to implement. INCREASED: - control and accountability: small-business owner is often willing to settle for a smaller monetary reward in return for person control and accountability. Instead of formalisation owner tends to control through direct supervision and involvement. - economies of scale: depends on industry. Need access to markets, capital and technical skills - environmental dependence: The larger an organisation, the more able it is to control/mange its environment and reduce its dependence on suppliers, competitors and financial resources. - One poorly performing manager can have a significant impact on overall performance

The industry-structure relationship

Researches look at two variables that tend to differ by industry category - capital requirements for entry and product-innovation rates. Type A industries: high capital requirements + high product-innovation rate Type B industries: low capital requirements + high product-innovation rate Type C industries: high capital requirements + low product-innovation rate Type D industries: low capital requirements + low product-innovation rate

The Common Denominator

Routineness: this is the common theme between Woodward, Perrow, and Galbraith. - processes or methods that transform inputs into outputs differ by their degree of routineness - every landmark contribution includes some kind of routineness

Divisionalized Structure

Set of autonomous self-contained units, each typically configured as a machine bureaucracy. Dominant middle management (divisional management) has great deal of control over individual businesses. Usually divisionalized according to product, location, or customer... useful when the services and products are diverse, when the organization operates in different markets, or when the organization is large. Advantages: - Provides clear outcome-> divisional managers is responsible for meeting goals - Head office not involved in day-to-day operations - Risk is spread -> ineffective performance in one does not affect others - Each division can easily be sold or new businesses acquired - Good to train prospective managers Disadvantages: - Cooperation between divisions is not good - little incentive to exchange of knowledge - Cost may be high, caused by duplication of activities and resources this reduces efficiency - Employees are usually not transferable through units/divisions especially if spatial dispersion is high

Goal Attainment Approach (chapter 3)

The effectiveness is assessed on whether the organisation is able to accomplish the goals it has decided to pursue. Examples: Achieving certain quality outcomes, achieving certain profit objectives. Assumptions: - Organisations are deliberate + act rational + goal-seeking entities - Goals have to be time-bound, explicit and progress towards goals must be measurable Disadvantages: - Key group hard to identify: not clear whose goals apply. Shareholders? Top management? Environmental groups? - Organisations have "official" and "unofficial" sets of goals. - Hard to identify whether goals have been achieved (confidential because of competitors) - Short- and long-term goals, so which should apply?

Jay Galbraith

The process of transformation has different levels of uncertainty - when task uncertainty increases, so does the amount of information that needs to be processed. Amount of information, and how information was processed became the major determinant of the structure of the organization. 1. Rules and programs 2. Hierarchical referral 3. Goal setting 4. Creation of slack resources (increase time, reduce performance level + inventories) 5. Creation of self contained tasks (reducing complexity: divisionalising) 6. Investment in vertical Information systems (Sophisticated computer systems) 7. Creation of lateral relations (creation of specific coordinating positions: project managers)

Bartlett and Ghoshal

They proposed a strategy linking global strategy and structure. The strategy adopted when entering overseas markets depends on the interaction of cost pressures found in the market with the pressure for local responsiveness. Responding to cost pressures mean that firms must work hard at reducing costs, while local responsiveness implies that products must be altered in some way to suit local tastes. They determined that each of these strategies required specific organizational structural characteristics to be effective. International Strategy, Multi-domestic Strategy, Global Strategy, Transitional Strategy

Systems Approach

Views goals as only one element. Long-term survival important. Treats organisation as a system of interrelated subparts. Focus is on HOW goals are achieved. - The ability to acquire resources - Maintain itself internally as a social organization (stability of related subparts) - Interaction successfully with its external environment as well as clarity of internal communication - Replenishment of resources (can be intangible: patent) Advantages: - Management less likely to make decisions that trade off long-term health for short-term goals - Increases awareness of interdependence - Is applicable when goals are vague or defy measurement Disadvantages: - Some process variables are easy to measure; others are not e.g. rate of innovation - Quick change in environment: certain measures may easily become irrelevant - Seems to focus on means rather than effectiveness itself

