FITTING DESIGN TO SITUATION

Presented by J. B. Nangpuhan II (MPA Student) for the class (Organizational Design) of Dr. S. K. Kim at Chonnam National University, South Korea. 2010

 

SUMMARY

 

KEY TERMS:

·         effectiveness – 효과적임

·         age – 나이

·         size – 크기

·         environment – 환경

·         power – 능력

 

INTRODUCTION

In this chapter, we will discuss the situational or contingency factors, organizational states or conditions that are associated with the use of certain design parameters. It involves four situational factors: age and size of the organization; use of technical system in the operating core; various aspects of its environment, notably stability, complexity, diversity, and hostility; and certain of its power relationships. But before we discuss each, let’s look into the comment of the author on the notion of effectiveness in structural design.


I.        TWO VIEWS OF ORGANIZATIONAL EFFECTIVENESS

One study by Khandwalla (1971, 1973b, 1974) found that effectiveness was dependent on the interrelationships among design parameters; in other words, on the use of different ones in a consistent or integrated manner. Such studies lead us to two important and distinct conclusions about structural effectiveness: (1) congruence hypothesis: effective structuring requires a close fit between the situational factors and the design parameters. It means that a successful organization designs its structure to match its situation; (2) configuration hypothesis: effective structuring requires an internal consistency among design parameters. In this case, the successful organization develops a logical configuration of the design parameters. The two hypotheses, through the influence of the organizational factors, can be combined into a single hypothesis: extended configuration hypothesis – effective structuring requires a consistency among the design parameters and contingency factors.

In discussing these relationships in this chapter, the situational factors will be treated as independent variables (that is, as given) and the design parameters as dependent ones (that is, to be determined). These assumptions will be dropped when we get to the configurations. These configurations are systems which are integrated with all the others.

We shall also consider a set of intermediate variables through which situational factors affect the design parameters. These variables will affect the work that is done in the organization and include the following concerns:

a.)    The comprehensibility of the work (which most strongly affects specialization and decentralization);

b.)    The predictability of the work (which most strongly affects standardization in its three forms – design parameters of behavior formalization, planning and control systems, and training and indoctrination);

c.)     The diversity of the work (which most strongly affects the choice of bases for grouping units, behavior formalization, and the use of liaison devices); and

d.)    The speed with which the organization must respond to its environment (which most strongly affects decentralization, behavior formalization, and unit grouping).

 

The flow of discussions about age and size, technical system, and environment will be done in two ways: (a) in terms of a set of hypotheses, each typically related to a specific situational factor to one or more design parameters; and (b) in terms of a framework or set of organizational types suggested by this set of hypotheses. The power factors will be discussed only in terms of the hypotheses. As we shall see, these types reinforce the findings of the earlier chapters that point the way to our configurations.

 

II.      AGE AND SIZE

Five hypotheses will discuss the effects of age and size on structure with considerable evidence. The two hypotheses are concerned to age and three on size. We can clarify and synthesize these 5 hypotheses by looking at organizational aging and growth not as linear progressions, but as a sequence of distinct transitions between “stages of development.”

 

HYPOTHESIS 1: The older the organization, the more formalized its behavior.

As organization age, all other things being equal, they repeat their work, with the result that it becomes more predictable, and so more easily and logically formalized. This can be more illustrated by the “we’ve-seen-it-all” syndrome.

 

HYPOTHESIS 2: Structure reflects the age of founding of the industry.

This is being suggested by the work of Arthur Stinchcombe (1965), who studied contemporary organization operating in industries founded in four different eras. He found a relation between age of industry and job specialization as well as the use of trained professionals in staff positions. Example, organization of the prefactory era (e.g. farms) tend to rely more heavily on family personnel retaining a kind of craft structure; organizations in the early 19^th century (e.g. textiles) use virtually no unpaid family workers, but many clerks as a sign of bureaucracy; the era of railroads and coal mines tend to rely heavily on professional managers in place of owner-managers, a second stage of “bureaucratization of industry” (according to Stinchcombe); the era of motor vehicles, chemicals, etc. are distinguished by the size of their staff departments and their use of professionals in their administrative structure. Later we shall see that the next era also exhibit distinctive structural characteristics.

 

HYPOTHESIS 3: The larger the organization, the more elaborate its structure – that is, the more specialized its tasks, the more differentiated its units, and the more developed its administrative component.

