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Summary Organisation Theory

Stephen P. Robbins & Neil Barnwell
5th Edition

Chapter 3
Organisational effectiveness = how to identify a successful organisation.
Every discipline in the administrative sciences contributes in some way to helping managers make
organisations more effective. An appropriate organisation structure also makes an organisation effective.
The way we put people and jobs together and define their roles and relationships is an important
determinant in whether an organisation is successful.
Ways of measuring effectiveness
Goal attainment approach (1950s) = effectiveness was considered to be related to whether an
organisation achieved its goals or not.
survival approach = measuring effectiveness by considering survival a necessary precondition for success.
Problems: The death of organisations is not always clear.
Organisations can survive long periods of time without being effective.
Organisational effectiveness criteria = an organisation can be effective or ineffective on the basis of a
number of different dimensions that may be relatively independent of one another.
Organisational effectiveness requires multiple criteria, different types of organisations have to be
evaluated using different characteristics and effectiveness must consider both means (processes) and
ends (outcomes).
Organisational effectiveness = the degree to which an organisation attains its short-term (ends) and longterm (means) goals, the selection of which reflects strategic constituencies in the organisations
environment, the self-interest of the evaluator and the life stage of the organisation.
The goal-attainment approach
= an organisations effectiveness is judged in terms of whether it achieves its goals. Effectiveness is
assessed on whether the organisation accomplishes its ends while tending to downplay the means of
getting there
Assumptions
The goal-attainment approach assumes organisations are deliberate, rational, goal-seeking entities.
Organisations must have goals, these must be explicit, sufficiently clear to be understood and widely
known. The goals should also be of a manageable number and should reflect areas important to the
organisation. Also here must be general consensus or agreement on these goals. Finally, progress
towards goals must be measureable and there should be a time limit attached to them.
Making goals operative
First identify the organisations goals. Then develop measures to determine the extent to which the goals
were being met.
Problems
The goal-attainment approach assumes rationality in goal setting and evaluation that is rarely met in
practice. Most organisations, and organisational processes, are far too fuzzy for the goal-attainment
approach to displace other measures of effectiveness.

- Whose goals do you apply? Key decision makers are used to set goals, but it is hard to define
membership of this group. Even within an organisation, groups would differ in which goals were
important.
- The difference between what an organisation states officially are its goals and what the actual goals of
the organisation are. Official goals tend to be influenced strongly by standards of social desirability, yet
rarely make any contribution to what the organisation is actually trying to accomplish. Many
organisational goals are confidential, in order not to become known to competitors.
- An organisations long-term goals are often different from its short-term goals.
- The fact that organisations have multiple goals can create difficulties. They can compete with each
other and sometimes are even incompatible. The goal-attainment approach assumes that there is
consensus on goals and that they are compatible with each other.
- The assessment to whether a goal has been achieved may not be easy. They can mean different things
to different people.
- Where multiple goals exist, they must be ordered according to importance if they are to have meanings
for assessing effectiveness. How do you allocate relative importance to goals that may be incompatible
and represent diverse interests?
- Goals may not direct behavior. Organisations may act first, and then later create a goal to justify what
has happened.
Value to managers
Some goals are clearly measurable. The validity of those goals identified can probably be increased
significantly by:
- Ensuring that input is received from all those who have a major influence on formulating and
implementing the official goals.
- Including actual goals obtained by observing the behaviour of organisations members
- Reducing the degree of incompatibility between goals
- Recognizing that organisations pursue both short- and long-term goals
- Insisting on tangible, verifiable and measurable goals
- Viewing goals as dynamic entities that change over time rather than as rigid or fixed.
If managers are willing to accept the complexities inherent in the goal-attainment approach they can
obtain reasonably valid information for assessing an organisations effectiveness. But there are other
dimensions to organisational effectiveness than identifying and measuring specific ends.
The systems approach
= an organisations effectiveness should be evaluated by its ability to acquire inputs, process the inputs,
channel the outputs and maintain stability and balance.
Assumptions
A systems approach to effectiveness implies that organisations are made up of interrelated subparts. If
any of these subparts perform poorly, it will negatively affect the performace of the whole system.
Effectiveness also requires awareness of, and successful interaction with, important environmental

constituencies that have the power to disrupt the stable operation of the organisation. Survival requires
a steady replenishment of resources, also intangibles as ideas, consumed in production.
Making systems operative
First we look at a sampling of criteria that systems advocates consider relevant; then we consider the
various ways in which managers measure these criteria. The system view looks at criteria such as the
ability to ensure continued receipt of inputs into the system and the distribution of outputs and
flexibility of response to the environmental changes. In contrast to the goal-attainment approach, the
system approach focuses on the means necessary to ensure the organisations survival.
Important systems interrelationships can be converted into organisational effectiveness variables or
ratios such as input/output, transformations/input, transformations/output and so on. Operations
managers and management accountants use many of these measures when they asses the effectiveness
of the transformation process.
Another way to measure the effectiveness within the systems approach is the concept of added value.
The cycle of absorbing inputs from the environment, turning them into usable products and services and
then marketing these should leave a surplus of cash over and above that needed to maintain the system
in its repetitive cycle. This surplus is called the value added and Kay suggests that the larger it is, the
more successful the company. The value added is less than the operating profit because return to
shareholders is included in the capital costs.
Problems
- While some process variables may be specific and easy to measure, other critical ratios are not so easy
to quantify. Rates of easy measurement and the quality of the management require easy measurements.
- Its focus is on the means necessary to achieve effectiveness rather than on organisational effectiveness
itself. It makes little sense to be a great producer of steam locomotives if they are technologically
obsolescent.
The goal-attainment and systems approach complement each other. The first uses end goals, the second
uses means goals. If we do not reach our end goals, then management should establish a process to find
out why this may be so. In this they would be focusing on means goals.
Value to managers
Managers who use a systems approach are less inclined to look for immediate results. They are less likely
to make decisions that trade of the organisations long-term health and survival for ones that will make
them look good in the near term. They are aware of the need for continuous improvement and that such
improvement takes time. The system approach increases the managers awareness of the
interdependence of organisational activities.
The system is also applicable where end goals either are vague or defy measurement. Finally occasionally
environments present sudden and unexpected threats. In such cases survival becomes the most
important goal of the organisation and almost the sole effectiveness criterion.
The strategic-constituencies approach
= an organisations effectiveness is determined by how successfully it satisfies the demand of those
constituencies in its environment from which it requires support for its continued existence. This
approach is not necessarily at variance with the systems view, the emphases are different rather than
incompatible. The systems approach places greater emphasis on the transformation of inputs into

outputs whilst the strategic-constituencies approach emphasizes the importance of significant groups in
the environment.
Assumptions
The strategic-constituencies approach views organisations as to exist within an environment where
demands are placed on the organisation by various important groups, or constituencies. Organisational
effectiveness becomes an assessment of how successful the organisation has been in satisfying those
strategic constituencies on which the survival of the organisation depends.
The organisation has a number of important constituencies, each with different degrees of power and
each trying to have its demands satisfied. But as each constituency also has a unique set of values, it is
unlikely that their preferences will be in agreement. The effectiveness of a company can be said to be
influenced by its ability to identify its critical constituencies, assess the pressures they can place upon the
company and respond effectively to their demands.
The strategic-constituencies approach assumes that managers pursue a number of goals and that those
selected represent a response to those interests groups that control the resources necessary for the
organisation to survive. The strategic-constituencies approach would argue that effective organisations
align their goals with important areas of the environment.
Making strategic constituencies operative
It starts with identifying what constituencies are critical to the organisations survival. The next step is to
determine the relative power of each constituency. Then it is required to identify the expectations that
these constituencies hold for the organisation. It would then conclude by comparing the various
expectations, determining common expectations and those that are incompatible, assigning relative
weights to the various constituencies and formulating a preference ordering these various goals for the
organisation as a whole. This preference order represents the relative power of the various strategic
constituencies. The organisations effectiveness would then be assessed in terms of its ability to satisfy
these goals.
The stakeholder approach to effectiveness (Archie Carroll)
The 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 organisation or even its direction.
All groups, like families of workers, environmentalists, residents near the plant and those generally
concerned, even though they may not be formally organized as a pressure group, are considered to be
affected by the organsation and should therefore be considered when important decisions are made.
The stakeholder approach considers that an organisation is effective only if it takes into account the
wider community that has an interest in the decisions of the organisation, even if this is at the cost of
profits.
Problems
- The task of separating the strategic constituencies from the larger environment is easy to talk about but
difficult to do. What was critical to the organisation yesterday may not be so today and may be entirely
different tomorrow.
- Even if he constituencies in the environment can be identified and are assumed to be relatively stable,
what separates the strategic constituencies from the almost constituencies?
- Identifying the expectations that the strategic constituencies hold for the organisation present a
problem. How do you tap that information accurately?

- Although the strategic constituencies approach assumes that an organisations basic goal is survival, it
may not be the case in many instances. Organisations are often established with the idea of selling them
to someone else once they reach a certain size.
Value to managers
By operationalizing the strategic-constituencies approach, managers decrease the chance that they
might ignore or severely upset a group whose power could significantly hinder the organisations
operations. If management knows whose support it needs if the organisation is to maintain its health, it
can modify its preferred ordering of goals as necessary to reflect the changing power relationships with
its strategic constituencies.
The balanced scorecard approach (Kaplan and Norton)
= the balanced scorecard seeks to balance the various demands on the organisation with its capabilities.
It attempt to integrates all the before mentioned approaches.
In generation the various measures used in the balanced scorecard, one seeks to balance the various
demands on the organisation with its capabilities. As a result, developing the measures becomes a
diagnostic tool a management technique to align the organisation with its environment and a
measurement system to identify whether goals are being met. It is also seen as a means to developing
and implementing strategy.
Making the balanced scorecard operative
The questions answered by balanced scorecard are:
- How do important financial providers perceive us? (financial perspective) Financial measures
enable an organisation to determine how profitable it is and its rate of return on assets. The
financial measures indicate whether an organisations strategy and its execution are contributing
to profitability, or covering costs.
- How do customers see us? (Customer perspective) Goals and measures under this heading
typically include assessment of time to delivery, product utility and performance and service,
which, when combined, show how the product or serve contributes to creating value for
customers.
- What must we excel at? (Internal perspective) These measures concentrate on what the
company must do internally to meet the customers expectations. This is a process-driven
measure.
- Can we continue to improve and create (Innovation and Learning perspective) This is associated
with the ability to develop and introduce new products of value to customers or clients. It also
includes measures of continues improvement and production efficiencies.
Management should identify just a few goals for each of the four perspectives. The measures developed
for each goal should be easy to understand and contribute to deciding whether the goals has been
achieved or not. The balanced scorecard method differs from the goal-attainment approach because it
formalizes the way in which goals are determined. It also proposes that there are multiple goals, which
exist within an network of interrelationships.
Benefits
- It brings together in a single report many areas of importance to an organisations
competitiveness. These include both short-term efficiency issues and those relating to the longterm adaptability of the organisation

The scorecard acts to guard against suboptimisation. By forcing senior managers to consider all
important operational issues operational issues together, they are compelled to evaluate
whether improvement in one area may have been achieved at the expense of creating problems
in another.
It puts into perspective the use of financial measures as means of information to managers.
Financial measures tend to be backward-looking as they provide information only on what has
occurred in the past. Financial measures are important but must be considered in combination
with other sources of information in order to allow a comprehensive picture of the organisation
the emerge.
The underlying theme of the balanced scorecard is organisational survival.
Problems
- The utility may be limited if what is chosen to be measured is not important. Problems arise
when what is measured is not very important.
- It takes a benign view of the organisations environment The organisations managers have in
their mind worst case scenarios which can threaten their organisation but which are not obvious
or immediately apparent.
Value to managers
The balanced scorecard is an attempt to identify what is important to the organisation and to develop
appropriate measures of these. It brings together in a single management report the different elements
of a companys competitive agenda. The balanced scorecard also has the advantage that it involves a
reasonably wide range of mangers and stakeholders in the process of nominating what is important for
the organisation (See table 3.4, page 97)
Structure of an organisation = its overall dimensions, characteristics and areas of responsibility.
- Complexity
- Formalization
- Centralization
Chapter 4
COMPLEXITY
Definition
Complexity = the degree of differentiation that exists within an organisation. The degree of horizontal,
vertical and spatial differentiation in an organisation.
Horizontal differentiation
= the degree to which an organisation is separated into different units on the basis of the tasks
performed by organisational members, their education and training, and their administrative groupings.
The larger the number of different occupations within the organisation, that require special knowledge
and skills, the more complex the organisation. This is because diverse skills and orientations make it
more difficult for organisational members to communicate and more difficult for management to
coordinate their activities. Also, it increases the chance of there being different goal emphases, time
orientations and even a different work vocabulary.

Almost all organisations rely on job specialization. The reasons for this are
- No one person can perform all required tasks.
- Limitations of knowledge.
- To have highly trained workers undertaking tasks requiring lower level skills is a waste.
- Special knowledge may be required in order to respond to local conditions or the needs of
particular groups of customers.
- Efficiency
- Training is simplified
- Workers can concentrate on what they are good at
The areas of responsibility reflect the complexity of the organisation. The greater the complexity of the
organisation, the more likely it is that the areas of responsibility of a particular position will be more
highly defined.
As specialization increases, so does complexity. This is because the organisation then requires more
sophisticated and expensive methods of coordination and control.
Vertical differentiation
= the depth of the structure of an organisation, the number of layers of management from the lowest
level workers to the chief executive officer. The greater the number of layers, the more complex the
organisation.
The more levels that exist between top management and lower level workers, the greater the potential
for communication breakdown, the more difficult it is to coordinate the decisions of managerial
personnel and the more likely it is that political and power plays will slow decision making and create
administrative bottlenecks.
Span of control = the number of subordinates that a manger an supervise efficiently.
The narrower the span of control, the taller the organisation (the more layers).
Layers of management
- Top management: main responsibility setting the strategic direction
- Middle management: they implement the plans of senior managers and supervise lower level
managers and provide input into decisions made by top management.
- Lower level management: day-to-day tasks of supervising the production of goods and services.
The use of computers and computer-based communications has facilitated the flow of communications
across and up and down the organisation. This has removed the need for large numbers of managers to
gather and process information.
Spatial dispersion
= the degree to which the location of an organisations facilities and personnel is dispersed
geographically.
This is high when the operations of an organisation are geographically widely spread. It is low when
organisations take place in a very small geographic area.
A lower level of spatial dispersion generally presents fewer problems for management. The geographical
distance is small and therefore fewer communication problems should arise.

A high level of spatial dispersion leads to greater amounts of time and effort, hence cost, in managing
these issues. Managing in different time zones can also be present. High spatial dispersion causes higher
complexity.
Why is complexity important?

The more complex an organisation, the greater the need for effective communication, coordination and
control devices. As complexity increases, so do the demands on management to ensure that
differentiated and dispersed activities are working smoothly and together towards achieving the
organisations goals. Managers must give more attention and spend more time on managing the
organisation.
Differentiation is often in the interests of economy and efficiency or in order to accommodate company
expansion. Thus the economies that increased size generates must be set against the increased burden
and cost of managing a more complex organisation.
FORMALISATION
Definition
Formalization = the degree to which jobs and procedures within the organisation are standardized. If a
job is highly formalized, those doing the job have a minimum amount of discretion over what is to be
done, when it is to be done, and how it should be done. Tasks have to be undertaken in exactly the same
way.
Formalization may also take the less tangible form of predictable thought patterns and approaches to
problem solving within the organisation.
While the existence of extensive policy manuals and highly defined job descriptions may be evidence of
written formalization, similarity in the ways of thinking of organisational members is also evidence of
behavioral formalization.
Range of formalization
The degree of formalization can vary widely between and within organizations. The greater the
professionalization of the job, the less likely it is to be highly formalized. Yet there are obvious exceptions
(public accountants, lawyers). Formalization also differs with the level of the employee or manager and
the work of their department, it is inversely related to the level of organisation.
Why is formalization important?

-
Standardizing behavior reduces variability

The same standards of service can be provided every time, everywhere
Products can flow smoothly down the assembly line
Permits members of the organisation to anticipate how others will act in certain situations and
lay down guidelines to follow
The greater the formalization, the less discretion is required from the job incumbent
low pay
Reduce amount of risk arising from the actions of any one person
Formalization techniques
External formalization = hiring employees that are professional and have extensive formalization.

