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It is useful to make a distinction between the basic structure and the operating mechanisms which implement and reinforce this basic structure. Design of the basic structure involves such central issues as how the work of the organization will be divided and assigned among positions, groups, departments, divisions, etc., and how the coordination necessary to accomplish total organizational objectives will be achieved. Choices made about these issues are usually publicized in organization charts and job descriptions. If we recognize that behavior in an organization is influenced by a system of variables (technical, individual, social and organizational inputs), it is obvious that such formal documents are only one method of signaling to individuals what behavior is expected of them. Nevertheless, this method is important because it is so widely used by managers to define and communicate their expectations of other organization members.
Managers also can reinforce the intent of their basic structural design through what we call operating mechanisms. Operating mechanisms include such factors as control procedures, information systems, reward and appraisal systems, standardized rules and procedures, and even spatial arrangements. These structural variables can be used to more clearly signal to organizational members what is expected of them, to motivate them toward their assigned part of the organization's goal, and, as necessary, to encourage them to undertake collaborative activity. While our central focus is on the basic structure, we shall have more to say about these operating mechanisms later.
Conventional Approaches To Structural Design
In the past, the most widely used ideas about structural design were those developed by a group of organization theorists who have been labeled the classicists (Fayol, 1925; Gulick, 1937). Fayol and Gulick, drew heavily on their own experience in early twentieth century organizations and on the industrial engineering ideas of Frederick J. Taylor. While a detailed review of these ideas is beyond our scope, we can briefly summarize the central features of their "principles of organization."
With regard to the division of work, most of the authors recommended dividing up the work by function (i.e., sales, manufacturing, engineering, etc.). The one exception was Gulick, who suggested that the work of an organization could be divided on several bases: by function; by product; by territory; by time. In any case these writers emphasized economic and technical efficiency. The only human variable given major attention was the limited intellectual capacity of the individual. To cope with this limitation, division of labor was advocated. Each individual would have a narrow task which, given his limited capacity, he could accomplish in the most technically efficient manner. While these ideas are based on the simplistic assumption that man is motivated only by money and will do as he is directed, they still persist and are widely used as a basis for making decisions about organization structure.
According to these writers, coordination was not a major problem. Work was to be divided so that the subgoals of various units would add up to the overall organizational goals. Any remaining coordinating issues would be handled through the management hierarchy. Since people followed the direction of their superiors, the management hierarchy was the only coordinating device necessary.
While this approach has been widely used, it has severe limitations. First, it provides little help in designing a task with intrinsic motivation. Second, it is of limited value in dealing with the multiple levels of division of work in most large organizations. Third, managers have become more aware that the management hierarchy is not sufficient as a mechanism to achieve the coordination required in an organization. The goals of individuals and units do not automatically add up to the total goals of the organization.
Because of these shortcomings, other organizational theorists, most of whom were psychologists or social psychologists, began conducting research into these issues and have more recently come up with a second set of prescriptions which, while less widely applied, are sufficiently used to be worthy of mention. Perhaps the most concise statement of these ideas is offered by Likert (Likert, 1968; McGregor, 1960). This approach considers the motivational and collaborative issues left unattended by the classical theorists. While these behavioral scientists do not deal explicitly with the issue of division of labor, they do implicitly suggest that jobs should be divided to give the individual meaningful work over which he can have some feeling of control and influence. According to this view, the individual is motivated by self-actualization, and it follows that he will seek more complicated and engaging jobs. This must be taken into account in the division of work. The individual is also motivated by social needs and it is therefore important, according to Likert, to structure the organization so that each individual belongs to a cohesive work group in which participation in decision making is the accepted norm.
While this approach offers no explicit recommendation about how to divide up the work of an organization to provide self-actualizing work and group membership, it is very explicit about how to achieve collaboration or coordinated effort. This is done by linking work groups together by members who hold overlapping membership in two or more groups. This "linking pin" individual is a key figure in the organization, since it is through him that information about group objectives and decisions is transmitted and conflicting viewpoints are resolved.
One shortcoming of this approach is the implicit assumption that all individuals are motivated by similar needs. No attention is focused on the important differences in individual needs. A second problem is, because of either the needs of organization members or the nature of the task, linking pin and participative decision-making practices are often impractical. For example, some managers find it difficult because of their own predispositions to involve subordinates in all decisions. Similarly, some tasks require decisions for which the information is not available to all the members of the work group.