The larger organization must use more elaborate coordination devices such as hierarchy to coordinate by direct supervision, more behavior formalization to coordinate by the standardization of work processes, more sophisticated planning and control systems to coordinate by output standardization, or more liaison devices to coordinate by mutual adjustment. We should expect sharper lines drawn between the operators who do the work, the analysts who design and plan it, and the managers who coordinate it. The reason for increasing structural elaboration is because of the forces of economic and technological development bringing new industries with new structures.

 

HYPOTHESIS 4: The larger the organization, the larger the average size of its units.

As an organization adds new employees, it forms new units with new managers. As the organization grows, positions become more specialized and the units more differentiated making it easier to manage. Through standardization, the manager’s job can be partially institutionalized which reduce his workload and enabling him to supervise more people. Thus, to the extent that larger organization size means greater specialization, it also means larger unit size.

 

HYPOTHESIS 5: The larger the organization, the more formalized its behavior.

The larger the organization, the more behaviors repeat themselves. As a result, the more predictable they become and so the greater the propensity to formalize them. These phrases can give a clear definition of the hypothesis: “Listen, mister, I’ve heard that story at least five times today. Just fill in the form like it says.”

The findings of the last two hypotheses also suggest increasing formalization with increasing size. Larger organization will be more regulated by rules and procedures and make greater use of formal communication.

 

A.      Stages of Structural Development

William Starbuck (1965) with his “metamorphosis model” viewed growth not as “a smooth continuous process” but as one “marked by abrupt and discrete changes” in condition and structure. Organizations generally begin their lives with nonelaborated, organic structures. Some begin in the craft stage and then shift to entrepreneurial stage itself, led by powerful executives who coordinate largely by direct supervision. As it continuous to grow, it begins to formalize its structures and eventually make the transition to a bureaucratic structure. Further growth and aging often encourage the bureaucracy to diversify and split into market-based units, or divisions, superimposed on their traditional functional structures making it a divisionalized structure. Finally, another stage called matrix structure transcends divisionalization and cause a partial reversion to organic structure.

Of course, not all organizations need to pass through all these stages but many seem to go through a number of them, sometimes dropping at some intermediate stage.

 

III.    TECHNICAL SYSTEM

Since technology is a broad term, we only focus in this discussion the technical system of the organization which means the instruments used in the operating core to transform the inputs into outputs.  In discussing the effect of the technical system on the structural parameters, we find it convenient to introduce our framework or organizational types first, and then turn to hypotheses.

 

Woodwards’ Study of Unit, Mass, and Process Production

Joan Woodward’s analysis of the effects on structure of different forms of technical systems used in industry focused on three basic systems of production – unit (essentially custom), mass (of many standard items), and process (the intermittent or continuous flow of fluids). Woodward found some marked relationships between these three systems of production and various of the design parameters specifically in moving from unit to mass to process production:

v  The span of control of the chief executives increased.

v  The span of control of middle managers decreased.

v  The ratio of managers to nonmanagers increase and their qualifications rose.

v  The ratio of clerical and administrative personnel to production personnel increased.

v  The number of levels of management in the production department increased.

v  The span of control of the first-line supervisors was highest in mass-production firms.

v  The mass-production firms had the smallest proportion of skilled workers.

v  The mass-production firms were bureaucratic in structure, whereas the process- and unit-production firms tended to be organically structured.

 

A.      Unit Production

This system was an ad hoc or nonstandard form of organization and so there was no standardization or formalization in the unit producer’s operating work. In short, it was an organic structure.  Any coordination that could not be handled by mutual adjustment among the operators themselves was resolved by direct supervision by the first-line managers. According to Woodward, unit production is characterized as craft in nature – the structure built around the skills of the workers in the operating core. Of the three forms of production, the unit type had the smallest proportion of managers and widest span of control at the middle levels as shown in Figure 6-2. The span of control in the strategic apex is narrow thus; they spend more time with customers and could not supervise as many people.

 

B.      Mass Production

Contrary to unit production, mass production is standardized and formalized leading to all the characteristics of the classic bureaucracy. Operating work was routine, unskilled, and highly formalized. The first-line supervisors had wide spans of control by direct supervision. Technostructure in the mass production was so formalized having clearly defined work duties, emphasized written communication, unity of command, span of control at top levels often in the 5-7 range, rigid separation of line and staff, and considerable action planning.