Selection
Even though there is a comprehensive body of laws to eliminate discrimination against target groups in
hiring, this still leaves a fair amount of discretion as to who to hire. Interviewers will always be looking at
the ability of a person to fit into the organization and reflect its values as one of the prime requirements
for selection.
Role requirements
Individuals in organisations fulfill roles. Every job carries with it task requirement and expectations about
how the incumbent is supposed to behave. Role requirements may be explicit and defined in great
detail; in such cases the degree of formalization is high. When the individual is free to react to situations
in unique ways, the formalization is low.
Rules, procedures and policies
Rules = explicit statements that tell an employee what he or she ought or ought not to do. They generally
leave no room for employee judgment or discretion.
Procedures = a series of interrelated sequential steps that employees follow in the accomplishment of
their task. These insure standardization of work processes.
Policies = guidelines that set constraint on decisions that employees make. They are largely developed to
guide and regulate behavior in situations where it is difficult or impossible to define the problem to be
faced. Policies leave greater discretion for decision makers than do rules. Policies provide parameters
which guide decision making.
Socialization
Socialization refers to an adaption process by which individuals absorb the values, norms and expected
behavior patterns for the job and the organisation of which they will be part. This may be likened to
learning the organisations culture. Most processes of socialization happen on the job due to
observation, behavior modification and interaction with existing members.
Training
Many organisations provide training for employees to instil in employees preferred work behavior and
attitudes. Development programs and apprenticeship methods are used to teach employees preferred
job skills, knowledge and attitude. It includes both on-the job as off-the-job varieties. The aim is to
reduce variability in the behavior of organisational members.
Rituals
In business organisations rituals are essentially communal activities which bring people and groups
together. Rituals are processes by which members prove their trustworthiness and loyalty to the
organisation by participating in various behaviors in which predetermined responses are expected.
(Christmas parties, informal lunches etc.)
CENTRALIZATION
Definition
Most organisational theorist agree that the term centralization refers to the degree to which decision
making is concentrated at a single point in the organisation, usually top management. The term
decentralization is often used where decision making is widely dispersed within the organisation.

Centralization is only concerned with the formal structure, not the informal organisation.
Centralization looks at decision discretion. Where decisions are delegated downwards but
extensive policies exist to constrain the discretion of lower level members, there is increased
centralization. Policies can act to override decentralization.
Concentration at a single point can refer to an individual, a unit or a level, but the single pint
implies concentration at a high level.
Information processing can extend top management control, but the decision choice may still lie
with the low-level member.
The transference of all information requires interpretation. The filtering that occurs as
information passes up and down through layers of management is a fact of life. Control of
information input is a form of de-facto decentralization and is a highly political activity.
Management decisions are centralized if concentrated at the top, but more the information
input to those decisions is filtered through others, the less concentrated, controlled and well
informed are the decisions.
Why is the Centralization-Decentralization Issue Important?

Decision making and information processing are central to the coordination process. Yet information
itself is not a scarce resource in organisations. The scarce resource is the processing capacity and
knowledge to make the best use of information.
Reasons to decentralize
- To avoid reaching the point where a managers capacity is exceeded.
- Facilitates speedy action because it avoids the need to process the information through vertical
hierarchy. This will help the organisation to adapt to fast changing conditions in the
environment.
- Provide more detailed input into the decision. If those familiar with an issue make a decision,
they are more likely to discriminate between relevant and irrelevant information.
- Can act as motivator to employees by allowing them to participate in the decision-making
process.
- Creates training opportunity for lower-level managers. By delegating authority, top management
permits less experienced managers to learn by doing.
There are of course conditions under which centralization is preferred. When a comprehensive
perspective is needed in a decision or where concentration provides significant economies, centralization
offers distinct advantages.
- Top-level managers are in a better position to make strategic decisions. This will make sure the
decision will benefit the whole organisation rather than a special-interests group.
- Certain activities are clearly carried out more efficiently when centralized. (Finance, Legal)
- When an organisation is under threat
COORDINATION
= the process of integrating he objectives and activities of the separate units of an organisation in order
to achieve organisational goals efficiently.
All organisations require coordination between the various individuals and groups. When complexity
increases, so does the need to coordinate the activities of the various organisational members. Where
adequate coordination is absent, efficiency is lost.

Coordination Devices
- Programmed coordination = rules and regulations characterizing a bureaucracy; common
management techniques such as planning, goal setting, scheduling, sequencing and developing
various types of standard operating procedures; and planning in detail how to move towards a
goal.
- Individual coordination = the appointment of a person whose main task is to coordinate the work
of others. Used where situations cannot be fully anticipated or where unusual circumstances
demand a unique solution to a problem (project management etc.). Coordination by hierarchy is
also part of individual coordination.
- Informal coordinating = voluntary action of those who need to cooperate with others (mutual
adjustment.
ORGANISATION DESIGN OPTIONS

Configuration = a complex clustering of elements that are internally cohesive and where the presence of
some elements suggests the reliable occurrence of others.
Common elements in organisations

Mintzberg argues that there are five basics parts to any organisation
- Operating core = employees, who perform the basic work related to the production of products
and services.
- Strategic apex = top-level managers who are charged with the overall responsibility for the
organisation
- Middle line = managers who connect the operating core to the strategic apex
- Technostructure = analysts who have the responsibility for developing the programs, procedures
and rules which standardize the work of the organisation.
- Support staff = people who fill the staff units that provide indirect support services for the
organisation.
Any of these five parts can dominate an organisation and where each dominate a different
organisational form emerges. There are five distinct design configurations and each one is associated
with the domination by one of the five basic parts.
The Simple Structure (Strategic apex)

= low in complexity, has little formalization and has authority centralized in one person.
Strengths and weaknesses
Weaknesses
Strengths
- Applicable only to small organisations
- Decision making is fast
- Simple structure concentrates power in
- Flexible operations that require little cost
one person abuse of authority
- No layers of cumbersome structure
- Accountability is clear
- Minimum amount of goal ambiguity (clear goals)
- Easy to see how ones actions contribute to the
- organisations goals
When should you use it?
- When the number of employees is small, informal communication is generally effective and the
cost of administration low. As long as the structure remains small, one person can effectively

oversee all activities, be knowledgeable about the key problems and make all important
decisions.
In the formative years of an organisation.
When an organisation suddenly confront a hostile environment, management is likely to resort
to at least one feature of the simple structure: centralized decision making.
Managers who want to acquire maximum power, because it is an excellent vehicle for
concentrating power in a single place.
Machine Bureaucracy (Technostructure)

= has highly routine operating tasks that are grouped into functional departments, formalized rules and
regulations, centralized authority and decision making that follows the chain of command. It also has a
lot of people whose job it is to standardize the work of the organisation.
Strengths
- Performs standardized activities in a highly efficient manner
- Can get by with less talented, cheaper,
middle and lower level managers and
Weaknesses
operatives
- Specialisation creates subunit conflicts.
- Obsessive concern with following rules
Unresponsive to enviroment
- When matched with large size, a stable
environment and a technology that permits
standardized, routine work.
- Mass production firms, service organisations, government agencies, organisations that have
special safety needs
Divisional Structure (Middle Management)

= set of autonomous self-contained units, each typically configures as a machine bureaucracy, controlled
by a central headquarters. The dominant part of the divisional structure lies with middle management.
The term middle-managers represents chief executives in the context of divisional structure. They are
answerable to senior managers and supervise lower level managers.
Each division is generally autonomous, with the divisional managers responsible for its performance. The
divisional managers generally hold major strategic decision-making authority in relation to their
business. This form has also has a central head office which typically includes financial, legal and tax
services.
Strengths
- Provides clear accountability and responsibility for the performance of each division.
- It frees head office staff from involvement with the day-to-day operating details so they can pay
attention to the long terms
- Structures provides the training and developing of general managers
- As each division is autonomous, it can be sold or disposed with minimal effect on the entire
organisation. (Other way around)

Weaknesses
- The duplication of activities and resources, raises costs and reduces efficiency
- Propensity of the divisional form to make cooperation between divisions difficult
- The autonomy of the divisions can breed resentment in the division managers
Creates coordination problem
- When you want to achieve product or market diversity because this causes more complex
organisations
Size increase (complexity increases)
- When an organizations technical system can efficiently be divided into segments, one for each
division
- Environment that is neither very complex nor very dynamic
Professional Bureaucracy (Analysts)

= decentralized configuration in which highly trained specialists form the operating core but where the
benefits of standardization and decentralization are still achieved. This means highly skilled
professionals, high complexity, decentralization and the use of internalized professional standards in
place of external formalization.
Strengths
- It can perform specialized tasks those that require the skills of highly trained professionals
with the same relative efficiency as the machine bureaucracy.
Weaknesses
- Tendency for subunit conflicts to develop because various professional functions seek to pursue
their own narrow objective, placing self-interest above the organisations.
- The specialists are often constrained by the rules of their profession, this means then cant be
managed in the same way as employees in other structural configurations.
- Difficult to coordinate the work of the various professionals.
- It is difficult to set strategic priorities, because it has no clear strategic apex.
- When matched with a complex and stable environment
Adhocracy (Support Staff)

= decentralized form which is characteristic by high horizontal differentiation, low vertical
differentiation, low formalization, intensive coordination and great flexibility and responsiveness. Groups
of teams that have few rules, regulations or standardized routines.
Horizontal differentiation is high because adhocracies are staffed predominantly by professionals with a
high level of expertise.
Vertical differentiation is low because the many levels of administration would restrict the organisations
ability to adapt.
The need for supervision is reduced because professionals have internalized behaviors.
Coordination is quite extensive as it is important for tasks to be carried out in the correct way.

Decision making is decentralized because it is necessary for speed and flexibility and because senior
management cannot be expected to possess the expertise needed to make all decisions.
Strengths and Weaknesses
Strengths
- Able to respond rapidly to change and innovation and to facilitate the coordination of diverse
specialists.
Weaknesses
- Conflict due to no clear boss-subordinates relationships
- Can create social stress and psychological tension for members because of rapid change of
teams etc.
Factors that determine whether adhocracy is effective:
- Strategy
- Technology
- Environment
- Life stage
Adhocracy is associated with strategies of diversity, change, complexity and/or high risk. Such strategies
demand the flexibility inherent of adhocracy.
The technology will contain little formalization, which will make it complex. This requires coordination
and integration of specialized skills.
The adhocracys environment will be dynamic and complex, this also requires intense coordination.
Small, innovative firms are often adhocracies. His is because they need flexibility as they attempt to
identify a market niche and determine precisely how gals are to be attained.
Chapter 5
Strategy is an imperative, which means it is a variable that dictates structure. Strategy remains one of
the fundamental influences on the way organisations are managed. The following research and theorybuilding has been carried out on profit-seeking organisations!
What is strategy?
Strategy (Chandler) = the determination of the basic 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.
Goals must be accompanied by a plan of implementation if they are to be of any use.
Strategic decisions = the general purpose and direction of the enterprise and the methods by which they
will be achieved.
Tactical decisions = the day-to-day decisions associated with implementing plans and operating the
enterprise.
Goals and strategy may not be seen as the same thing. Goals refer to ends: what we wish to achieve by a
certain point in time. Strategy refers to both means and ends, that is, where we wish to be at some point
in the future and how we intend to get there. Not all goals have strategic implications and are not
relevant when the structural implications of strategy are considered.

Two approaches to determine strategy

- Planning mode: views strategy as the outcome of a rational deliberate process, as a plan or
explicit set of guidelines developed in advance.
- Sees strategy as emerging from a string of minor incremental decisions
Problems with the planning mode:
- Environments are never stable, competitors rarely predictable and strategy can change with the
fortunes of the various factions constantly jostling for influence within the organisation.
- What managers say they are trying to achieve and what plans they have in their head may be
two different things.
Evolutionary mode = it views strategy as a stream of significant decisions evolving over time. It takes into
account occurrences as unexpected opportunity, the changing perceptions if the board etc.
Bounded rationality = the situation where human mind has difficulty in grasping a situation because of its
complexity. The decision maker does not have perfect knowledge of all variables.
Decisions makers will therefore stop searching for an alternative as soon as the minimum requirements
for a decision are being met.
Decisions are the outcomes of four partially dependent streams: a stream of problems, a stream of
potential solutions, a stream of participants and a streams of solutions. These formed a garbage can into
which numerous participants had contributed various problems and solutions. (Cohen, March, Olsen)
One way of viewing the determination of strategy is that the overall direction of the organisation is set
by the planning mode but the evolutionary mode is often used in response to short-term opportunities
and threats.
Levels of strategy
Organisations that are in multiple businesses need to develop different strategies for different levels of
activities. Thus, it is necessary to differentiate between corporate-level and business-level strategies.
Corporate level strategy = attempt to define the nature of the businesses in which the firm seeks to
operate. Needed if an organisation is in more than one line of business. It determines the roles that each
business in the organisation will play, which will receive funds for expansion and which will be divested.
Business level strategy = strategies adapted by business units of the organisation. How should we
compete in each of our businesses? For small businesses in only one line of activity and the large
organisation that has avoided differentiation, business-level is the same as corporate strategy. Yet for
organisations in multiple businesses, each division will have its own strategy that defines the products of
services it will offer etc.
The beginnings Chandlers strategy-structure thesis
A new strategy required a new or at least refashioned structure if the enlarged enterprise was to be
operated efficiently unless structure follows strategy, inefficiency results.

Growth and diversification give rise to the need for a multidivisional structure, with each division having
its own management and a fair degree of autonomy. Highly centralized structure becomes inefficient
and impractical for dealing with the significantly greater complexity.
Chandler argued organisations typically begin as single-product organisations. The simplicity of this
strategy is compatible with a simple structure or a machine bureaucracy, depending on the size of the
company. The efficient structure for an organisation with a single-product strategy is one that is simple
high centralization, low formalization and low complexity.
As a firm moved to a multiproduct strategy, it adopted a divisionalised structure. This vertical integration
strategy makes for increased interdependence among organisational units and creates the need for
more complex coordinating devices. This desired complexity is achieved by redesigning the structure to
form specialized units based on the functions performed.
Finally if growth proceeds further into product diversification, structure must again be adjusted if
efficiency is to be achieved. A product-diversification strategy demands a structural form that permits
the efficient allocation of resources, accountability for performance and coordination between units.
This can best be achieved through the creation of a multiple set of independent divisions, each
responsible for a specified product line.
The research
Faults in Chandlers study
- Chandler only looked at very large and successful industrial business firms which dominated
their industries. Whether his findings would be applicable to other organisations could not be
answered from this sample.
Chandlers sample was composed of companies that were prominent in the new technological
waves. Further companies in the emerging technologies lent themselves to large size, partly to
achieve economies of scale.
- When Chandler used the term strategy, he really meant growth strategy. Growth was his
major concern, not profitability or survival.
- There is always the problem of generalizing from one point to another. Further research is
required to determine whether his thesis holds for firms established at different times or in
different countries.
Summarising Chandlers contribution
Chandlers claim that strategy influences structure seems well supported, but this support must be
qualified by the difficulty involved in generalizing his conclusions to a wider population of companies. His
definition of strategy, based on product differentiation is far from all-inclusive. Also Chandlers analysis
refers only to one phase of industrial expansion, and its applicability to current industrial experience and
technologies may be limited.
Contemporary strategy structure theories
Miles and Snows four strategic types
Four types based on rate at which they change their products or markets (Miles and Snow)
- Defenders
- Prospectors
- Analyzers
- Reactors

Defenders
Organisations that seek stability by producing only a limited a limited set of products directed at the
narrow segment of the total potential market. Within this limited domain, defenders strive aggressively
to prevent competitors from taking market share or customers from them. There is little or no scanning
of the environment to find new areas of opportunity but there is intensive planning oriented towards
cost and other efficiency issues. The result is a structure made up of high horizontal differentiation with
highly specialized tasks, centralized control and decision making, and an elaborate formal hierarchy for
communications and coordination.
Prospectors
Organisations whose strategy is to find and exploit new product and market opportunities. Innovation
may be more important than high profitability. The prospectors 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 research. As flexibility is critical to prospectors, the structure will
also be flexible. It will rely on multiple technologies that have a low degree of routinisation and
standardization. There will be numerous decentralized units. The structure will be low in formalization
and have decentralized control.
Analyzers
Organisations whose strategy is to move into new products or markets only after their viability has been
proven. They attempt to minimize risk by adopting innovations after they have been proven by others.
Analyzers live by imitation. They take the successful ideas of prospectors and copy them or take them
over and greatly expand their production. Analyzers must have the ability to respond to the lead of key
prospectors, yet at the same time maintain operating efficiency in their stable product and market areas.
They also must have high margins to justify the risks that they take and to cover their productive
inefficiencies. Analyzers seek both flexibility and stability. Parts of these organisations have high levels of
standardization, routinisation and automation to attain efficiencies. But they are flexible to introduce
new product lines.
Reactors
A residual strategy that describes organisations that follow inconsistent and unstable patterns that arise
when one of the other three strategies is pursued improperly. In general, reactors respond
inappropriately, perform poorly and, as a result, are reluctant to commit themselves aggressively to a
specific strategy for the future.
See table 5.1, page 159
See figure 5.5, page 159
Porters competitive strategies
Micheal Porter argues that no firm can successfully perform at an above-average level by trying to be all
things to all people. Management must select a strategy that will give its organisation a competitive
advantage. There are three categories.
- Cost leadership
- Differentiation
- Focus
Cost leadership strategy aims to achieve the lowest cost within the industry. Success with this strategy
requires that the organisation be the cost leader and not merely one of the contenders for that position.