Planning mode

Views strategy as a plan or explicit set of guidelines developed in advance

Joan Woodward

Woodward's investigation demonstrated a link between technology, structure and effectiveness. Firms that constructed a structure similar to that proposed, were the most efficient ones. focuses on production technology, first attempt to view organization structure from a technological perspective: applies only to manufacturing industries. The relationship between structure and effectiveness became apparent when she grouped companies according to their typical mode of production technology. She treated these categories as a scale with increasing degrees of technological complexity (unit to process). 1. Unit production: defined as technology where units are custom-made and work is non-routine. (special purpose vehicles, turbines) 2. Mass production: which is large-batch or mass-produced technology (refrigerators, cars) 3. Process production defined as highly controlled, standardized and continuous processing technology (oil, chemicals)

Balanced Scorecard Approach

balance various demands. Not one measure-> views performance in several areas of business: not just results but how they are achieved. Four perspectives: 1 Financial - How do the shareholders perceive us? 2 Customer - Assessment of time delivery, market share - how do customers perceive us ? 3 Internal - what internally to do to meet customers requirement - where must we excel? 4 Innovation and learning - ability to develop and introduce new products- what can be improved? Disadvantages: - Ranking not easy of goals - Utility is limited if what is chosen is irrelevant - What important is changes over time -> measures need to change quite often

Global strategy

cost pressure: high, local responsiceness: low Adopted where a product can be sold in most markets with very little modification Firms using this strategy work very hard at lowering costs by locating activities where they make most sense and through extensively engaging in practices that spread knowledge throughout the company. Firms normally locate their key activities in a few important centres, which provide cost and other benefits

Multidomestic strategy

cost pressure: low + local responsiveness pressure: high aims to achieve maximum local responsiveness with products customized to meet local conditions. Firms tend to establish complete value chains in each of the major markets they serve. Achieving economies of scale and spreading experience around the firm is difficult using this strategy.

Aldrich

criticized the Aston Group Study after finding several other plausible interpretations of the data.

Garbage can

decisions are the outcome of four partially dependent streams: stream of problems, a stream of potential solutions, a stream of participants, and a stream of solutions

Hall

he conducted a study with many diverse organizations and didn't find a clear connection between size and structure. Large organizations are not necessarily more complex than small ones.

Intensive technology

high complexity and low formalization coordination through mutual adjustment Specialized response to diverse set of problems. Problem cannot be predicted accurately. Includes technologies in hospitals, universities. Intensive technology creates reciprocal interdependence - the outputs of units influence each other in a reciprocal fashion.

Craft technologies

ill-defined - few exceptions relatively difficult problems - limited set of exceptions (e.g custom tailoring, furniture restoring) problem solving requires knowledge and experience -> high degree of decentralization. The span of control is moderate to wide, coordination is assured through reports and meetings.

Non-routine technologies

ill-defined - many exceptions many exceptions and difficult-to-analyse (research activities) demand flexibility -> decentralised, high interaction, minimum degree of formalization. Span of control is moderate - narrow. Group norms and group meetings are procedures for coordination and control. The more routine the technology, the higher structured the organization should be, conversely; non- routine technologies require greater structural flexibility.

Strategy, defined by Chandler

includes both the long-term goals and objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals.

Aston Group

increased size ----> greater standardization/formalization concluded that an increased scale of operation increases the frequency of recurrent events and the repetition of decisions, making standardization preferable. They found that organizational size was related positively to specialization, formalization and vertical span, and negatively to centralization.

Peter Blau

increased size ---> higher divisionalization argued the importance of size as a determinant of structure. He concluded that size is the most important condition affecting the structure of organizations. He found that increasing size promotes structural differentiation but at a decreasing rate. These increases were in the number of local branches into which the agency was dispersed, the number of vertical levels in the hierarchy, the number of functional divisions at the headquarters, and the number of sections per division.

Differentiation Strategy (porter)

is one where a firm seeks to be unique in its industry in ways that are widely valued by buyers. Companies differentiate by putting emphasis that their product is high in quality. Offer extraordinary service (effective not efficient). Key is: Attribute chosen must be different from those offered and significant enough to justify a price premium that exceeds the cost of differentiation. Rely on development of unique products. Consequently: High degree of flexibility. Best Structure: - Low complexity - Low formalization - Decentralized decision making

Transnational strategy

is very rare in practice. A transnational strategy attempts to achieve maximum local responsiveness while achieving worldwide economies of scale. Experience is spread throughout the organization regardless of its origins, and firms are considered stateless.