Both of these approaches described above are subject to a more general criticism. While each offers a particular prescription about how to design the basic structure of an organization, both approaches are offered as the one best way to organize. To the readers who have already been exposed to a systemic conceptual framework, it should be obvious that any blanket prescription is an oversimplification. As the title of a book on organization theory states, "It all depends." (Sherman, 1966) Furthermore, recent research which utilizes the systemic approach suggests that the choices made in designing a basic structure depend on the task and human inputs involved.
A Systemic Approach To The Design Of Organization Structure
Two recent studies point to the validity of this conclusion. Burns and Stalker, in their pioneering study of firms in both a dynamic, changing industry and a more established, stable industry, report that there were important structural differences between the successful firms in each industry (Burns and Stalker, 1961). In the stable industry, successful organizations tended to be what the authors called "mechanistic." There was more reliance on formal rules and procedures. Decisions were made at the higher levels of the organization. The spans of supervisory control were narrow. In the more dynamic industry, the authors characterized the effective organizations as "organic." Spans of supervisory control were wider; less attention was paid to formal procedures; and more decisions were reached at the lower levels of the organization. The second study was conducted by Joan Woodward (Woodward, 1965). She found that economically successful organizations in industries with different production technologies were characterized by different organization structures. For example, successful firms in industries with a unit or job shop technology had wider spans of supervisory control and fewer hierarchical levels than did successful firms with continuous process technologies.
While both of these studies consider the structure of an organization as one variable in a system affecting behavior in organizations, they do not provide a conceptual framework which is sufficiently comprehensive for analyzing and solving structural design problems. A more recent study by Lawrence and Lorsch builds on the basic idea of Woodward, Burns and Stalker, and others, and provides a more comprehensive analytic framework for working on structural design problems. (Lawrence and Lorsch, 1967)
Differentiation And Integration
Before describing the analytic framework which Lawrence and Lorsch have developed, it is important to emphasize three points. First, this conceptual scheme is based on an empirical study of ten organizations with varying levels of economic performance in three different industrial environments (plastics, consumer foods, standardized containers) and these findings have been corroborated by research in several additional settings. Second, this conceptual model does not provide a prescription for the one best way to organize. Instead, it provides a framework for thinking about structural design issues based on the demands of the organization's particular market and technological environment. Third, this set of concepts can be used to analyze the structural design which seems to best fit an organization's environment. These concepts can also be used to understand the organization's current strengths and weaknesses and to help determine what design changes will move a particular organization toward a better fit with the demands of its specific environment.
As we begin this discussion, we must first define two of the central concepts in this framework. First, differentiation is defined as the differences in cognitive and emotional orientations among managers in different functional departments, and the differences in formal structure among these departments. Rather than thinking of division of work as only affecting the economies and efficiencies of task performance, as did the classicists, Lawrence and Lorsch recognized that each unit was itself a subsystem in which members would develop particular orientations and structural patterns, depending on their task and their predispositions. Since different units were working with different parts of the organization's environment [e.g., market, scientific techno-economic (manufacturing) variables], these units would develop differentiation to some degree or other, depending upon the specific environment.
The second concept which we want to define is integrationââ‚¬"the quality of the state of collaboration that exists among departments that are required to achieve unity of effort by the environment.
As we have already indicated, different environments require varying degrees of differentiation among organizational units. Basically, the extent of organizational differentiation depends upon the certainty or uncertainty of the environment and its diversity or homogeneity. Rather than being concerned with the environment as a single entity, the authors recognized that complex organizationsââ‚¬"those with more than one unitââ‚¬"actually segment their environments into parts. The authors then identified the relative certainty of the parts of any environment. For example, each of the ten organizations was dealing with a market subenvironment (the task of the sales organization), a techno-economic subenvironment (the task of the manufacturing unit) and a scientific subenvironment (the task of the research or design unit). Each of these subenvironments within any one industry had a different degree of certainty of information about what needed to be done. How similar or different these parts of any environment were on the certainty-uncertainty continuum determined whether that environment was relatively homogeneous or diverse. For example, in one of the environments studied, the container industry, all parts of the environment were relatively certain and the environment was characterized as homogeneous. On the other hand, in a second environment, the plastics industry, the parts of the environment ranged from a highly certain techno-economic sector to a very uncertain scientific subenvironment and the total environment was characterized as more diverse. As suggested above, the degree of differentiation in an effective organization was found to be related to the diversity of the environment. Thus, in the economically effective container industry there was less differentiation than in an effective plastic organization. The less effective organizations in these industries did not meet the environmental demand for differentiation so well.