Also, the product or service being offered must be perceived as comparable to that offered by rivals, or
at least acceptable to buyers.
Differentiation strategy aims to achieve a unique position in an industry in ways that are widely valued
by buyers. It might emphasize on high quality, extraordinary service, innovative design etc. The key is
that the attribute chosen must be different from those offered by rivals and significant enough to justify
a price premium that exceeds the cost of differentiation.
Focus strategy aims at cost advantage or differentiation advantage in a narrow segment. Management
will select a segment or group of segments in an industry and tailor the strategy to serve this segment to
the exclusion of others. The goal is to exploit a narrow segment of the market.
Stuck in the middle = organisations that are unable to gain a competitive advantage through one of
various strategies. Such organisations will have great difficulty achieving long-term success. When they
do it is usually a result of competing in a highly favorable industry characterized by plentiful resources, or
having their rivals similarly stuck in the middle.
See table 5.2, page 164.
Strategy and globalization
What makes globalization a challenge for companies entering overseas markets is that it introduces a
whole new set of complexities to their operations. Different countries exhibit variations in taste,
customs, practices and legal systems, as well as industry structures and technical sophistication.
Barlett and Ghoshal claim that the strategy adopted when entering overseas markets depends on the
interaction of cost pressures (firms must work hard to reduce costs) found in the market with the
pressures for local responsiveness (products must be altered in some way to suit local taste). They
propose four strategies.
-
International strategy requires firms to transfer valuable skills and product knowledge to
overseas markets. Some customization may take place for local markets. Research and
development is centralized in the home market, but manufacturing, distribution and marketing is
carries out locally.
Multidomestic strategy 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.
Global strategy is adopted where a product can be sold in most markets with very little
modification. Firms work very hard at lowering the costs by locating activities where they make
the 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.
Transnational strategy attempt to achieve maximum local responsiveness while achieving

worldwide economies of scale. It is very rare. Experience is spread out throughout the
organisation regardless of its origins, and firms are considered stateless with no obvious country
or location.


Limitations to the strategy imperative
Once an organisation establishes is strategy it must adopt a structure which leads to the successful
implementation of the strategy.
Few argue that strategy cannot determine structure because of doubts about the amount of discretion
that managers actually have in determining strategy. Once established, basic strategies change very
rarely because any changes lead to major organisational upheaval. So the influence of strategy upon
structure would be greater in the early development period of an organisation. Once a firm becomes
established, managers may be severely restricted in their discretion. Organisations cannot easily change
their basic technologies.
When managers implement a new strategy, there is often no immediate change in structure. Yet
advocates of a strong strategy-structure relationship believe this doesnt prove strategy doesnt follow
structure. They point out that there is often a time lag between a change in strategy and the emergence
of a new structure. If researchers fail to find a strategy-structure relationship they can always claim that
there is a lag and that structure hasnt caught up yet. Yet some organisations are indeed slower to adapt
their structures to changing strategies. The less competition, the slower the adaption.
Strategy does not exist independently of other influences on organisational structure such as technology
and environment.
Applicability of the strategy imperative
Strategy-structure relationship may only be valid for the top layers of structure, particularly in large
organisations. The daily work of the organisation for lower level managers and workers continues in
much the same way regardless of the strategy adopted. There are exceptions of course.
Could strategy follow structure?
Structure may limit strategic choices and channel strategy in certain directions. Structure can motivate or
impede strategic activities as well as simply constrain strategic choices. Power holders are always
reluctant to reduce their power and one of the best ways to preserve it is to resist any change to an
organisations structure. As a consequence, although strategies may change to adapt to emerging
circumstances, structure will lag because of political consideration.
Any company of long standing has legacy systems; established ways of doing things, often reflected in
rules and regulations and standard operating procedures. These take time to establish and once in place
channel thinking into predetermined patterns. Strategy becomes a projection of past actions based on
what the organisation can structurally achieve.
The industry structure relationship
There are distinguishing characteristics of industries that affect the strategies the will choose. As a result,
strategy may be merely an intermediate step between the unique characteristics of the industry in which
the organisation operates and the structure it implements to achieve alignment.
Industry categories do influence structure. While there are certainly intra-industry differences there is a
high degree of similarity whiting industry categories. These similarities lead to strategies that tend to
have largely common elements and, in turn, these result in structural characteristics that are very
similar.

The power of combinations the strategy of industrial networks

In many cases networks of companies as well as individual companies, implement strategies. Also
strategies of individual companies are both shaped and constrained by other companies with which they
have close and ongoing mutual dependencies.
Different forms of networks and strategic alliances
- Dominant company which clearly leads a group of subcontractors
- No leading company or project leader to offer direction or control (Clusters)
- Strategic alliance, two or more companies which cooperate in a venture by each contributing
their distinctive skills while maintaining their independence. Formalized.
Looking at individual companies and their strategies in the networks or clusters provide an incomplete
picture of what is actually being produced. The success of any individual company largely depends on the
success of the network or the cluster.
Through specialization, companies can reduce their organisational complexity by narrowing the range of
products they produce. They can achieve greater effectiveness from their research and development
efforts, and probably be more innovative, by knowing their product in greater detail. Consequently they
enjoy the benefits of simpler, less complex structures with smaller investment in coordination devices.
Chapter 6
Strategy is an imperative, which means it is a variable that dictates structure. Strategy remains one of
the fundamental influences on the way organisations are managed. The following research and theorybuilding has been carried out on profit-seeking organisations!
What is strategy?
Strategy (Chandler) = the determination of the basic 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.
Goals must be accompanied by a plan of implementation if they are to be of any use.
Strategic decisions = the general purpose and direction of the enterprise and the methods by which they
will be achieved.
Tactical decisions = the day-to-day decisions associated with implementing plans and operating the
enterprise.
Goals and strategy may not be seen as the same thing. Goals refer to ends: what we wish to achieve by a
certain point in time. Strategy refers to both means and ends, that is, where we wish to be at some point
in the future and how we intend to get there. Not all goals have strategic implications and are not
relevant when the structural implications of strategy are considered.
Two approaches to determine strategy
- Planning mode: views strategy as the outcome of a rational deliberate process, as a plan or
explicit set of guidelines developed in advance.
- Sees strategy as emerging from a string of minor incremental decisions
Problems with the planning mode:
- Environments are never stable, competitors rarely predictable and strategy can change with the
fortunes of the various factions constantly jostling for influence within the organisation.

What managers say they are trying to achieve and what plans they have in their head may be
two different things.
Evolutionary mode = it views strategy as a stream of significant decisions evolving over time. It takes into
account occurrences as unexpected opportunity, the changing perceptions if the board etc.
Bounded rationality = the situation where human mind has difficulty in grasping a situation because of its
complexity. The decision maker does not have perfect knowledge of all variables.
Decisions makers will therefore stop searching for an alternative as soon as the minimum requirements
for a decision are being met.
Decisions are the outcomes of four partially dependent streams: a stream of problems, a stream of
potential solutions, a stream of participants and a streams of solutions. These formed a garbage can into
which numerous participants had contributed various problems and solutions. (Cohen, March, Olsen)
One way of viewing the determination of strategy is that the overall direction of the organisation is set
by the planning mode but the evolutionary mode is often used in response to short-term opportunities
and threats.
Levels of strategy
Organisations that are in multiple businesses need to develop different strategies for different levels of
activities. Thus, it is necessary to differentiate between corporate-level and business-level strategies.
Corporate level strategy = attempt to define the nature of the businesses in which the firm seeks to
operate. Needed if an organisation is in more than one line of business. It determines the roles that each
business in the organisation will play, which will receive funds for expansion and which will be divested.
Business level strategy = strategies adapted by business units of the organisation. How should we
compete in each of our businesses? For small businesses in only one line of activity and the large
organisation that has avoided differentiation, business-level is the same as corporate strategy. Yet for
organisations in multiple businesses, each division will have its own strategy that defines the products of
services it will offer etc.
The beginnings Chandlers strategy-structure thesis
A new strategy required a new or at least refashioned structure if the enlarged enterprise was to be
operated efficiently unless structure follows strategy, inefficiency results.
Growth and diversification give rise to the need for a multidivisional structure, with each division having
its own management and a fair degree of autonomy. Highly centralized structure becomes inefficient
and impractical for dealing with the significantly greater complexity.
Chandler argued organisations typically begin as single-product organisations. The simplicity of this
strategy is compatible with a simple structure or a machine bureaucracy, depending on the size of the
company. The efficient structure for an organisation with a single-product strategy is one that is simple
high centralization, low formalization and low complexity.
As a firm moved to a multiproduct strategy, it adopted a divisionalised structure. This vertical integration
strategy makes for increased interdependence among organisational units and creates the need for

more complex coordinating devices. This desired complexity is achieved by redesigning the structure to
form specialized units based on the functions performed.
Finally if growth proceeds further into product diversification, structure must again be adjusted if
efficiency is to be achieved. A product-diversification strategy demands a structural form that permits
the efficient allocation of resources, accountability for performance and coordination between units.
This can best be achieved through the creation of a multiple set of independent divisions, each
responsible for a specified product line.
The research
Faults in Chandlers study
- Chandler only looked at very large and successful industrial business firms which dominated
their industries. Whether his findings would be applicable to other organisations could not be
answered from this sample.
Chandlers sample was composed of companies that were prominent in the new technological
waves. Further companies in the emerging technologies lent themselves to large size, partly to
achieve economies of scale.
- When Chandler used the term strategy, he really meant growth strategy. Growth was his
major concern, not profitability or survival.
- There is always the problem of generalizing from one point to another. Further research is
required to determine whether his thesis holds for firms established at different times or in
different countries.
Summarising Chandlers contribution
Chandlers claim that strategy influences structure seems well supported, but this support must be
qualified by the difficulty involved in generalizing his conclusions to a wider population of companies. His
definition of strategy, based on product differentiation is far from all-inclusive. Also Chandlers analysis
refers only to one phase of industrial expansion, and its applicability to current industrial experience and
technologies may be limited.
Contemporary strategy structure theories
Miles and Snows four strategic types
Four types based on rate at which they change their products or markets (Miles and Snow)
- Defenders
- Prospectors
- Analyzers
- Reactors
Defenders
Organisations that seek stability by producing only a limited a limited set of products directed at the
narrow segment of the total potential market. Within this limited domain, defenders strive aggressively
to prevent competitors from taking market share or customers from them. There is little or no scanning
of the environment to find new areas of opportunity but there is intensive planning oriented towards
cost and other efficiency issues. The result is a structure made up of high horizontal differentiation with
highly specialized tasks, centralized control and decision making, and an elaborate formal hierarchy for
communications and coordination.
Prospectors
Organisations whose strategy is to find and exploit new product and market opportunities. Innovation
may be more important than high profitability. The prospectors 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 research. As flexibility is critical to prospectors, the structure will
also be flexible. It will rely on multiple technologies that have a low degree of routinisation and
standardization. There will be numerous decentralized units. The structure will be low in formalization
and have decentralized control.
Analyzers
Organisations whose strategy is to move into new products or markets only after their viability has been
proven. They attempt to minimize risk by adopting innovations after they have been proven by others.
Analyzers live by imitation. They take the successful ideas of prospectors and copy them or take them
over and greatly expand their production. Analyzers must have the ability to respond to the lead of key
prospectors, yet at the same time maintain operating efficiency in their stable product and market areas.
They also must have high margins to justify the risks that they take and to cover their productive
inefficiencies. Analyzers seek both flexibility and stability. Parts of these organisations have high levels of
standardization, routinisation and automation to attain efficiencies. But they are flexible to introduce
new product lines.
Reactors
A residual strategy that describes organisations that follow inconsistent and unstable patterns that arise
when one of the other three strategies is pursued improperly. In general, reactors respond
inappropriately, perform poorly and, as a result, are reluctant to commit themselves aggressively to a
specific strategy for the future.
See figure 5.5, page 159
Porters competitive strategies
Micheal Porter argues that no firm can successfully perform at an above-average level by trying to be all
things to all people. Management must select a strategy that will give its organisation a competitive
advantage. There are three categories.
- Cost leadership
- Differentiation
- Focus
Cost leadership strategy aims to achieve the lowest cost within the industry. Success with this strategy
requires that the organisation be the cost leader and not merely one of the contenders for that position.
Also, the product or service being offered must be perceived as comparable to that offered by rivals, or
at least acceptable to buyers.
Differentiation strategy aims to achieve a unique position in an industry in ways that are widely valued
by buyers. It might emphasize on high quality, extraordinary service, innovative design etc. The key is
that the attribute chosen must be different from those offered by rivals and significant enough to justify
a price premium that exceeds the cost of differentiation.
Focus strategy aims at cost advantage or differentiation advantage in a narrow segment. Management
will select a segment or group of segments in an industry and tailor the strategy to serve this segment to
the exclusion of others. The goal is to exploit a narrow segment of the market.

Stuck in the middle = organisations that are unable to gain a competitive advantage through one of
various strategies. Such organisations will have great difficulty achieving long-term success. When they
do it is usually a result of competing in a highly favorable industry characterized by plentiful resources, or
having their rivals similarly stuck in the middle.
See table 5.2, page 164.
Strategy and globalization
What makes globalization a challenge for companies entering overseas markets is that it introduces a
whole new set of complexities to their operations. Different countries exhibit variations in taste,
customs, practices and legal systems, as well as industry structures and technical sophistication.
Barlett and Ghoshal claim that the strategy adopted when entering overseas markets depends on the
interaction of cost pressures (firms must work hard to reduce costs) found in the market with the
pressures for local responsiveness (products must be altered in some way to suit local taste). They
propose four strategies.
-
International strategy requires firms to transfer valuable skills and product knowledge to
overseas markets. Some customization may take place for local markets. Research and
development is centralized in the home market, but manufacturing, distribution and marketing is
carries out locally.
Multidomestic strategy 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.
Global strategy is adopted where a product can be sold in most markets with very little
modification. Firms work very hard at lowering the costs by locating activities where they make
the 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.
Transnational strategy attempt to achieve maximum local responsiveness while achieving

worldwide economies of scale. It is very rare. Experience is spread out throughout the
organisation regardless of its origins, and firms are considered stateless with no obvious country
or location.

Limitations to the strategy imperative
Once an organisation establishes is strategy it must adopt a structure which leads to the successful
implementation of the strategy.
Few argue that strategy cannot determine structure because of doubts about the amount of discretion
that managers actually have in determining strategy. Once established, basic strategies change very
rarely because any changes lead to major organisational upheaval. So the influence of strategy upon
structure would be greater in the early development period of an organisation. Once a firm becomes
established, managers may be severely restricted in their discretion. Organisations cannot easily change
their basic technologies.

When managers implement a new strategy, there is often no immediate change in structure. Yet
advocates of a strong strategy-structure relationship believe this doesnt prove strategy doesnt follow
structure. They point out that there is often a time lag between a change in strategy and the emergence
of a new structure. If researchers fail to find a strategy-structure relationship they can always claim that
there is a lag and that structure hasnt caught up yet. Yet some organisations are indeed slower to adapt
their structures to changing strategies. The less competition, the slower the adaption.
Strategy does not exist independently of other influences on organisational structure such as technology
and environment.
Applicability of the strategy imperative
Strategy-structure relationship may only be valid for the top layers of structure, particularly in large
organisations. The daily work of the organisation for lower level managers and workers continues in
much the same way regardless of the strategy adopted. There are exceptions of course.
Could strategy follow structure?
Structure may limit strategic choices and channel strategy in certain directions. Structure can motivate or
impede strategic activities as well as simply constrain strategic choices. Power holders are always
reluctant to reduce their power and one of the best ways to preserve it is to resist any change to an
organisations structure. As a consequence, although strategies may change to adapt to emerging
circumstances, structure will lag because of political consideration.
Any company of long standing has legacy systems; established ways of doing things, often reflected in
rules and regulations and standard operating procedures. These take time to establish and once in place
channel thinking into predetermined patterns. Strategy becomes a projection of past actions based on
what the organisation can structurally achieve.
The industry structure relationship
There are distinguishing characteristics of industries that affect the strategies the will choose. As a result,
strategy may be merely an intermediate step between the unique characteristics of the industry in which
the organisation operates and the structure it implements to achieve alignment.
Industry categories do influence structure. While there are certainly intra-industry differences there is a
high degree of similarity whiting industry categories. These similarities lead to strategies that tend to
have largely common elements and, in turn, these result in structural characteristics that are very
similar.
The power of combinations the strategy of industrial networks
In many cases networks of companies as well as individual companies, implement strategies. Also
strategies of individual companies are both shaped and constrained by other companies with which they
have close and ongoing mutual dependencies.
Different forms of networks and strategic alliances
- Dominant company which clearly leads a group of subcontractors
- No leading company or project leader to offer direction or control (Clusters)
- Strategic alliance, two or more companies which cooperate in a venture by each contributing
their distinctive skills while maintaining their independence. Formalized.