Long-Linked Technology

moderate complexity and formalization coordination through extensive planning and scheduling A must be performed before B, B before C and so forth= fixed sequence of connected steps. E.g. mass production assembly lines. Accompanied by sequential interdependence = requires high level of coordination->acquiring raw materials and Distribution of products become major areas of concern-> management tries to control in and outputs and integrates vertically: forward: distributer, backwards: suppliers

Informal Coordination

mutual adjustment is the coordination which results from the voluntary action of organizational members

Size and Centralization

no correlation at all

Individual Coordination

project managers (coordinate work of others) or coordination by hierarchy...when unusual circumstances demand a unique solution to a problem, individual coordination is often used. It involved the appointment of a person whose main task is to coordinate the work of others. Typical work includes project management, and various types of system and activity integration. These coordinators are expensive. Coordination by hierarchy also falls under this category.

Stakeholder Approach

recognizes not only the importance of strategic constituencies, but also those who may not have the political power to influence the existence of the organization or even its direction. It challenges the view that organizations only exist to maximize profits. It recognizes that organizations are only effective if they take into account the wider community.

Programmed Coordination

rules and regulations characterizing a bureaucracy as well as common management techniques such as planning, goal-setting, scheduling, timetabling, sequencing, and developing various types of standard operating systems.

Defenders

seek stability by producing only a limited set of products directed at a narrow segment of the total potential market. They strive aggressively to prevent competitors from taking market share or customers from them. They ignore developments or trends outside their market. The result of this strategic type is high horizontal differentiation and highly specialized tasks. Structure: - High division of labour - Standardization of operations - High formalization - Centralized decision making

Prospector

the opposite of defenders. Their strength lies in finding and exploiting new product and market opportunities. Innovation may be more important than high profitability. Their success depends on developing and maintaining the capacity to survey a wide range of environmental conditions, trends, and events and then introduce new products based on the research. Very flexible structure and low degree of standardization and routinization. There are multiple decentralized unites. It is not a very efficient strategic type. - Rely on multiple technologies that have low degree of routinisation and standardization - Have numerous decentralized units Structure: - Low complexity - Low formalization - High levels of coordination - Decentralised decision making

Analyser

they attempt to minimize risk by adopting innovations after they have been proven by others. They seek to minimize risk and maximize opportunity for profit. They are imitators. Structure: 1. Has high standardization, routinisation, and automation to attain efficiencies (e.g. manufacturing and distribution). 2. Is flexible enough to introduce new product lines (e.g. marketing and product development) In this way, analysers seek structures that can accommodate both stable and dynamic areas of operation. Managers pursuing analyser strategy perceive considerable change and uncertainty but wait until competitors develop a viable response, and then quickly adopt it.

Cost Leadership Strategy (porter)

when organization sets out to be the low cost producer in its industry. Success when organization is not only cheap but the cheapest, the cost leader. Product must be comparable to that of competitors or at least acceptable to buyers. To be successful, companies using this strategy seek for: - Efficiency of operations - Economies of scale - Technological innovation - Low-cost labor - Privileged access to raw materials Best Structure: - High complexity - High in formalization - High in centralization

Complexity

‣ Horizontal differentiation: considers the number of different occupational, task and administrative groupings within the organization. ‣ Vertical differentiation: refers to the number of layers of management in the organization ‣ Spatial dispersion: describes the extent to which the organization's facilities and personnel are spread over a wide geographical area.

Variety-Predictability Continuum (Perrow)

◦ Routine technologies: have few exceptions and say-to-analyse problems. The mass-production processes used to make steel or motor cars or fast food belong in this category. ◦ Engineering technologies: have a large number of exceptions, but they can be handled in a rational and systematic manner. The construction of office buildings would fall into this cell, as would the activities performed by accountants. ◦ Craft technologies: deal with relatively difficult problems but with a limited set of exceptions. This would include custom tailoring, furniture restoring, or the work of performing artists. ◦ Non-routine technologies: are characterized by many exceptions and difficult-to-analyse problems. Examples would be strategic planning and basic research activities.