Woodward characterized mass production to the most segmented among the three and the most riddled with hostility and suspicion. The three major points of conflict are the following: (1) conflict between the technical and social systems of the operating core; (2) conflict between short-range focus of the lower-level managers and the long-range focus of the senior managers specifically during action planning; (3) conflict between the line and staff groups in the administrative structure, one with authority, the other with expertise.

Hunt (1970:171-172) considers mass production as “performance” organizations while unit production and process production as “problem solving” organizations.

 

C.      Process Production

This system is automated, highly mechanized, and the result is work that is highly regulated. The operating core transcends a state of bureaucracy – totally standardized but without the people – and the administration shifts its orientation completely. The rules, regulations, and standards are now built into machines, not workers. But outside the machines, we can find technical specialists to maintain them, support staff of professional designers who control the work of managers and technocratic staff, and the strategic apex no longer concern with “running today’s factory, but with designing tomorrow’s” (Simon ,1977:22-23).

In process production, the first-level supervisory spans of control were narrow and they rely most on training and indoctrination. The line managers had training and knowledge similar to that of the staff specialists, and the two in fact interchanged jobs regularly. At the strategic apex, the use of “management by committee” is common instead of by single decision makers which are contrary to unit and mass productions.

Thus, automation appears to place an organization in a “postbureaucratic” state: the technical system is fully regulating, but of machines, not people, and the social system – largely outside the operating core – need not be controlled by rules and so can emerge as an organic structure, using mutual adjustment among the experts, encouraged by the liaison devices, to achieve coordination.  Contrary to mass producers, process production experienced less conflict.

The next three hypotheses are about the relationships between structure and technical system.

 

HYPOTHESIS 6: The more regulating the technical system, the more formalized the operating work and the more bureaucratic the structure of the operating core.

When the technical system is broken down into simple and specialized tasks that remove discretion from those who have to use it, the operating work becomes more routine and predictable. As a result, the more easily specialized and formalized. As argued by Woodward, this technical system was almost completely regulating – that is, automated. The administrative structure is characterized as organic but the operating cores (machines) being perfectly bureaucratic.

 

HYPOTHESIS 7: The more sophisticated (difficult to understand) the technical system, the more elaborate the nonoperating structure – specifically, the larger and more professional the support staff, the greater the selective decentralization (to the staff), and the greater the use of liaison devices (to coordinate the work of that staff).

Organizations with sophisticated technical systems are expected to have high proportion of support staff who rely heavily on the liaison devices at middle levels, to favor small units there, and to decentralize selectively – that is, give the support staff power over the technical decisions.

 

HYPOTHESIS 8: The automation of the operating core transforms a bureaucratic administrative structure into an organic one.

Automation does not simply bring about more regulation of the activities of the operating core; it eliminates the source of many of the social conflicts throughout the organization. Technical systems, typically being the most sophisticated, require the largest proportion of staff specialists. These people tend to communicate among each other informally and to rely for coordination on the liaison devices. Thus, automation of the operating core breeds all kinds of changes in the administrative structure that drive it to the organic state.

This leads us to an interesting social implication: that one apparent solution to the problems of impersonal bureaucracy is not less regulation of operating tasks but more, to the point of automating them. Automation seems to humanize the traditional bureaucratic structure, something that democratization proves unable to do.

 

IV.    ENVIRONMENT

Another situational factor to be considered when designing the structure of the organization is the characteristics of the general environment. Environment means the aggregate of surrounding things, conditions, or influences (Random House Dictionary). It comprises virtually everything outside the organization – its technology; the nature of its products, customers, and competitors; its geographical setting; the economic, political, and even meteorological climate in which it must operate; and so on. Organizational environments focus on four particular dimensions:

1.       Stability – The stability of an organization’s environment can range from stable to dynamic, from that of the wood carver whose customers demand the same pine sculptures decade after decade, to that of the detective squad that never knows what to expect next. In here, dynamic means unpredictable, not variable; variability may be predictable. Some factors that make the organization dynamic are unstable government, unpredictable shifts in the economy, unexpected changes in customer demand, etc.

2.       Complexity – Technology is the focus of the organization in here. The environment can range from simple to complex, from that of the manufacturer of folding boxes who produces his simple products with simple knowledge, to that of the space agency that must utilize knowledge from a host of the most advanced scientific fields to produce extremely complex outputs. The complexity dimension affects structure through the intermediate variable of the comprehensibility of the work to be done. Rationalized knowledge is considered simple.