Looking at individual companies and their strategies in the networks or clusters provide an incomplete
picture of what is actually being produced. The success of any individual company largely depends on the
success of the network or the cluster.
Through specialization, companies can reduce their organisational complexity by narrowing the range of
products they produce. They can achieve greater effectiveness from their research and development
efforts, and probably be more innovative, by knowing their product in greater detail. Consequently they
enjoy the benefits of simpler, less complex structures with smaller investment in coordination devices.
Chapter 7
DEFINING TECHNOLOGY
Technology = the information, equipment, techniques and processes required to transform inputs into
outputs in an organisation. Technology look at how the inputs are converted into outputs.
Problem: Given the wide diversity of organisations and what they do, how is it possible to measure
technology?
Technology Classifications
- Work-flow activities
- Characteristics of materials used in the work flow
- The degree of continuous, fixed-sequence operations
- The extent of automation
- The degree of interdependence between work systems
We lack the precision to create a universal and generalized measure of technology. There have been a
number of landmark contributions linking technology to various aspects of organisational structure. The
four studies that are going to be described take very different perspectives on technology, but they will
give you the basics of understanding what we know about how technology affects structure.
THE INITIAL THRUST: WOODWARDS RESEARCH (mid-1960s)

Background
Joan Woodwards study is only applicable to manufacturing industries. She chose 100 manufacturing
firms in the south of England. The data she gathered allowed her to compute various measures of
structure: the number of hierarchical levels, the span of control, the administrative component, the
extent of formalization and he like. She also gathered financial data on each firm which allowed her to
classify the companies as above-average or below-average in terms of success or organisational
effectiveness. Her goal was to answer the question: is there a correlation between structural form and
effectiveness? Her proposition was that there is one optimum form of organisational structure that
contributes to organisational effectiveness.
Her efforts to link common structures to effectiveness where unsuccessful. The structural diversity
among the firms was so great that is was impossible to establish any relationship or draw any valid
conclusion. It was after Woodward had grouped the firms according to their typical mode of production
technology that relationships between structure and effectiveness became apparent.
Woodward categorized the firms in three types of technologies
- Unit production technology where units are custom-made and work is non-routine
- Mass production large-batch or mass-produced technology (basically routine in nature)

Process production highly controlled, standardized and continues processing technology

(routine)
Woodwards findings
Woodward found that there were distinct relationships between these technology classifications and the
subsequent structure of the firms, and that the effectiveness of the organisation was related to the fit
between technology and structure. She also found that when technological complexity increased, so did
the proportion of administrative and support staff personnel as distinct from those actually involved in
the production process.
A careful analysis of her findings led Woodward to conclude that for each category on the technology
scale and for each structural component, there was an optimal range around the median point that
encompassed the positions of the more effective firms. (See Table 7.1, page 215)
Evaluation
Edward Harvey was an early advocate of Woodward. He believed that more specific technologies
present fewer problems requiring new or innovative solutions than do more diffuse or complex
technologies. So he took 43 different industrial organisations and rated them as technically diffuse (unit
production), technically intermediate (mass production) and technically specific (process production).
Harvey found a relationship between technical specificity and structure which was consistent with
Woodwards findings.
Woodwards findings were also supported in another study of manufacturing firms. The researcher, like
Woodward, found no evidence of such a thing as a universally optimum structural form. His data
constituted strong evidence to confirm Woodwards claim that unit, mass and process production result
in different structural forms and that proper fit within categories increases effectiveness.
Yet criticism has also been made about Woodwards study. Her measure of technology has been
criticized as unreliable. Her methodology may lead to differing conclusions being drawn. Het measures of
organisational success may be criticized as lacking rigour. And finally, as her firms were all British firms,
generalization to all organisations must be guarded.
KNOWLEDGE-BASED TECHNOLOGY: PERROWS CONTRIBUTION

Background
Perrow concentrated on knowledge technology rather than production technology. He defined
technology as the action that an individual performs upon an object, with or without the aid of tools or
mechanical devices, in order to make some change in that object. He then proceeded to identify what
he believed to be the two underlying dimensions of knowledge technology:
- Task variability the number of exceptions encountered in performing a task. These exceptions
will be few in numbers if the job is high in predictability.
- Problem analyzability the type of search procedures followed to find successful methods for
adequately responding to task exceptions, from well-defined and analyzable to ill-defined and
unanalyzable.
These two dimensions can be used to construct a two-by-two matrix (see figure 7.1, page 218) The four
cells in this matrix represent four types of technology:
- Routine Technologies containing few exceptions and easy-to-analyze problems.
- Engineering Technologies containing a large number of exceptions, but can be handles in a
rational and systematic manner.
- Craft Technologies containing relatively difficult problems but with limited set of exceptions.

Non-routine technologies containing many exceptions and difficult-to-analyze problems.
Perrow also proposed that task variability and problem analyzability were positively correlated. It would
be unusual to find instances where tasks had very few exceptions and search was clearly unanalyzable or
where tasks had a great many exceptions and search was well defined and easily analyzable. (See table
7.2, page 219)
Perrow argued that control and coordination methods should vary with technology type. The more
routine the technology, the more highly structured the organisation should be. Perrow identified key
aspects of structure that could be modified to the technology:
- The amount of discretion that can be exercised for completing goals
- The power of groups to control the units 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
the planning of others.
Evaluation
One study, of 14 medium-sized manufacturing firms that looked only at the two extreme cells routine
and non-routine technologies found support for Perrows predictions. Another, covering 16 health and
welfare agencies, confirmed that organisations do have diverse technologies and that the more routine
the work, the more likely it is that decision making is centralized.
State employment-service agencies were the set of organisations analyzed in yet another test of
Perrows theory. Again, the results proved consistent with Perrows predictions: work that was high in
routineness was associated with high formalization.
Unlike Woodward, Perrow did not intend that his typology should be applied to the whole organisation,
particularly if it was a large one. He viewed technology as being best measured at the work-group or
individual level. Hence Perrows model is applicable to all types of work in all nature of industries
provided we use the appropriate unit of analysis.
In summary, there appears to be considerable support for Perrows conclusions. Organisations and
organisational subunits with routine technologies tend to have greater formalization and centralization
than do their counterparts with non-routine technologies.
TECHNOLOGICAL UNCERTAINTY: THOMPSONS CONTRIBUTION

Background
Thompson sought to create a classification scheme that was sufficiently general to deal with the range of
technologies in complex organisations. He proposed three types that are differentiated by the tasks an
organisational unit performs
Long-linked technology (routine)
= a fixed sequence of connected steps: sequentially interdependent tasks. Arising from sequential
interdependence, efficiency requires a high level of coordination between activities. This leads to major
uncertainties facing management being on the input and output sides of the organisation. As a result,
management tends to respond to this uncertainty by controlling inputs and outputs.
Mediating technology (routine)
= the process of linking together different clients in need of each others services: pooled
interdependence. The managers of mediating technologies face uncertainty arising from the

organisations potential dependence on a small number of clients and the risks inherent in client
transactions. This can be dealed with by increasing the number of clients or customers served.
Intensive Technology (non-routine)
= the utilization of a wide range of customized responses, depending on the nature and variety of the
problems, reciprocal interdependence. This is a process of adjustment where those involved observe and
consult with each other and share information in order to determine the best way forward. A number of
different resources are available to the organisation, but only a limited combination is used at a given
time depending on the situation.
Structural Implications
Each technology creates a type of interdependence. Long-linked technology is accompanied by sequence
interdependence the procedures are highly standardized and must be performed in a specified serial
order. Mediating technology has pooled interdependence two or more units each contribute separately
to a larger unit. Intensive technology creates reciprocal interdependence the outputs of units influence
each other in a reciprocal fashion. Each of these interdependencies, in turn, demands a certain type of
coordination that will facilitate organisational effectiveness yet minimize costs.
In general terms, we can translate Thompsons insight into structural terminology. He argued that
demands placed on decision making and communication as a result of technology increase from
mediating (low) to long-linked (medium) to intensive (high).
Mediating technology = rules and procedures. Low complexity, high formalization
Long-linked technology = extensive planning and scheduling. Moderate complexity and formalization
Intensive technology = mutual adjustment. High complexity, low formalization
Evaluation
There is a shortage of data against which Thompsons predictions can be judged. The only study of
consequence using Thompsons dimensions measured not structure but the relationship between
technology and organisational effectiveness. The investigators concluded that the criterion of
effectiveness varies with the type of technology used by the organisational unit.
TASK UNCERTAINTY: GALBRAITHS CONTRIBUTION

Background
Uncertainty = the difference between the amount of information required to perform a task and the
amount of information already possessed by the organization.
The extent of uncertainty of the task itself was not of primary importance to Galbraith. Rather, he
considered that as a task uncertainty increased, so did the amount of information that had to be
processed among decision makers in order to achieve the desired level of organisational performance.
The amount of information, and how this information was processed, became the major determinant of
the structure of the organisation.
Galbraith has identified different organisation design strategies to accommodate different levels of
uncertainty and information processing. Another method to deal with uncertainty is the use of goals or
targets.
Once these systems of handling uncertainty are no longer effective, the organisation can do one of two
things: it can reduce the need for information processing or increase its capacity to handle information.

Reducing the need for information processing can involve the creation of slack resources. These are
additional resources over and above the minimum required to complete the task. The creation of selfcontained tasks involves reducing complexity by creating groups which have all the necessary resources
to complete the tasks.
To increase the capacity to process information, one could invest in vertical information systems.
Finally, the creation of lateral relations sees greater emphasis being placed on groups and teams being
able to communicate and coordinate with each other. This may be the creation of specific coordinating
positions or it may be by groups coordinating through a computer program.
Conclusions
Galbraith argued that the key determinant of organisational structure was the amount of information
that had to be processed in order to turn inputs into outputs. He did not suggest a specific level of
information processing that would lead to specific structural outcomes. In organisations were there was
a repetitive cycle of events, rules and regulations could be used to handle most tasks. Exceptions to
events covered by formalization methods were few in number and could be handled by hierarchical
referral. As exceptions became more common, so uncertainty and the need to process information grew.
This resulted in changes to the organisations structure.
Both Perrow and Galbraith deal with the routineness of tasks yet Perrow looks at the impact of routines
on the level of those carrying the task while Galbraith look at the effect on the structure of the whole
organisation. Underlying Galbraiths model is the idea that organisations become more complex as the
need to process information increases.
Evaluation
There is no great deal in the model to prove or disprove. Each of the seven methods of dealing with
information, with its consequent structures, demonstrably exist. What Galbraith has done is bring them
together as interconnected parts of a model which has as its base the assertion that the need to process
information is the main determinant of organisation structure.
Finally Galbraiths categories also allow for an element of routines. Work that is routine in nature has low
uncertainty, and there is not a great requirement to process information. Alternatively, non-routine work
tends to have high uncertainty, with far more need to process information.
TYING IT TOGETHER: WHAT DOES THIS ALL MEAN?

Is it possible to isolate technology as a contingency?
Technology and structure are both multidimensional concepts that are influenced by many different
factors. As a result, it is possible that technology is related to structure, although not in a manner which
may be revealed as general principles.
Isolating the influence of technology from other variables presents problems. Also separating the
influences of size and technology presents difficulties. A number of researchers suggest that
organisational size is the critical determinant of structure, not technology. Several of the Aston Group
studies failed to find an association between technology and structure. Rather, size was found to have a
more dominant influence on structure. However, in one case the Aston Group was able to support
Woodwards conclusion concerning technology and structure, but again the explanation or the
association was based on size. If technology has an influence on structure, the Aston Group reasoned, it
is most likely to affect those activities closest to the technology itself. Therefore, the larger the
organsation, the smaller the role technology is likely to play, at least at the organisational level.
Conversely, the smaller the organisation, the more likely it is that the whole organisation will be
influenced by the production work flow or operation core. (See figure 7.4, page 227)

The common denominator: routineness

The process or methods that transform inputs into outputs differ by their degree of routineness.
Work-unit level versus organisational level

Organisations are differentiated into many parts, this differentiation has led to almost all large
organisations and many of moderate size having multiple technologies. Technology research has been
undertaken at the organisational and work-unit levels. Both view technology as the means by which
tasks are accomplished, but one considers the organisation as the unit of analysis and the other
considers the work unit as the primary unit. Organisational-level analysis starts with the major product
or service offered, which leads it to focus on the dominant conversion technology. Work-unit level
analysis starts with the tasks performed by the individual employees or the work unit, which in turn
becomes the unit of study.
The organisational-level studies are still mixed, with few consistent relationships appearing between
technology and structure. But the work-unit-level studies have produced more consistent results: in an
evaluation of the relationship between technology and a set of structural variables in eight work-unitlevel studies, one study found that at least half the correlations were significant and all were in the same
direction.
Work-unit-level studies support the technological imperative because they have a simpler concept of
technology, and similarity of work patterns amongst subjects is greater. Also they are researching
technology at the operating core. Organisational level studies have difficulties in defining and measuring
technology in a manner appropriate for this level of analysis. The resultant inconsistent findings suggest
that he technological imperative may have its greatest impact on small organisations or mid-sized
organisations which are dominated by one technological type.
SPECIAL ISSUES IN ORGANISATIONAL TECHNOLOGY

Manufacturing and service technologies
Most studies investigating the impact of technology on organisation structure have been carried out on
manufacturing organisations. However, an increasing number of the workforce is involved in providing
services. There is also a third group that can be called combined product and service firms. (see figure
7.5, page 230)
Features of service industry
- Simultaneous production and consumption
- Customer part of production process
- Output to suit customers needs
- Intangible output: it cannot be stored, inventoried, seen
- Labour intensive services
The characteristics of the service industry have an impact on their structure.
- Those providing the service come in direct contact with the customer and must stress
interpersonal skills. This in turn indicates high levels of training in the service industries.- Because of customer interaction in service industries, decision making in relation to how the task
is carried out tends to be more decentralized than in manufacturing.
- Most service organisations are segregated into smaller operating units which may be managed
on decentralized basis. In many service operations it is difficult to achieve economies of scale.
And most services must be taken to where the customers are.

Manufacturing companies interact with their customers through boundary spanners, whose main task
it is to interact with customers. The boundary spanners have the effect of protecting the operating core
from intrusions by customers., thus allowing work to proceed without interruptions.
Technology and information processing

Information technologies (IT) is a generic term covering the application of computerized informationprocessing techniques to organisational operations. It covers a number of different categories of
information processing providing information efficiencies and information synergies:
-
Day-to-day operations (inventory control, information storage etc.)

Improve efficiency, particularly in resource usage
Technologies that improve communication (email, internet etc.)
Helps bring people together, promotes coordination between individuals and
subunits.
Control systems (monitor and evaluate performance)
conform the existing control mechanisms
Decision support systems (calculating potential rates of return generating spreadsheets etc.)
support intellectual process of planning and decision making
Codifying the knowledge base
apply past and current knowledge to organisational problems
Promote innovation
database which allows research, design etc. to not be close
Interorganisational systems (between organisations)
Information efficiencies = the cost and time savings that result when IT permits individual employees to
become more productive.
Information synergies = emerge when two or more individuals or subunits use IT to collaborate across
organisational boundaries.
The influence of IT on structure

IT is an enabling technology, it enables organisations to do things which they would not have otherwise
been able to do. As a result, it differs from the other contingencies in that its impact often generates
opposite outcomes.
(See table 7.4, page 234)
Extent of IT usage
One study determined that extensive users of IT tend to have decentralized decision making and a
greater reliance on workforce skills, and provide incentives that are subjective in nature. Another
theorist has proposed that there are conditions which would predict the extent of IT usage. The more
dynamic and less routine the work of an organisation, the more likely it is that extensive IT will be used.
One study also concluded that as investment in IT increased, organisations tended to become smaller.
One of the problems of studying the influence of IT on organisations is the long time frame from the
introduction of the technology until its use has settled into a stable pattern and new forms of organizing
have emerged.

IT and formalization
Much of the information to support formalization may now be held in computer data banks. Thus IT is
highly suited to increase formalization within an organisation. But it can also reduce much of the drudge
and routineness associated with high formalization by simplifying the way that information is stored and
retrieved.
Impact on communication and coordination
IT has greatly increased the capacity to improve coordination both within and between units. This has
permitted an increase in the complexity of the work being undertaken and reduced the amount of time
needed to accomplish a given tasks.
Impact on middle managers
The result of research is mixed with evidence supporting both an increase and decrease in the numbers
of middle managers as a result of IT usage. A contributing variable is the extent to which decision making
in the organisation is centralized. Where both computing decisions and organisational decisions are
centralized, top management tends to use IT to reduce the number of middle managers. Where both
decisions regarding the use of IT and decisions made by middle managers are decentralized, then
typically middle management numbers increase.
Impact of communication technologies
The ability to transmit large amount of information and to communicate with those who may be half a
world away inevitably has an impact on the way organisations are structured and managed. It links
people who may otherwise not communicate. Communication technologies also facilitate the wider
geographic spread of organisations. This has led to a pattern of decentralizing functions to where they
are most appropriately located. When the cost of communication fell, it became possible to disperse
operations into smaller, more widely distributed units which would still communicate relatively easy
with each other. In summary, what communication technology is permitting is the decentralization of
functions, with each function taking on the form most appropriate to its task.
Impact on decision making
There is evidence that IT is assisting lower level decisions making rather than executive decision making.
IT is used more intensively by those at the operating levels of the organisation rather than those
occupying the executive suite. The lower level of manager, the more likely it is that decision making is
routine and hence supported by IT. Higher level management is involved in decisions requiring more
intuitive judgment, which is poorly supported by IT.
IT and Size
IT has facilitated the emergence of organisations of immense size. As a result of pervasive use of IT, large
size is no longer seen to be accompanied by diseconomies of scale. This has encouraged managers to
believe that the problems of large size can be adequately managed. But IT has also enabled smaller
organisations to work together in networks and clusters whilst maintaining their independence.
The structure of IT departments
Many IT departments are large and effectiveness depends on their structure reflecting the key tasks
which they undertake. IT departments are now significant parts of most organisations, and the loss of
middle managers from production and accounting functions has been made up by new managers being
hired to administer the IT function. The structure of IT departments reflects that of the organisation it
serves. Where decision making is centralized, the IT departments tend to be centralized as well.

However, where organisations are decentralized, the IT function also tends to be decentralized. A further
influence on IT departments is the increasing trend to outsource. IT lends itself to outsourcing, as it can
be bundled into self-contained operations which are capable of being undertaken by those outside the
organisation.
Does structure follow an IT program?

Introduction of new IT programs may also have an influence upon structure. Generally, when
organisations are considering their information processing needs, they determine what they want from
new computer programs. Most companies have found that introducing such programs has led to
changes in organisational structure to conform to the program. Largely this involves a process of
business re-engineering and is driven by the flow of goods and information across an organisation rather
than following the vertical flow of command and control in the organisation.
The IT structural imperative

Recent IT innovations have introduced programs which undertake a far wider range of activities and
which appear to dictate structural elements. We can suggest that IT programs embody social rules within
them and these social rules become part of the organisations structure. Some researchers suggest that
IT systems have limited capacity to influence structure. This approach is called structuration. Technology
is a tool which, when it is applied in a workplace, goes through a process of absorption through learning
and adaption ant the way it is used and the structures which emerge from its application are the results
of a process of negotiation and interaction by those who use the technology.
IT as a moderator of relationships
Organisations that, before the introduction of IT, had large head offices simply to facilitate
communication between key functions can now locate those functions where it makes most sense. This
enabling function suggests that IT moderates the relationship between organisational functions and
outcomes. This implies that the outcome of an activity depends on the nature and type of IT that may be
applied. This also works in reverse: for any given outcome, IT influences the nature of the activity. The
impact of IT must be viewed as being non-deterministic as the direction of cause and effect relationships
is difficult to determine.
Computerization and manufacturing systems

Computer-integrated manufacturing = manufacturing process controlled by computers, which brings
together all aspects of the production process. It permits the linking of design, production systems,
inventory control, planning, scheduling and distribution into virtually one function.
CIM permits the speeding up of product innovation by parallel design and development of various
components, reduced time for product testing, and the simultaneous development of manufacturing
processes and tooling as a product is being designed.
CIM has also led to a change of strategy form any manufacturing companies. For much of the 20th
century manufacturing companies tried to achieve large production runs of standard products leading to
lower costs of production (economies of scale). This is still applicable yet computer-based control or
manufacturing has led companies to being able to achieve economies of scope. These are derived from
the ability to change production quickly to any one of a set of products.
A further contribution to strategy is that advanced manufacturing technologies enable the firm to work
selectively with external design, suppliers, customers and other firms.
See figure 7.5, page 244 !!!

Does IT cause structure or does structure cause IT?

IT reinforces the existing structure, as well as allowing new structures to evolve. Although IT can replace
much of the routine work in organisations, it need not change the basic reporting relationships of the
organisation. IT is often implemented to make existing structures work better.
On the other hand, IT has seen the evolution of some radically new structures and ways of working. The
creation of networks of separately owned companies, each producing individual parts of a complex
product is permitted by electronic data interchange.
TECHNOLOGY AND STRUCTURE

Technology and 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. This relationship is
more likely to hold for the structural activities in or near the operating core.
The reverse also holds: that is, non-routine technology is likely to lead to high complexity.
Technology and formalization

Studies suggest that care must be taken in generalizing about technologys impact on formalization. That
they are related is undoubtedly true. But when controlled for size, most of this association disappears.
Therefore we propose that the relationship holds for small organisations and activities at or near the
operating core. As the operating core becomes more routine, work becomes more predictable. In such
situations, high formalization is an efficient coordination device.
Technology and centralization

The technology-centralization relationship is moderated by the degree of formalization. Both formal
regulations and centralized decision making are control mechanisms, and management can substitute
one for the other. Routine technologies should be associated with centralized control if there is a
minimum of rules and regulations. If formalization is high, routine technology can be accompanied by
decentralization.
Chapter 8
DEFINING ENVIRONMENT
General Versus Specific Environment
General environment = Conditions that may have an impact on the organisation, but their relevance is
not particularly clear.
Economic factors, political conditions, the social milieu, the legal structure, the ecological
situation and cultural conditions.
Specific environment = part of the environment that is directly relevant to the organisation in achieving
its goals. It is this part of the environment with which management will be concerned, because it is made
up of the critical constituencies that can positively or negatively influence the organsations
effectiveness. It is unique for every organisation and it changes with conditions.
Clients or customers, suppliers of inputs, competitors, governments, unions, trade associations
and public pressure groups.
Domain = an organisations niche that it has staked out for itself with respect to products or services
offered and markets served.

An organisations specific environment will vary depending on the domain it has chosen. The domain
determines the point at which an organisation is dependent on its specific environment. Change the
domain and you will change the specific environment.
Actual versus Perceived Environment

Evidence suggests that measures of the actual characteristics of the environment and measures of
characteristics perceived by management are not highly correlated. It is perceptions that lead to the
decisions that managers make regarding organisation design.
We must rely upon comparing environments and making informed judgments as to the differences
between them since we lack the ready means of assessing and measuring how fast an organisation is
changing and how stable it is.
Problems
- The same environment that one organisation perceives as unpredictable and complex may be
seen as static and easily understood by another organisation.
- Classifying environments which are partly stable and partly changing raises issues.
- Those in one part of an organisation may select parts of that environment as being important
whereas people in another part of the same organisation see something else as important.
Environmental uncertainty
Environments differ in what we call environmental uncertainty. Some organisations face relatively stable
environments; this means that few forces in their specific environment are changing. Other organisations
face very dynamic environments. The number of uncertainties that may exist in an organisations
environment also influences management action. Some environmental uncertainties are easier to
predict, and therefor manage, than others. Alternatively, some environmental change is difficult to
understand. This particularly applies to technological change.
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 organisations effectiveness,
management will try to minimize it.
The Enacted Environment

= Interpretation which explains the process through which the actual and perceived environments
interact in relation to environmental uncertainty.
Proponents of the enacted environment claim that uncertainty and the environment exist
simultaneously within the decision makers head. There then commences a cycle of searching for
information in order to reduce uncertainty, leading to a perception of more uncertainty because of the
information gathered. This feeds into a need to gather more information etc.
Environmental enactment may also explain how the introduction of computers may have increased
uncertainty. As companies now, as oppose to 40 years ago, are able to process information about for
instance client information and product sales, the company may LOOK far more uncertain because of
this information.

LANDMARK CONTRIBUTIONS
Burns and Stalker
What Burns and Stalker found was that the type of structure that existed in rapidly changing and
dynamic environments was significantly different from that in organisations with stable environments.
They labelled these two structures organic and mechanistic.
Mechanistic structures (Stable, certain environment)
- Structures characterized by high complexity, formalization and centralization.
- Job specialization is high, with each worker only making a small contributions to the final output.
- Efforts are concentrated rather on improving the technical processes rather than the final
product.
- Power and knowledge reside in the management hierarchy.
- Most flow of information and communication is vertical.
- Emphasis is placed upon knowledge of internal processes rather than general knowledge of the
environment.
Organic structures (Rapidly changing, dynamic environment)
- Flexible and adaptable
- Emphasis on knowledge
- Emphasis on lateral communication
- Tasks are continuously redefined through interaction with others
- Commitment to the firm is valued more highly than obedience and adherence to establish
procedures
- Power and influence derives from knowledge and expertise, rather than position in the
hierarchy.
- Top managers are not considered the repository of knowledge
- Problems are addressed to the person experiencing the problem
- Communication consists of advice and information
Burns and Stalker believed that the most effective structure is the one that adjusts to the requirements
of the environment. However, they recognized that the mechanistic and organic forms were types which
formed two ends of a continuum; they did not represent themselves as polar opposites form which one
must be selected. The nature of the environment determined which was preferred over the other.
Lawrence and Lorsch

Lawrence and Lorsch sought to align the internal environments of the firms with their respective
external environments. They hypothesized that the more successful firms within each industry would
have better alignments than the less successful firms.
They measured the external environment as the degree of uncertainty.
- Rate of change in product innovation over time
- Clarity of information that management had about the environment
- Length of time it took for management to get feedback from the environment on actions taken
by the organisation.

They separated internal environment into two dimensions

- Differentiation task segmentation and attitudinal differences held by individuals in various
departments
- Integration the quality of collaboration that exists among interdependent units that are
required to achieve unity of effort.
Lawrence and Lorsch proposed that the more turbulent, complex and diverse the external environment
facing an organisation, the greater the degree of differentiation among its subparts. If the external
environment is very diverse and the internal environment was highly differentiated, there would be
need for and elaborate internal integration mechanism to avoid having units going in different
directions.
In diverse environments, there were more differentiated units. Where the greatest standardization
existed there was the least differentiation. The most successful firms had a higher degree of integration
than their low-performing counterparts.
Environments are composed of a number of sub environments, each with different degrees of
uncertainty. Successful organisations subunits meet de demands of the sub environments. Successful
organizations have more nearly solved the dilemma of providing both differentiation and integration by
matching their internal subunits to the demands of the sub environment. The environment in which an
organisation functions, is of foremost importance in selecting the structure appropriate for achieving
organisational effectiveness.
Duncans complexity and change framework

Robert Duncan classified environments along two dimensions
- The rate of change of environments some environments change slowly, some change rapidly.
- Environmental Complexity the greater the number of elements there are in an environment,
the more complex the environment.
The interaction of environmental complexity and stability forms a two by two matrix, where different
levels of uncertainty may be identified. Each of these levels of uncertainty leads to the adoption of
different structural responses. (See figure 8.2, page 265)
Duncans framework identifies most variables defining organisational environments. It argues that
environments are not single elements but are composed of a number of elements; the greater the
number of elements the greater the complexity. The rate of change of these elements determines the
stability of the environment. Stability enables decision making to be centralized and permits high levels
of formalization. But complexity comes with the need to gather process and respond to numerous
environmental elements, each with their own demands. His leads to decentralization and a greater need
for coordination.
THE ROLE OF THE BOUNDARY SPANNER

The role of the boundary spanner is relevant to the area where the organisation interacts with its
environments, at the boundary of the organisation. Boundary spanners may refer to individuals or
departments that may be seen as liaising between the organisation and its environment.
Boundary Spanners contribution to managing environmental uncertainty
- They have expertise in understanding and interpreting the environmental segment which they
are concerned with

They filter and process environmental information into a form which is useful to the organisation
and then transmit this information through established channels
They protect the core from undue disruption by removing the need for it to interact directly with
the environment
They represent the organisation to the environment
THE USE OF INFORMATION TECHNOLOGY IN COMPLEX ENVIRONMENTS

Research indicates that complex and dynamic environments are intense users of information technology.
There are a number of outcomes of the application of communication technology in situations where
great emphasis is placed upon lateral communication. First, existing organisations may increase their
effectiveness in handling difficult-to-predict environment, as managers and other staff will be better
informed and response time will be faster. Second, environments which were considered to be
unpredictable and difficult to operate in will become more manageable as information becomes more
readily and widely available. Environments may then be perceived as more stable. Third, other
organisations may consider that they now have the capacity to operate in more unstable environments
and, as a result, may be tempted to move from the predictability of stable environments.
A SYNTHESIS: THE ORGANISATION AND ENVIRONMENTAL UNCERTAINTY

Recent research suggest that there are three key dimensions to any organisations environment:
- Capacity the degree to which an environment can support growth.
Rich and bountiful environment: plentiful resources
Scarce environment: few inputs
- Stability the extent to which there is little change in the environment.
Dynamic: high degree of unpredictable change
Stable: low degree of unpredictable change
- Environmental complexity the degree to which the environment is concentrated on just a few
elements.
Simple environment: few concentrated elements
Complex environment: many different elements
(See Figure 8.3, page 270)
There is evidence that relates the degree of environmental uncertainty to different structural
arrangements. The more scarce, dynamic and complex the environment, the more preferable will be the
organic structure. The more abundant, stable and simple the environment, the more appropriate will be
the mechanistic structure.
THE ENVIRONMENTAL IMPERATIVE

The Case For
The open-systems perspective provides further support for the environmental perspective. It identifies
that organisations are dependent on acquiring inputs and disposing outputs if they are to continue to
survive. These inputs and outputs flow from and to the environment. Because of this dependency,
organisations cannot ignore their environment.
Not all environments behave in the same way. Some cannot be predicted with any degree of confidence.
Some behave in random ways, while others vary along predictable dimensions. New elements in the
environment are constantly emerging while other unpredictable elements progressively come under

greater control. Past problem areas often become more predictable over time or greater knowledge of
them reduces the uncertainty surrounding them. Environmental dependence creates uncertainty for
managers.
Organisations have increasingly moved towards focusing on core competencies. This often means
divesting itself of non-core businesses, but it also includes outsourcing of such tasks as logistics,
information technology etc. One of the main effects of doing this is to reduce uncertainty by operating in
a market segment which is sufficiently narrow to understand and to respond to in an informed way.
Information technology also assists in reducing technology because greater amounts of information
about the environment can be processed, which leads to better knowledge, more informed decisions
and faster and speedier organisational response. It also enables greater differentiation.
The case against

If the environment does have an impact upon structure, it may be limited to those subunits or
departments that interact directly with the environment. These departments are often termed boundary
spanners.
Not all uncertainty in the environment may have consequences for the organisation. Uncertainty,
therefore, is relevant only when it occurs along with the organisation being dependent upon that part of
the environment. Moreover, uncertainty is unplanned variation.
The environmental imperative is not in agreement with observed reality. Not only do organsations that
operate in seemingly similar environments have different structures, they often show no significant
difference in effectiveness. Furthermore, many organisations have similar structures and very diverse
environments.
ARE ENVIRONMENTAL CHANGES LEADING TO NEW ORGANISATIONAL FORMS?

Organisational researchers have suggested that environmental and technological changes have created
the conditions for the emergence of new organisational forms which differ considerably from traditional
organisational structures. They also see two main trends in organisational response. The first is for
organisations to rely more upon core competencies. The trend to concentrate often leads to smaller
organisations, each contributing to part of the supply chain.
When the structure of the organisation is considered, the proponents of the new organisational design
will be replaced by lateral communication facilitated by information technologies.
FURTHER ISSUES RELATING TO ORGANISATIONAL ENVIRONMENTS

The Population-ecology approach to organisational selection
= the environment selects certain types of organisations to survive and others to perish based on the fit
between their structural characteristics and the characteristics of their environment.
In any given population of organisations there are variations in such characteristics as structure,
management skills, knowledge and attitudes, and access to resources. Population ecologists argue that
certain organisations survive based on the fit between the organisation and its environment. Those that
are selected to survive are those that are best adapted to the environment. Survival according to
population ecology is the maintenance of an independent existence.
Organisations such as key government departments are virtually guaranteed existence. As a result, a
population of such organisations does not exist and hence the ideas of population ecology have limited
application in their case.