3.       Market diversity – The markets of an organization can range from integrated to diversified, from that of an iron mine that sells its one commodity to a single steel mill, to those of a trade commission that seeks to promote all a nation’s industrial products all over the world. Market diversity affects the structure through the intermediate variable of the diversity of the work to be done.

4.       Hostility – it can range from munificent to hostile, from that of a prestige surgeon who picks and chooses his patients, through that of a construction firm that must bid on all its contracts, to that of an army fighting a war. Hostility is influenced by competition; by organization’s relations with unions, government, and other outside groups; and by the availability of resources to it. Hostile environments are typically dynamic but extreme hostility affects structure through the intermediate variables of the speed of necessary response.

 

The organization’s ability to cope with its environment is the main point here. The next four hypotheses (9-12) consider one of the dimensions but hypothesis 13 contradicts all of them.

 

HYPOTHESIS 9: The more dynamic the environment, the more organic the structure.

When an organization is faced with uncertain sources of supply, unpredictable customer demand, frequent product change, high labor turnover, unstable political conditions, or rapidly changing technology (knowledge), the organization cannot easily predict its future, and so it cannot rely on standardization for coordination. It uses a more flexible and less formal coordinating mechanism – direct supervision or mutual adjustment. Hence, the structure is organic.

 

HYPOTHESIS 10: The more complex the environment, the more decentralized the structure.

The difference between stability and complexity in terms of structure is that; environmental stability affects bureaucratization (the dice roller easily comprehends his game but he cannot predict its outcome – it is simple but dynamic), while environmental complexity affects decentralization (the clinical surgeon spends years trying to learn his or her complicated work, yet undertakes it only when rather certain of its consequences – complex but stable). However, hypotheses 9 and 10 are confusing.

For a complex environment, the top manager gives up a good deal of his power to others – other managers, staff specialists, sometimes operators as well. Should the complex environment instead be dynamic, the organization seeks coordinating mechanism that is both decentralizing and organic; thus it will lead to mutual adjustment as a coordinating mechanism.

Based on the discussion of Galbraith as illustrated in Figure 6-3, there emerged two kinds of bureaucratic and two kinds of organic structures, in each case a centralized one for simple environments and a decentralized one for complex environments. A centralized bureaucracy operates in a simple environment, while a decentralized bureaucracy operates in a complex environment, both of them in a stable situation.

 

HYPOTHESIS 11: The more diversified the organization’s market, the greater the propensity for it to split into market-based units (given favorable economies of scale).

The organization that can identify distinctly different markets – products or services, geographical regions, or clients – will be predisposed to split itself into high-level units, and to give each control of a wide range of the decisions affecting its own markets. This is similar to that of limited vertical decentralization in Chapter 5. In simple terms, diversification breeds divisionalization. But in here, divisionalization cannot be fully achieved because of one key impediment which is the presence of a common technical system or critical function that cannot be segmented.

Divisionalization appears to be better suited to simple diversified markets than complex ones (this will be discussed in Chapter 11.

 

HYPOTHESIS 12: Extreme hostility in its environment drives any organization to centralize its structure temporarily.

This can be explained in terms of the existing coordinating mechanisms. Since direct supervision is the fastest and tightest means of coordination, it can be use to control hostile environments. In the case of a complex environment that faces extreme hostility, the decentralized organization will presumably be centralized power temporarily in order to survive.

 

HYPOTHESIS 13: Disparities in the environment encourage the organization to decentralize selectively to differentiated work constellations.

Disparities in the environment encourage the organization to differentiate its structure, to create pockets – what we earlier referred to as work constellations – to deal with different aspects of the environment (different “subenvironments”). The organization can use selective decentralization in both the vertical and horizontal dimensions to address disparities arising from any level in the organization. In other words, it can centralize and decentralize at the same time.

 

An Organizational Type for Each of Four Environments

Hypotheses 9 and 10, although initially stated in terms of continuous relationships, seem more powerful when used to generate specific types of structures found in specific kinds of environments. In particular, the four basic types (stability, complexity, market diversity, and hostility) emerge from that discussion, as we can see in matrix form below:

 

	Stable	Dynamic
Complex	Decentralized Bureaucratic (standardization of skills)	Decentralized Organic (mutual adjustment)
Simple	Centralized Bureaucratic (standardization of work processes)	Centralized Organic (direct supervision)

Simple, stable environments give rise to centralized, bureaucratic structures, the classic organizational type that relies on standardization of work processes (and the design parameter of formalization of behavior) for coordination.  A complex, stable environment leads to structures that are bureaucratic but decentralized, reliant for coordination on the standardization of skills. Standardization comes since the organization can predict the work; it also decentralizes since the work is difficult to comprehend. Example of this includes hospitals and universities.