Assumptions of population ecology

First population ecology focuses on groups or populations of organisations, not on individual
organisations. You would use it to explain why from 200 car manufacturers one a handful survive. It also
provides a sound framework on which to base analysis of industries with high failure rate.
Second, population ecology defines organisational effectiveness as simply survival.
Third, population ecologists assume that the environment is totally determining. It assumes that
management has little impact on organisational survival. Managers are not seen as proactively managing
or influencing the organisations interactions with its environment.
Fourth, the carrying capacity of the environment is limited. This sets up a competitive arena, where some
organisations will succeed and others will fail.
Finally population ecology assumes the existence of a three-stage process that explains how
organisations operating in similar environmental niches often have common structural dimensions. The
process proposes that forces of change are generated in the environment rather than from managerial
action.
The organisational change process
The three-stage process of change recognized variations within and between organisations, the selection
of those variations that are best suited to their environments, and a retention mechanism that sustains
and reproduces those variations that are positively selected (See figure 8.4, page 277).
Within any population of organisations there will be variations in organisational forms. These can be
planned or random variations. Some of these variations are better suited to their environments than
others. Those that are better suited survive, while the others fall out of the set and perish. Organisations
that have a form that fits their environment are positively selected and survive. This finally leads to the
retention of those variations that are positively selected.
Limitations to the population-ecology view
- The theory ignores managerial motives and abilities. But management can often influence their
environment to their advantage.
- Population ecology appears to have reduced application to large and powerful organisations.
These organisations can often insulate themselves against failure and can control their own
environment.
- In public-sector organisations efficiency and adaption are not effectiveness criteria.
So population-ecology is applicable to small and powerless organisations.
Implications
Population-ecology provides an explanation of why organisations in common populations tend to have
common structural characteristics and why certain types of organisations survive while others die.
Population ecology also tells us that survival will be significantly influenced by the capacity and stability
of the organisations environment.
Institutional Theory
= an approach which integrates an organisations past actions and the social and environmental
pressures on it to explain organisational practices.
Institutional Theory proposes that organisations are influenced not only by their internal processes but
also by the need to adapt to the institutional pressures in the external environment. This need for

adaption then leads to behaviors being repeated and becoming institutionalized. This process is called
isomorphism.
We can divide institutional demands into two broad types:
- Economic and technical demands management must develop organisational structure to meet
these demands.
- Social demands rewards organisations for conforming to societal values, norms and
expectations.
Although all organisations must respond to both economic and social demands, for many only one group
clearly dominates
Evaluation of institutional theory
One of the more useful contributions of institutional theory is the explanation of the way in which social,
economic and legal pressures influence organisational structures and practices. An organisations ability
to adapt to these plays a part in favoring organisational survival.
Resource-dependence theory
= draws on the concept of the open system to promote the ways in which the organisation depends on
the environment for its resources.
Resource dependence brings with it the capacity of suppliers to exert power on organisations, and as a
result makes them vulnerable to the exercise of power. The dependent organisation will in turn take
various actions to minimize the impact of its resource dependence. The action that the organsation takes
depends on the criticality of the resource.
Resource-dependence theory is a useful way to analyze threats to the organisation. Dependence creates
uncertainty, but while the direction of the uncertainty is generally predictable, its magnitude is not.
THE ENVIRONMENT-STRUCTURE RELATIONSHIP

Some organisations are much more dependent on the environment and certain sub environments than
others. This dependency creates vulnerabilities for the organisation, which managers attempt to
minimize.
A dynamic environment has more influence on structure than a static environment does. A dynamic
environment will push an organisation towards an organic form, even if large size or routine technology
suggest a mechanistic structure. When operating in a dynamic environment, firms differentiate
themselves into various parts based on the needs of each environmental segment. Arising from this, we
would expect more intensive coordination in a dynamic environment.
Environment and Complexity

Environmental uncertainty and complexity are directly related. High environmental uncertainty tends to
lead to greater complexity. In order to respond to more dynamic and complex environments,
organisations differentiate themselves into multiple environments and subunits.
Environment and Formalization

Stable environments should lead to high formalization because stable environments create a minimal
need for rapid response, and economies exist for organisations that standardize their activities. But we
caution against assuming that a dynamic environment must lead to low formalization because
management preference will undoubtedly be for insulating operation activities from uncertainty. If

successful, a dynamic environment is likely to lead to low formalization of boundary activities while
maintaining relatively high formalization within other functions.
Environment and Centralization

The more complex the environment, the more decentralized the structure. Regardless of the staticdynamic dimension, if a large number of dissimilar factors and components exist in the environment, the
organisation can best meet the uncertainties that this causes through decentralization.
Disparities in the environment are responded to through decentralization. When different responses are
needed to different sub environments, the organisation creates decentralized subunits to deal with
them, so we can expect organisations to decentralize selectively.
Extreme hostility in the environment drives organisations, at least temporarily, to centralize their
structures.
Chapter 9
Power-control view = an organisations structure at any given time reflects the interests of those in
power who select a structure that will, to the maximum degree possible, maintain and enhance their
influence and control and permit them to implement their policies.
STRATEGIC CHOICE AND THE EARLY CHALLENGE TO CONTINGENCY

John Child argued that the contingencies we have discussed so far did not explain all the variance that
we have found in organisations. He sought to demonstrate that managers have considerable latitude in
making strategic choices.
Strategic Choice (Child) = although there are limitations on managers discretion to make decisions, there
is still scope for them to make choices favorable to themselves. The contingencies do not compel
managers to implement certain structures, they rather limit the choices that managers have. Childs
argument can be condensed into four basic points:
1. Decision makers have more autonomy than that implied by those arguing for the dominance of
environmental, technological and other forces. Managers can select from among a wide range of
viable alternatives which all accommodate the needs of the environment and technology.
2. Organisational effectiveness should be construed as a range instead of a point. Organisational
effectiveness is not something which can be measured and conclusions drawn to whether the
organisation has reached the maximum attainable. Managers make choices that meet a
generalized criterion of effectiveness. This means that decision makers may be content with
varying levels of organisational effectiveness, as long as they meet the minimum satisfactory
level.
3. Organisations often have the power to manipulate and control their environments. Managers of
large companies are able to create demand for their products and control their competitive
environments, at least to the extent that threats are reduced.
4. Perceptions and evaluations of events are an important intervening link between environments
and the actions of organisations. People do not perceive environmental characteristics the same
way. The ability and authority, to define the threats facing an organization provides a strong
power base.
THE ROLE OF RATIONAL CHOICE IN ORGANIZATIONS

Rationality = the belief that decisions are goal-directed and consistent. It includes perfect understanding
of the problem, adequate information to assess possible alternative solutions, and no emotional

attachment to any particular outcome on the part of the decision maker. Decisions may also be
implemented at little cost or disruption.
Rational decision making also ignores the possibility that others in the organsation, besides
management, and even those outside the organisation, might have the power to influence structural
decisions. Also should a decision maker find it difficult to choose between alternatives that would
benefit the organisation and those that would benefit him personally, the rational choice argument
implies that the interests of the organisation would predominate.
Power-control advocates argue that the assumption of rationality in decision making does not reflect
reality and thus decision makers rarely follow the traditional decision-making process. Decision making is
often neither consistent nor value-maximizing, hence it fails to reflect rationality. Goal consensus is
difficult, there may be external influences and further the implementation of structural change
represents challenges which deter anything but major changes.
Non-rationality
Given the complexity of large organizations, decision makers reduce options to a few decision criteria
which they deem to be important. Their choice of criteria and the selection of alternatives will reflect
their self-interests, their ideologies and beliefs systems, fashions and fads in management, the culture of
the organisation and the influence of experience. It will also reflect the realities of what is capable of
being implemented. The result is that a decision makers selection of the best solution is not an optimum
choice but one that meets the minimum decision criteria. Actual decision making therefore, is not a
comprehensive process of searching for an optimum solution. It is an incremental process, whereby the
decision maker assesses choices until one is found that leads to an acceptable outcome.
Divergent interests
Decision makers often have their own agendas and interest which they pursue when making decisions.
This means that the interests of the decision maker and the interest of the organisation rarely entirely
coincide. Organisations are composed of groups and individuals with divergent interests (See figure 9.1,
page 295). The decision maker is likely to let his own interest influence decision making. Moreover, if
confronted with a set of choices, all of which meet the good enough criterion, he would choose the one
most beneficial either personally or to their point of view, or both.
Modern management techniques aim to merge the interests of the decision maker and those of the
organisation, thus reducing the influence of the managers self-interest. This may be achieved in a
number of ways. The most obvious are rewarding sales staff for what they sell and top management for
achieving profit goals. But socialization also plays part and a strong culture can also serve to keep the
interests of the organisation uppermost in managers minds.
Dominant coalitions
The individuals who make up the organisation coalesce into groups with similar interests or values. These
are called coalitions and they flourish largely because of the differences of opinion. The action of these
groups reinforces the political nature of organisations, and even plays a part in deciding what is
considered rational and what is not.
Coalitions form to protect and promote interests which are held in common. Probably the most visible
coalitions form along department lines but are not limited to functional units. They can also be formed
around personalities, relationships and shared interests as well as ethnic and gender groups. Coalitions
are able to exert influence through collective decision making and through problem definition and
manipulation of data gathering and information flows.

Dominant coalition = the group within an organisation with the power to influence the outcome of
decisions.
In a small company, the dominant coalition and the owner are typically one and the same. In large
organisations, top management usually dominates, but not always. Any coalition that can control the
resources on which the organisation depends can become dominant.
Power and authority

Authority = the right to act, or to command others to act, towards the attainment of organisational
goals. This right derives its legitimacy from the authority figures position in the organisation.
Power = an individuals capacity to influence decisions.
Authority contributes to an individuals power; that is, the ability to influence, based on an individuals
legitimate position, can affect decisions, but one does not require authority to have such influence (See
figure 9.2/3, page 297/298).
- The higher one moves in an organisation (an increase in authority), the closer one automatically
moves towards the power core
- It is not necessary to have authority to wield power, because one can move horizontally towards
the power core without moving up the hierarchy.
CONTINGENCIES AND THE NATURE OF THE ORGANISATION

Environmental influences may act as major limitations on decision making, as well as being a source of
ideas and opportunity.
Legacy systems and large size

Legacy systems = the existing systems, rules, procedures, roles, responsibilities and ways of doing things
that are accepted practice within an organisation. They have emerged from a stream of past decisions
and become institutionalized and therefor organisations often reflect past practices rather than current
needs.
While legacy systems often contribute to the smooth operation of the organisation, there is a negative
side. Established ways can predetermine courses of action. They can also orient managers to address
problems using certain mindsets, even going so far as to define the nature of problems. The existence of
legacy systems can also lead to large organisations being slow to react to change.
Designing around people

The attitudes and capabilities of existing management and staff influence design outcomes. The subtle
interplay of personality, skills, interests, experience, age, coalition membership and power and politics
leads to tasks being allocated that may not be optimal but which suit the skill set of management staff.
Some companies attempt to overcome this problem by having what is called a spill and fill. All positions
are declared vacant. An organisation design is proposed with job descriptions for each area of
responsibility. Those who feel that they have the skills and experience appropriate to a position may
then apply for it.
Institutional and external pressures

Institutional forces may be legislative in origin, but they may arise from the needs of customers or
expectations of other stakeholders. Organisations undertaking identical tasks, one a subsidiary of an

overseas firm and one locally owned, may have different structural forms because of their different
ownership patterns.
Management fashion and fads

Hardly a year goes by without new fashion or idea being promoted as the answer to managements
problems. Many books about these subjects are persuasively written, often by consultants seeking to
promote their own business. Whatever their utility they do create social pressure to conform to their
prescriptions.
THE ROADS TO POWER

There are three roads to acquisition of power
- Hierarchical authority
- Control of resources
- Network centrality
Hierarchical authority
Formal authority is a source of power. It is not the only force of power, but individuals in managerial
positions can influence through formal degree.
The managers job comes with certain rights to reward and punish. Additionally, it comes with
prerogatives to make certain decisions. Further, the higher the positions a manager holds in the
organisation, the more likely to be able to access information which is useful to them, but which is
denied to others.
But many managers find their formal influence over people or decisions extremely limited because of
their dependence on others within the organisation. Also, their power is limited by restrictions placed on
them by more senior managers.
Control of resources and ability to reduce uncertainty

If you have something that others want, it gives you potential power over them. It also leads you to
having a major influence on decisions. But the mere control of a resource is no guarantee that it will
enhance your power. The resource must be both scarce and important to the organisation, this creates
uncertainty for the organisation which they try to reduce.
Resource scarcity increases the power of the resource older also a resource for which there is no close
substitute has greater scarcity than one that has high substitutability. For example, those who possess as
kill that an organisation needs but no one in the organisation possesses, will be in a more influential
position. The same works for departments.
As environments become more competitive, and opportunities and threats more pronounced, those in
the organisation who have the knowledge to manage the resultant uncertainty gain power for
themselves, knowledge in this case is the scarce resource. However the use of knowledge as source of
power provides insight into employee actions that are often seen as irrational (refusing to train people,
creating specialized language etc.)
Network centrality
= the degree to which a position in an organisation allows an individual to integrate other function or
reduce organisational dependencies.
Positions within the organisation whose main function is to coordinate information flows and the work
of others may be a source of power. Those individuals or groups in a position of network centrality gain

power because their position allows them to integrate other functions or to reduce organisational
inefficiencies or uncertainties. It also provides them with privileged access to wide sources of
information which may be used selectively to influence decisions.
SYNTHESISING THE POWER-CONTROL VIEW

An organisations structure, at any given time, is to a large extent the result of those in power selecting a
structure that will maintain and enhance their control.
Structural decision making as a political process

Structural decisions are often the result of political activity. Organisational politics involves activities to
acquire, develop and use power and other resources to obtain a preferred outcome when there is
uncertainty or disagreement about choices.
Organisations rarely conform to the rational model. Environments and technologies change, leading to
different schools of thoughts as to how to respond. In addition, changes in senior management may lead
to different approaches to defining what the problems facing the organisation are and how to solve
them. Selecting between the different alternatives gives rise to political activity in organisations. But
organisations are not entirely political. The need to satisfy their various critical constituencies restricts
the range of responses open to them and limits the possible options around which political activity can
be carried on.
We can identify five areas in which structure creates political arenas in organisations.
1. Position in the hierarchy status, and therefor influence, is closely attached to the position of a
department head in the organisations hierarchy.
2. Resource allocation the better funded the department, the more status it has and the more
likely it is to influence decisions. The allocation of resources also indicates its favor with senior
management. Therefore resources such as budget are subject to considerable political lobbying.
3. Interdepartmental coordination relationships between departments are part of organisational
life. At the lower level, there relationships are often routine and characterized by established
rules and practices. Further up the management hierarchy, relationships between departments
are less well defined, this leads to conflict. Polictical activity is often involved in seeking an
acceptable outcome.
4. Responsibility exceeding authority authority should normally equal responsibility. However this
rarely applies. Senior managers are far more likely to delegate responsibility but withhold the
authority that should go with it. This creates the situation where lower level managers are forced
to engage in political behavior in order to achieve their goals.
5. Structural change all structural change leads to managers and departments redefining their
authority and power relationships. Intense political activity results as managers and departments
seek to maximize their position after the change.
We can identify the ways in which power is likely to be exercised in a political arena. The following
describe the way that political tactics are used:
- Building coalitions coalition building relies on developing and maintaining mutually strong
relationships with other people. These may be based on liking, trust and respect but also on
shared interests and desired outcomes.
- Defining the nature of the problem identifying a problem is not easy. If a person or coalition
can control the way the problem is defined, often they are well on the way to determining the
solution.
- Enhancing legitimacy and expertise a managers or departments power is greatly enhanced
when they do their job well and when they have a good reputation for task knowledge and

achievement. Managers should seek to ensure that the reputation of their own department is
enhanced, as this is their main power base.
Making preferences explicit, but keeping power implicit the best political players are those who
have the courage to reveal their preferred outcome, then try to convince others that their point
of view is correct. But obvious displays of power are counterproductive. Power is exercised most
effectively when it is implied, rather than overtly exercised.
Expanding networks of influence politics involves trying to boost the number of people who
support you and minimize the number against you. Alliances can be built or expanded by such
means as hiring, transfers and promotions, as well as relationship building. One way to minimize
the competition is co-optation. Co-optation is bringing dissenters and opponents into the
network of influence.
Contingency factors as constraints

Strategy, size, technology and environment acts as general constraints on structure to narrow decisionmaking choices. They set the general parameters for organisational effectiveness. But within the
parameters there is still considerable room left for choice.
However, the role of the contingency factors as constraints points to an important observation in
relation to the role of power; its influence may be stronger at the higher levels in the organisations
hierarchy. This is because the demand of technology and environment on the operating core is a
stronger imperative than the influence of power.
The power-control model

See figure 9.4, page 309 + description of figure on bottom page 308
IMPLICATIONS BASED ON THE POWER-CONTROL VIEW

Technology and environment
Power control argues that both the environmental domain and the technology an organisation adopts
are chosen. For top management routine technologies have the advantage of predictability and thus
control by bureaucratic techniques. Bureaucracy tends to centralize power, and that which it does not
centralize, can control through extensive rules and regulations. Routine technologies largely exist in a
stable environment. So through choosing a stable environmental domain and routine technologies, top
management can keep a fairly tight hold on power.
Managers also seek to reduce environmental uncertainty; they rarely seek to operate in a more unstable
environment. Scarcity in the environment would include situations where there was intense competition
or limited opportunities of growth. This places enormous pressure on management to ensure the
organisations survival.
Organisational slack = the resources in excess of the minimum required for organisational effectiveness
and which provide the capacity for an organisation to respond to environmental change without
changing the organisation. The less slack an organsation has, the greater the pressure to optimize
organisation structure and the tighter the decision parameters will be.
Stability and mechanistic structures