When an environment is dynamic but nevertheless simple, the organization requires the flexibility of organic structure, but its power remains centralized. Direct supervision becomes its prime coordinating mechanism. This form is characterized as the same to an entrepreneurial firm – a marketplace that is simple to understand yet dynamic enough to keep out the bureaucracies. The entrepreneur can maintain a tight personal control, not even having to share his power with a technostructure.

In a complex yet dynamic environment, the organization must decentralize to managers and specialists who can comprehend the issues but they interact flexibly in an organic structure so they can respond to unpredictable changes. Mutual adjustment is the prime coordinating mechanism here, its use encouraged by the liaison devices.

 

V.      POWER

Another situational factor to be considered when designing the structure of the organization is the specific aspects of the system of power. A number of power factors also enter into the design structure – notably the presence of external control of the organization, the personal needs of its various members, and the fashion of the day – embedded in the culture in which the organization find itself (in effect, the power of social norms).

Three hypotheses describe a number of the findings about these power factors:

 

HYPOTHESIS 14: The greater the external control of the organization, the more centralized and formalized its structure.

The two most effective means to control the organization from the outside are (1) to hold its most powerful decision maker – its chief executive officer – responsible for its actions, and (2) to impose clearly defined standards on it, transformed into rules and regulations. The first centralizes the structure and the second formalizes it. External control forces the organization to be especially careful about its actions in terms of implementation of rules leading to a bureaucratic structure.

In the case of linking two organizations, centralization of power at the societal level leads to centralization of power at the organizational level, and to bureaucratization in the use of that power.

 

HYPOTHESIS 15: The power needs of the members tend to generate structures that are excessively centralized.

This hypothesis is based on the belief that all members of the organization typically seek power – specifically the power to control the decisions that affect their own work. In this case, more power can be concentrated at its top than the factors of age, size, technical system, and environment would normally call for (at least until the resulting inefficiencies catch up with the organization). This will avoid problems in handling the workers.

 

HYPOTHESIS 16: Fashion favors the structure of the day (and of the culture), sometimes even when inappropriate.

Fashion is the power of the norms of the culture. It plays an important role in structural design since it introduces new alternatives in the management and operation of the organization as it seeks the simple truth, “the one best way”. Fashion reflects advances in organizational design, advances that suit some organizations with older structure. We can also consider culture to have effects in structural design. Although structural fashion suits some organizations, it cannot suit the others.

 

CONCLUSION

The different situational factors tend to affect the structure at different levels, although a number can affect the same design parameter (as in the case of formalization of behavior, which is affected by age, size, technical system, environmental stability, and culture). The factors of age and size, although significant at all levels, seem most pronounced in the middle of the structure. By creating changes in the favored mechanism of coordination, they produce extensive structural elaboration.

The technical system, being housed in the operating core, clearly has its greatest effect there. Contrary to the technical system, the environmental factors seem to affect the managers and specialists near the strategic apex in the purpose of pacifying organizational boundaries. Finally, the power factors seem to cut across all levels of the structure, but only on a selective basis. External control, member needs for power, fashion, and culture sometimes modify the structures that would otherwise result from consideration of only the factors of age, size, technical system, and environment.

 

OPINION/생각엔

Fitting structural designs to certain situations is a very confusing task on the part of the middle-line managers and strategic apex. As has always been the case, the complexity of the situation can be address through coordination to analysts, technical experts, and most often the operating core. The 16 hypotheses discussed in this chapter give us a view of the four situational factors that affect the structural design of any given organization. Although in this particular chapter, we refer to organization ranging from simple to the most complex one. But we cannot disregard the fact that designing an organization also includes others factors which we have discussed in the previous chapters. Not only age, size, technical system, environment, and power that affects the design parameters; but we should also bear in mind factors like place, time, purpose, and etc.

 

Reference:

Mintzberg, H. (1993). Structure in Fives: Designing Effective Organizations. Upper Saddle River, NJ: Prentice-Hall, Inc. 121-150