The argument made by power-control advocates is that when change occurs, it is in effect a minirevolution. They further suggest that it is likely to occur only as a result of a political struggle in which
new power relationships evolve. This kind of political struggle is not common, when it does occur it

usually follows a major shake-up in top management or indicates that the organisation is facing obvious
and direct threats to survival.
The power-control view of structure predicts that not only will structures be relatively stable over time,
but mechanistic structures will be most numerous. Those in power will choose structures that maintain
their control. There will be some decision discretion available and within this, the dominant coalition will
select the most mechanistic alternative.
Complexity
Increased differentiation leads to difficulties in coordination and control. Management would prefer,
therefor, all other things being equal, to have low complexity. But of course not all other things are equal
and management can be expected to choose the lowest degree of complexity consistent with the
satisfaction criterion for organisational effectiveness.
It has been noted that information technology can permit the development of more elaborate and
complex structures without necessarily forsaking managements control.
Formalization
Because control is a desired end for those in power, organisation will have a high degree of
formalization. Management will make extensive efforts to routinize tasks and manage uncertainty. As
technology and environments are chosen by those in power, we can expect them to select those that are
compatible with high levels of formalization and maintenance of control. In those cases where factors
require low formalization, those in power can be expected to rely on sophisticated professionalized
information technology as a control device that can be substituted for rules and regulations. They can
also be expected to promote strong culture as a form of control.
Centralization
Power-control advocates claim that decentralization will occur infrequently. Even when it does, it may be
pseudo-decentralization. That is, top management will create the appearance of delegating decisions
downwards but will use information technology or other means to scrutinize the decisions which have
been made. Another favored management practice to enhance centralization is delegating responsibility
but withholding authority.
Chapter 13
WHAT IS ORGANIZATIONAL CULTURE?
Organisational culture = a system of shared meaning within an organization.
In every organization, there are patterns of beliefs, symbols, rituals, myths and practices that have
evolved over time. These, in turn, promote common understanding among members as to the purpose
of the organization and the way its members are expected to behave. Without such understanding,
which channels behavior into certain patterns and promotes common understanding amongst members,
organizational life as we know it would not be possible.
Edgard Schein: Organizational culture is the pattern of basic assumptions that a given group has
invented, discovered or developed in learning to cope with its problems of external adaption and
internal integration, and that have worked well enough to be considered valid, and, therefore, to be
taught to new members as the new way to perceive, think, and feel in relation to those problems.
A close study of Scheins definition identifies some key concepts of organizational culture:

First, it is composed of beliefs and assumptions. They form the mental concept of what we consider
reality. This affects how events are perceived and the interpretations placed upon them. The beliefs and
assumptions we apply at work are part of the social processes that have emerged from the way in which
organizations adapt to their environment. They have the purpose to enable the organization to survive in
the environment in which it operates. The culture of an organization should fit the environment it
operates in.
Organizational cultures exist because the conditions that foster their creation are commonly found.
These conditions are stability of membership and a repetitive cycle of events, which leads to a stable
pattern of interaction among members. Further, there is need for at least some measure of
organizational success as this indicates that the actions being taken are appropriate and should be
transferred to new members.
There are two types of values:
- Terminal values the desired end-state or outcome that people try to attain.
- Instrumental values desired modes of behavior.
Norms = behavioral and attitudinal standards that are taken as accepted for a given group.
Culture exists at two levels:
1. Outward manifestations of the culture observable and capable of some form of interpretation
(symbols, communication patterns, stories, physical layout)
2. Deeply held values, beliefs, assumptions, attitudes and feelings that underlie behavior difficult
to identify and hence interpret and understand.
Symbolic-interpretive approach to culture = culture is not just an instrumental feature to achieve
environmental adaption. It also satisfies a deeper human need by providing a sense of meaning and
belonging to organizational members. Organizations that impart this for their members are called social
movements.
Culture exists to facilitate the organizations movements towards its goals. Many organizations have
similar goals and operate in similar environments; the cultures of many businesses are very similar. A
distinctive culture takes a long time to evolve and learn and the fact that employees move seamlessly
between organizations indicates similarity between organisational cultures. It is also unlike that an
organization would develop a culture which was radically different from the environment in which they
operate. Further influences promoting similarity of cultures include common education and training
systems, legislation requiring certain forms of behavior, and high levels of labor turnover. In addition,
national cultures are reflected as well.
Is it possible to measure culture?

The following 10 characteristics, when taken together, reveal the visible features of an organisations
culture. They represent the key characteristics where cultures differ:
1. Individual initiative the degree of responsibility, freedom and independence that individuals
have.
2. Risk tolerance the degree to which employees are encouraged to be aggressive, innovative and
risk-seeking.
3. Direction the degree to which the organization creates clear objectives and performance
expectations.

4. Integration the degree to which units within the organization are encouraged to operate in a
coordinated manner.
5. Management support the degree to which managers provide clear communication, assistance,
and support to their subordinates.
6. Control the number of rules and regulations and the amount of direct supervision that are
used to oversee and control employee behavior.
7. Identity the degree to which members identify with the organization as a whole rather than
with their particular work group or field of professional expertise.
8. Reward system the degree to which reward allocations are based on employee performance
criteria in contrast to seniority, favoritism etc.
9. Conflict tolerance the degree to which employees are encouraged to air conflicts and criticisms
openly.
10. Communication patterns the degree to which organizational communications are restricted to
the formal hierarchy of authority.
DO ORGANIZATIONS HAVE UNIFORM CULTURES?

Most large organizations have a dominant culture and numerous sets of subcultures which differ in
varying degrees from the dominant culture. The core values are essentially retained but modified to
reflect the separated units distinct situation.
Dominant culture = expresses the core values shared by the majority of the organizational members.
Subcultures = separate cultures encompassed within organizational subunits. They can form vertically
and horizontally.
Horizontally: when a specific set of functional specialists have a set of common values
Vertically: when one product division has a different culture
CULTURE AND ORGANIZATIONAL EFFECTIVENESS

A strong culture is a culture characterized by intensively held, clearly ordered and widely shared core
values. The more members that accept these core values, the stronger the culture will be. Organizations
that have constant turnover among their members, will have a weak culture because members will not
have shared enough experiences to create distinctive common meanings.
Culture plays an important role in internal integration and external adaption of the organization to its
environment. Effectiveness requires that an organizations culture, technology, environment and
strategy are aligned with the organizations goals. The stronger an organizations culture, the more
important it is that culture be congruent with the other variables.
The successful organization will achieve a good external fit its culture will conform to its strategy and
environment. Successful organizations will also seek a good internal fit, with their culture properly
matched to their technology.
Organizations culture influences its ability to adapt to changes in the environment. This indicates that
the appropriateness is likely to change over time. As environments and technologies change, so too must
the organizations culture in order for the organization to maintain its effectiveness. The stronger the
culture, the more difficult it is to change.
CULTURE: A SUBSTITUTE FOR FORMALIZATION?

A further effect of a strong culture is that it promotes behavioral consistency. High formalization acts to
standardize employee behavior. High formalization in an organization creates predictability, uniformity

and consistency. A strong culture does the same, but without any need for written documentation or
obvious exercise of management power.
A strong culture may be more potent than formal controls, because culture influences thought processes
as well as organizational members actions. Once a culture has been established, behaviors which breach
the standards of the culture attract social sanction.
Many organizations that undertake work for which high levels of reliability are required have found that
one of the most effective ways in which reliability is promoted, is by the development of a strong
culture.
Some features of organizational culture can provide an intrinsic sense of belonging for the individual.
Being a member of the organization provides psychological support through a sense of shared goals,
values and behavior standards with an organizations members. This guides actins through providing a set
of sanctions and rewards to ensure that the organizations behavioral norms are being adhered to.
Many voluntary and non-profit organizations also have strong cultures which substitute for
formalization. In such cases those involved are guided by their identification with the goals of the
organization, and are prepared in many cases to self-manage their efforts.
The stronger an organizations culture, the less management need to be concerned with developing
formal rules and regulations to guide employee behavior. But the downside of a strong culture is that, if
it becomes inappropriate over time, it can be extremely difficult to change, and in some circumstances
will be so resistant to change as to threaten the organizations existence.
CREATING, SUSTAINING AND TRANSMITTING CULTURE

How a Culture Begins
An organizations current culture is largely due to what it has done before and the degree of success it
had with those endeavors.
The founders of an organization traditionally have a major impact on establishing the early culture. They
have a vision or mission as to what the organization should be. The small size that typically characterizes
any new organization further facilitates imposing the founders vision on all organisational members.
Because the founders have the original idea, they also typically have biases about how to implement the
idea. The organizations culture results from the interaction between the founders biases and
assumptions and what the original members who the founders initially employ learn subsequently from
their own experience.
Keeping a culture alive

Once a culture is in place, there are forces within the organisation that act to maintain it by giving
employees a set of similar experience.
- Selection practices
- Actions of top management
- Socialization
- Use of appropriate rewards and punishments
Selection practices
The stated goal of the selection process is to identify and hire individuals who have the knowledge, skills
and abilities to successfully perform the jobs within the organization. When more than one candidate fits
the job requirements,, the final decision making will be significantly influenced by the decision makers
judgment as to how well the candidates will fit into the organization.

This also works the other way around. The selection process provides applicants with information on the
organization. Candidates learn about the organization, and, if they perceive a conflict between their
values and the organizations, they can self-select themselves out.
Actions of top management
Top management has a symbolic influence on an organizations culture. The actions and attitudes of the
chief executive, or the divisional managers, are closely observed for guides as to what behavior is
acceptable and how the problems of the organization should be approached. Although in a large
organization the chief executive is rarely seen, the pronouncements from the executive suite are often
made available through annual reports etc.
The chief executive also has a major impact on culture through deciding who is hired and fired and who
is disciplined and for what.
Socialization
New employees are not hired fully indoctrinated into the organizations culture. Because they are least
familiar with the organizations culture, new employees are potentially most likely to disturb the beliefs
and customs that are in place. The adaption process is called socialization.
Most firms use induction courses. These are designed to provide new employees with an understanding
of what is expected of them, to tell them about the standards of dress and presentation required, how to
treat customers and to give hem other information relevant to their job. Then they acquire further
socialization by working with others on the job.
Use of appropriate rewards and punishments
Rewards and punishments send a powerful message to organizational members. Events such as who is
hired and fired, who is promoted and why, and actions that result in approval or admonition both
channel and direct behavior.
Learning the deeper aspects of a culture

Culture Is transmitted to employees in a number of other forms; stories, rituals, material symbols and
language.
Stories
Stories circulate through many organizations. They contain a narrative of events about the organizations
founders, key decisions that affect the organizations future course and actions of top management.
Stories serve a more important function that just being a narrative of occurrences or promoting
coordination. Stories permit the explanation and interpretation of events and situations that are too
complex for traditional linear analysis to explain.
Rituals
Rituals are a mean of transmitting culture. Activities such as recognition and award ceremonies, weekly
Friday afternoon drinks etc. are rituals that express and reinforce he key values of the organization, what
goals are important, which people are important and nay changes in power bases.
Material symbols
In many cases, material symbols are used to transmit and reinforce the culture of an organization. An
industry has arisen in recent times around generating image through office decoration and layout.
Interior decorators design and fit out offices to reflect the values and business philosophies of the client.
Even such factors as the type of car driven by the senior management of the organization reflect its

standards and values. Through the before mentioned means, messages are conveyed to employees
regarding such factors as who is important, the degree of egalitarianism desired by top management and
the kinds of behaviors that are appropriate.
Observation and experience
Much of what we learn is a result of observation and experience. This is often a far more powerful
teacher than written mission statements and policy and procedure manuals, which are often studied
only at a superficial level and generally induce acute boredom.
Language
Many organizations and units within organizations use jargon and terminology as a way to identify
members of a culture or subculture. By learning language in this way, members attest to their
acceptance of the culture and, in so doing, help to preserve it. In many cases te distinctive language of a
culture or subculture derives from the tasks undertaken and the technology used by the group.
WHEN CULTURES COLLIDE: MERGERS AND ACQUISITIONS

The contrast between two cultures is highlighted when organizations merge and an attempt is made to
generate a common culture. Not all mergers and takeovers result in cultural clashes; in many cases, a
business is taken over and run as an autonomous division. In this case there is generally not a great
pressure to change the existing culture. However, many mergers are aimed at attaining economies of
scale, which may only result from merging two organizations into one entity. In this case the merging of
cultures cannot be avoided and the success of the merger depends upon how effectively this is achieved.
Few mergers meet the expectations held of them. One of the difficulties arises form integrating the two
organizations in a way that achieves the anticipated economies and benefits.
When culture clashes occur during a mergers, they are generally well anticipated and discussed
beforehand. Senior management is usually optimistic that any problems are manageable and hat an
appropriate and supportive culture will emerge. This is often wishful thinking.
The forces driving mergers often reflect the confidence that everything may be managed. Business
always contains an element of risk. Sometimes this can easily be assessed and incorporated in the
business model. But the merging of cultures is a far more difficult task and the problems are often
downplayed in the optimism associated with doing a deal.
One attempt to overcome resistance to change is to dismiss most of the top managers in the weaker
partner in the mergers and replace them with the managers from the dominant party. The expectation is
that this will triumph over centers of resistance and quickly stamp the new culture on the weaker
company. It also gives a great sense of power and control, as well as providing a symbolic gesture as to
who holds the power. This often proves counterproductive. Valuable experience and corporate memory
are often dispensed with and new managers may not be as competent as the old. Dismay at seeing
valued and respected managers being dismissed for no apparent reason, can quickly feed into lack of
cooperation and distrust.
If the cultures of both companies are weak, then chances are that culture will not be an impediment to a
successful merges. Most successful mergers involve most of the following attributes
- Support from the top management of both companies
- Selection of the best manager for the jobs available
- Creation of integration teams not dominated by managers from one of the companies, which
concentrate on issues relevant to each area of the combined business
- Imposition of time limits aimed at limiting debate and promoting problem solving.

Globalization has added complexity, with many mergers now occurring across borders as companies
seek to expand market share or achieve economies of scale. These mergers present the additional
problem of coping with the integration of those with different national cultures. In some cases firms just
run their overseas operations as separate divisions. This avoids many problems arising from differences
in national culture.
Strong cultures are likely to hinder effectiveness in the newly merged organizations only when the
cultures are at odds. The incompatibility of two cultures need not be a problem when mergers are not
within the same industry. In such cases, the acquisition becomes a subculture of the larger organization.
HOW CAN CULTURES BE MANAGED?

A major contributor to organizational effectiveness is a high degree of congruence between the culture
of an organization and the demand placed by the environment upon the organization. As environments
are constantly changing, cultures must change to suit them.
An organizations culture has a marked influence on its employees. Because it is so deeply embedded in
either personality or beliefs, or both, this contributes to making culture the organizational characteristics
that is probably the most difficult to change. A further reason for this is that many features of culture are
not easily understood or interpretable and hence not amendable to conventional management
techniques. Also often management only plays a part in creating the culture, with the organizational
members themselves making a major contribution to many of its features. However, there are actions
that managers can take to facilitate cultural change.
What factors are likely to influence a cultural change program?

A dramatic crisis
The condition that is most universally acknowledged as having to exist before culture can be changed is a
dramatic crisis that is widely experienced by the organizations members. It calls into question current
practices and opens the door to accepting a different set of values that can respond better to the crisis,
and the post-crisis environment. The more widely the crisis is perceived to threaten the organization, the
greater its contribution to preparing the organization for cultural change.
A long-term slow decline
Many successful cultural change programs have emerged from the realization by management that its
organization has entered a new period of slow or no growth. In many cases this does not arise from any
particular management deficiency.
The organization does not face a dramatic crisis, rather their environments have changed slowly over
time and they have failed to adapt to these changes. Their senior management has come to the
realization that major changes need to be made to the way its organization operates, and this involves
cultural change.
Leadership turnover
As top management has a major influence in transmitting culture, a change in the organizations key
leadership positions facilitates the imposition of new values. But this is no insurance that the employees
will accept the new values.
Life-cycle stage
Cultural change is easier when the organization is in transition from the formation stage to the growth
stage and from maturity into decline. As the organization moves into growth, major changes will be

necessary. These changes are more likely to be accepted because the culture is less entrenched and
embodied in rules, regulations and practices. Additionally, a growing organization is more likely to hire
new employees, which gives management the opportunity to place those whose values are desired in
key positions.
The other opportunity for cultural change is when the organization enters the decline stage. Decline
typically requires cutbacks and other retrenchment strategies. Such actions are likely to highlight to
employees that the organization is experiencing a true crisis.
Age of the organization
The younger the organization, the less entrenched its values will be. We should therefor expect cultural
change to be more acceptable in younger organizations. The reason for this is that most young
organizations have no long-serving employees and lower levels of formalization.
Size of the organization
Cultural change is easier to implement in small organization because in such organizations, it is easier to
for management to reach employees.
Strength of the current culture
The more widely held a culture, and the higher the agreement of its values among members, the more
difficult it will be to change. Weak cultures should be more amenable to change than strong ones.
Absence of subcultures
Heterogeneity increases members concern with protecting their self-interest and resisting change. The
more subcultures there are, the more resistance there will be to changes in the dominant culture. Larger
organizations will be more resistant to cultural change because they typically have more subcultures.
What management techniques are available to change culture?

The following factors are important when attempting a cultural change program:
Applying firm leadership
No successful attempts at cultural change have been made without strong leadership driving the change
at the top of the organization. The leader should be capable of communicating his or her vision to a wide
variety of people and take every opportunity to do so.
Effective leadership cannot be imposed from the top of the organization. Leadership lies in creating
conditions in which people are inspired to follow. Consequently, leaders must work hard
communicating to a wide audience and constantly talking about and sharing their vision. The role of
leadership is so important that rarely does cultural change emerge as a bottom-up initiative. To be
effective it must always be initiated and nurtured from the very top of the organization.
Seeking political support
Leaders cannot function without some political support in their organizations. Leaders introducing
cultural change constantly seek out political support, as a base from which influence may spread.
Changing key personnel
It is inevitable in periods of cultural change that changes in management and other personnel take place.
Those associated closely with the old culture are generally moved aside and newer, more sympathetic
mangers appointed.

Implementing structural changes

Cultures have the tendency to resist change by reverting to their original characteristics. One of the ways
in which managers can counteract this is by making supporting structural changes. Structure influences
the way in which people behave in organizations.
Avoiding micro-managing the details
It is not possible for senior managers to micro-manage the details of cultural change. Micromanagement is concerned with managing the small details of day-to-day processes and events. Senior
management will have little alternative but to create the conditions that establish and nurture the new
cultural values and to constantly sell the advantages of a new way of doing things.
The need to be patient
All cultural change takes time; the bigger the change and the larger the organization, the longer it takes.
In a large organization, little in the way of substantial cultural change can be accomplished in less than
five years. This means that the change must often be steered by a number of successive senior
managers.
Applying appropriate management skills
The skills to introduce a major cultural change are not commonly possessed by managers. As a
consequence, many companies faced with the need to quickly address the problem of a cultural change
specifically appoint a chief executive whose task it is to quickly shake up the old culture to implant the
new, and then leave the task of consolidating the new culture to managers whose skills are more
appropriate to this task.
Chapter 15
DEFINITIONS
Organisational innovation = a process by which a new and significantly improved good, service, product
or practice, which is intended to be useful, is introduced. Innovation is more than just invention;
innovation is the process by which an invention is moved through the various stages of development
until it is applied in practice. It does not only refer to new products or changes to existing ones but may
also refer to new ways in which an organsation perceives problems and responds to problems or the
introduction of a major new IT application, a program of organisational change or a revised corporate
strategy.
Organisational knowledge = the collective knowledge of members of an organisation, which is available
for others to access and apply. Organisational knowledge has two main components improving the
opportunity for individuals to contribute to the organisation and improving the capabilities of the
organisation. It also includes improvement in the ability to interpret and respond to environmental
changes and in decision making.
Organisational learning = the process of improving organisational action through better knowledge and
understanding. It is individuals who learn, not organisations. Organisational learning implies that the
actions of the organisation have been changed in response to past experience. The capacity of the
organisation to learn has major implications for its ability to adapt to changing environments and
technologies.

ORGANISATIONAL INNOVATION
Bureaucracy and innovation (Problems)
Thomspon suggested that as organisations become more complex there is a growing gap
between the right to decide, emerging from the managers position in the hierarchy, and the ability to
decide. This gap creates tensions and exposed insecurities in the system and has serious effect upon
management behavior. Management may develop an exaggerated need for control, a heightened
emphasis upon rules and regulations, and resist any change to the status quo.
In bureaucracies, managers responsibility almost always exceeds their authority. This limits the
ability of decision makers to support projects, provide approval to expend money and push ideas
throughout the company. It also leads to the situation where many people can block innovation at
various stages but few have the authority to push it through against resistance.
A further problem is that bureaucracies have poor mechanisms for dealing with conflict.
Innovation has political consequences and these may be disruptive. Moreover, innovation is often
multidisciplinary and occurs at the intersections of departments and disciplines. Many managers view
relationships between divisions and departments as win-lose situations: one departments gain must
lead to another departments loss. Conflicts can easily arise where this belief prevails.
Information is a source of power and many managers and individuals tend to hoard it. This is
anathema to the innovating organisation, which depends upon free flow of information and cooperative
support.
Promoting organisational innovation

Endorsement of a supportive culture
Facilitating innovation requires multiple strategies, but all initiatives will fail unless the culture of the
organisation reflects appropriate attitudes and values. Such a culture is tolerant of new ideas and risk
taking, promotes cross-disciplinary cooperation and open communication and discourages politicking
and defensive behavior. It stresses the importance of the organisations goals and values over individual
and departmental interests. Such a culture must be fostered by top management.
Implementation of appropriate reward systems
Reward systems must also align with desired outcomes. This is often achieved through company-wide
rewards, rather than rewards based upon unit or department performance. Where departmental or
divisional rewards are given, it removes the incentive to cooperate with others in the organisation as
behaviors are seen to be a win-lose transaction.
Tolerance of ideas which are not implemented
No all innovations are successful and many ideas which look good at time, for various reasons do not
reach the implementation stage. Organisations that are successful at innovation generally are tolerant of
ideas which dont make the implementation stage. It is still possible to recognize effort and thank those
who tried.
Creation of boundary-spanning positions
Communication which flows across the organisation is important for innovation. In order to overcome
blocks to the flow of information across the organisation, boundary spanning roles are often created.
Boundary-spanning positions may have the responsibility of gathering and consolidating crossdisciplinary information, promoting communication, sharing ideas and coordinating effort.
The combination of structural positions and an appropriate culture highlight the dependence of
innovation upon information flows. Culture creates the environment upon which flows of information
may be based, while the formal positions provide its direction and focus.

KNOWLEDGE MANAGEMENT
For complex organisations to be effective they need to draw upon and coordinate the knowledge of
many persons with specialized knowledge. In many cases, this knowledge has nothing to do with the end
product but nevertheless their input is there.
At the core of knowledge management is the idea of drawing upon individual knowledge and
turning it into collective knowledge. Some organisations have a greater need to draw upon more
difficult-to-learn skills and specialized knowledge than others.
The intangible nature of knowledge makes it difficult to quantify and manage. We can measure the
extent of an individuals knowledge in a certain area. But little progress has been made in measuring an
organisations knowledge.
The growth of information technology has meant that vast amounts of data are now held in
computer memory and are available at little effort and cost. But the raw data is of limited use. Someone
needs to identify which data is important, collate the data into a useful package and then interpret it. We
call this process turning data into knowledge.
Tacit and explicit knowledge (Nonaka and Takeuchi)

Tacit knowledge = personal knowledge, specific to a particular context, difficult to formalize and, as a
consequence, not easy to communicate to others.
Explicit knowledge = codified knowledge, which may be transmitted in formal, systematic language.
Facilitating knowledge management

Knowledge management counters traditional command and control techniques. It involves facilitating
open communication, turning knowledge into a communal resource, and finding appropriate places to
store it and subsequently access it. Facilitating knowledge management may therefore be divided into
three parts: establishing a supportive culture, introducing an appropriate structure and making
appropriate use of technology.
Establishing a supportive culture
This involves moving away from traditional bureaucratic style to be a more inclusive system of
management. The key elements of such a culture are promotion of common goals, balance between
individual and group effort, removal of incentives to hoard knowledge and promotion of good
interpersonal communication.
Professional bureaucracies provide an example of how information may be shared in an
organisation. They regularly conduct staff seminars and allocate time for learning and keeping up with
the latest ideas, trends and legislations. Professionals are also more likely to have been trained to share
information, to value knowledge and to have ingrained learning habits.
Research has highlighted the importance of appropriate spatial/physical characteristics in aiding
communication flows and de-emphasizing hierarchy. A combination of retreat rooms, meeting areas and
common shared space is often desirable. Random personal contact is often promoted by choosing
buildings which enable staff to be located at the same level, rather than relying on lifts, and by
appropriate information technology support.
The location of facilities is generally important for promoting a desired innovative culture.
Applying the same principle of appropriate location, research departments are often established close to
universities, IT firms tend to cluster in the same area and top fashion designers head for Paris and Milan.
As part of a supportive culture, management must show that knowledge management is part of
the normal working of the organisation, not an add-on to already overloaded work lives. As such, it
should be accommodated into existing work schedules.

Introducing an appropriate structure

Structuring to facilitate knowledge mainly involves removing barriers to communication and facilitating
information sharing. Contemporary management techniques stress teamwork, and introduce
management structures which promote sharing information rather than hoarding it.
Sometimes team form naturally but they are most effective if constantly nurtured. Shared social
occasions are team-maintenance activities often used. Senior and middle management support is also
critical for communication lower in the organisation. Sometimes cross-departmental and
interdisciplinary communication require a more formalized response.
Many organisation have introduced the position of knowledge manager. This follows the design
dictum that all important tasks should have someone responsible for. It also signifies that knowledge is
important to the organisation. The advantage of having a knowledge manager is that the long-term
decline associated with the poor use of knowledge may be constantly combated.
Many knowledge managers are organisational insiders and they are aware of the location of the
repositories of knowledge and how harnessing knowledge may make a difference to the organisation.
They must be good communicators and have the respect of the staff they are likely to deal with. To be
effective they should report to a manager senior in the organsation.
The role of knowledge manager has no predetermined functions because each organisation, and
the challenges it faces, is unique and the knowledge manager must work within this unique
environment. The broadly defined tasks of a knowledge manager are:
- Identification of corporate knowledge and the barriers that prevent its collection and utilization,
including cultural and organisational factors
- Creation of infrastructure that facilitates and encourages individual development, group learning
and corporate sharing
- Introduction of processes to trap and interpret, package and present, and integrate into the
work process and culture the knowledge of the organisation
Where the role is new, three steps are required: preparing the organisation, managing the knowledge
assets, and leveraging knowledge.
As the knowledge manager does not work alone, the early stages of the implementation of a
knowledge-manager program should include a team drawn from important areas of the organisation.
Making appropriate use of technology
Information technology can provide useful tools to categorize and make knowledge available. It also links
employees so that knowledge may be easily shared.
One of the responsibilities of a knowledge manager is to select and introduce appropriate
programs to tap into the existing database of the firm. In doing this, the information must be presented
in a format which is of use to the person or group to whom it is directed. This process is called data
mining.
A further use of information technology is linking people within the organisation. Many IT
companies promote software which encourages communication amongst workers as a comprehensive
answer to knowledge management. However, many large companies dispersed geographically, promote
the use of an intranet. It has many features of the internet but is only directs at those inside the
organisation.
Essentially, knowledge-management technology overcomes time and distance limitations and
bring people together, and their ideas, no matter where they may be located.

ORGANISATIONAL LEARNING
Increasing a firms capacity to learn from past experiences will improve an organisations ability to adapt
to the changing environment and thus increase its survival prospects. Organisational learning has been
defined as the process of improving organisational action through better knowledge and understanding.
Organisational learning is concerned with the way an organisation senses changes and signals in its
external and internal environment, adapts accordingly, and then incorporates what has been learned
from the adaption within the organsations learning.
Schools of thought on organisational learning

It is possible to identify four different schools of thought through which to approach organisational
learning. These are the economic school, the developmental school, the managerial school and the
process school.
The economic school views organisational learning as a tool to promote the efficiency of the
organisation. This type of learning has been termed single loop learning by Argyris and Schon. Single loop
learning is learning that does not alter established practices and procedures of the organisation and
leaves the basic strategies of the organisation unchanged. The product of this form of learning may be
contained in formal rules, regulations and established practices and procedures, but sometimes problem
solving rules may be enhanced. It aims at improving existing processes through better use of knowledge
and experience.
The development school links learning to the organisational life cycle. It focuses on the
significance of each of the stages of the organisational life cycle for organisational learning. As a firm
grows and matures, it acquires experience, management depth and more resources for generating new
ideas and problem solving. Learning occurs as a series of sequential and related steps which makes it
difficult to leap ahead of competitors.
A further interpretation of the development school is the idea that the organisation moves
towards a goal or end state. In contrast to the life cycle model, there is no fixed path to follow to achieve
the end state, but in the process of moving towards the goal, experience and learning accumulate. Past
behavior and leaning is also seen as to influence and restrict, strategic options available to the
organisation.
Higher level learning is called double loop learning by Argyris and Schon. Higher level learning in
organisations originates in a less structured environment in which the possibilities are both greater and
more creative than for single loop learning.
An unexpected crisis or external shock is often a stimulus to organisational learning, they provide
the impetus for organisations end their management to question established practices and norms and
re-evaluate whether new ways need to be discovered.
The managerial school has emerged from the extensive literature aimed at improving learning
by management intervention. It is a process where singe loop and double loop learning combine to form
what Argyris and Schon call deuteron-learning. This is a form of learning which acknowledges the role of
management in creating the conditions for organisational learning to take place.
The managerial school considers that learning is dependent upon certain conditions or
circumstances. Managers can overcome the tendency towards entropy (winding down) by creating the
conditions necessary for higher level learning. These conditions generally include that the learning
organisation has to possess a supportive culture, a shared vision, low power distances, a team focus and
an acceptance that there is mutual benefit in sharing information. One problem of the managerial school
is that it promotes a one size fits all solution.
The process school of organisational learning concentrates upon the centrality of information
processing to learning. In this instance, information processing refers to the capacity and capability of

the individual to learn, rather than its more common IT association. If organisational learning is to be
enhanced, then the capacity of the individual to learn must be improved. The process school link
organisational learning to the cognitive and behavioral capabilities of individual members.
Learning is viewed by the process school as a socially constructed phenomenon which in
influenced by the quality and the nature of social relations within the firm. Management initiatives
aimed at promoting learning should concentrate on improving communication between individuals and
departments, exposure of individuals to new stimuli and experiences and the quality of interpersonal
interaction. A difficulty which the process school faces it that, in concentrating on the role of the
individual in organisational learning, it neglects the importance of higher order learning.
Coexistence of the organisational learning schools

Managers attempting to promote organisational learning in their organisations will use all four learning
school approaches. Most organisations will attempt to reduce costs by moving up the learning curve.
Organisations will be constrained by, or seek opportunity from their life cycle. As new initiatives are
often informed by fashionable publications or others experience it would be surprising if managers did
not draw upon the work of other in the field. And finally, the constant seeking of talented and educated
employees with good communication skills highlights the link that managers make between individual
and organisational learning.
Measurement of organisational learning

There is no unit of organisational learning that indicates the extent to which organisations are capable of
learning. The economical school however highlights that costs are important, and if an organisation is
competitive, then chances are it is using its intellectual capital productively. The development school
suggests that if an organisation handles the transition from one stage of growth to another without too
many problems, then learning paths should be open and staff should learn new ways of behavior.
There are some indicators which point to learning taking place. These may include a proportion of
revenue from new products, and speed and appropriateness of decision making. Also, experienced
managers are able to infer learning from the speed and manner in which the organisation responds to
crises and shocks. Organisational learning is also promoted by stability of organisational membership.
The organisational learning cycle

March and Olsen have described a cycle of organisational learning which integrates individual and
organisational learning. (See figure 15.1, page 489)
March and Olsen go on to describe what happens when this learning cycle is incomplete.
(See figure 15.2, page 489)
Role-constrained learning occurs when the link between an individuals beliefs and an individuals action
is broken.
Audience learning occurs when the link between the individuals actions and organisational actions is
broken. The effect is that the individual fails to see a link between their own actions and the
organisations actions.
Superstitious learning occurs when the link between organisational actions and environmental responses
is broken.
Learning under ambiguity occurs when the link between environmental responses and an individuals
beliefs is broken. This transpires when an individual fails to grasps the significance of what is happening
in the environment and what it means for their job.

Promotion of organisational learning

Managers may take certain actions to promote learning including trying to drive fear from the system so
that staff feel les constrained to make suggestions and take risks. The opposite of this is the presence of
a blame culture where managers are keen to highlight any deviations from established practices and
seek scapegoats when things go wrong.
Improving flows of information is also important. Good communication is fundamental to an
appropriate culture. Information flows may be improved by actively bringing together communities of
practice to share information.
But eventhough an organisation may possess the features of a learning organisation, there often
needs to be a trigger in order to stimulate the organisational learning cycle. A trigger may arise from
problems the organisation is facing, from new opportunities and from people.
Organisational unlearning is a process by which a person, or an organisation, comes to the
realization that existing knowledge, ways of doing things or procedures are no longer relevant and that
new ones must be developed and applied.

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Summary Organisation Theory Robbins & Barnwell 5th Edition

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Summary Organisation Theory

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Why is complexity important?

Why is formalization important?

Standardizing behavior reduces variability

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Why is the Centralization-Decentralization Issue Important?

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ORGANISATION DESIGN OPTIONS

Common elements in organisations

The Simple Structure (Strategic apex)

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Machine Bureaucracy (Technostructure)

Divisional Structure (Middle Management)

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Professional Bureaucracy (Analysts)

Adhocracy (Support Staff)

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Two approaches to determine strategy

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Multidomestic strategy aims to achieve maximum local responsiveness with products

Transnational strategy attempt to achieve maximum local responsiveness while achieving

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See table 5.3, page 166

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The power of combinations the strategy of industrial networks

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