Journal of Organizational Change Management

Innovative organizational structures and performance: A case study of structural

transformation to groovy community centers
Emmanuel Ogbonna and Lloyd C. Harris
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To cite this document:
Emmanuel Ogbonna and Lloyd C. Harris, (2003),"Innovative organizational structures and performance",
J ournal of Organizational Change Management, Vol. 16 Iss 5 pp. 512 - 533
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Innovative organizational
structures and performance
A case study of structural transformation
to groovy community centers
Emmanuel Ogbonna and Lloyd C. Harris
Cardiff Business School, Cardiff University, Cardiff, UK
Keywords Organizational structures, Organizational change, Organizational design,
Business performance, Innovation
Abstract Although there has been substantial academic and practitioner interest into innovative
structural arrangements, the study of structural transformation and the structural practices of
small to medium-sized organizations in traditional industries has been relatively ignored. This
article presents empirical evidence of a company that changed its organizational structure from a
traditional bureaucracy to a structure that was fundamentally different from those of other rms
within its industry. The changed structure was characterized by many novel attributes such as
devolved responsibility, empowerment, community orientation and a lack of hierarchy. Although
there was some evidence to suggest that the structure had positive performance implications, the
study also nds that the content, context and process of change were inuenced by a dominant
managing director such that the outcomes masked underlying political issues. The article concludes
by discussing the theoretical and practical implications of the ndings.
Introduction
The generation of an organizational structure that is capable of coping with the
needs of modern businesses has been one of the most problematic issues facing
organizations and their managers (see Miles et al., 1997; Black and Edwards,
2000). In this context, it is arguable that organizational structural change has
been one of the most topical issues in management and organizational studies
over the last two decades (for example Stebbins et al., 1998; Volberda, 1998;
Hinkin and Tracey, 1999; Pettigrew et al., 2000; Black and Edwards, 2000).
Interestingly, while there has been a spate of interest into the general area of
organizational structures, recent studies into innovative structures have tended
to focus on:
.
a limited range of structural forms and those frequently adopted by large
international organizations (for example Bartlett and Ghoshal, 1993;
Pettigrew et al., 2000); or
.
the complex structural congurations of high technology-driven
companies in hypercompetitive environments (for example, Bahrami,
1992; Miles et al., 1997; Black and Edwards, 2000).
The Emerald Research Register for this journal is available at The current issue and full text archive of this journal is available at
http://www.emeraldinsight.com/researchregister http://www.emeraldinsight.com/0953-4814.htm
This study was supported by the British Academy, grant number SG 31428.
JOCM
16,5
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Received 15 March 2001
Revised 13 January 2002
Accepted 13 June 2002
Journal of Organizational Change
Management
Vol. 16 No. 5, 2003
pp. 512-533
q MCB UP Limited
0953-4814
DOI 10.1108/09534810310494919
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Inexplicably, the innovative structural practices of small to medium-sized
organizations operating in non-technological sectors and within single national
geographical boundaries have been relatively ignored.
The rationale for this study is grounded in two inter-linked issues. First, the
study is designed to redress the paucity of empirical research into the
management of structural change in smaller rms in traditional sectors. In
particular, the study aims to explore and describe innovative structural
practices in smaller organizations in a non-technologically-driven sector.
Second, the study is a response to recent calls for greater understanding and
analysis of apparently novel managerial practices in order to bridge the
substantial gap that exists between theory and practice on the adoption and
diffusion of innovative ways of structuring and managing organizations (see
Romme, 1997; Lillrank and Holopainen, 1998; Pettigrew et al., 2000; Black and
Edwards, 2000).
The article begins by providing an outline of research into the structuring of
organizations. Thereafter the methodology adopted for the study is reviewed,
followed by the presentation of the ndings of the study and a discussion of the
insights uncovered. The article concludes with a discussion of the implications
of the ndings.
Innovative forms of organizing: a brief overview
Early studies of organizational structures, collectively described as classical
organizational theory, posited the structuring of organization as a search for
idealism (see for example Weber, 1947) or efcient structural principles (see
for example Fayol, 1949), with scientic characteristics (see Taylor, 1947).
Later research from the contingency perspective argued that the key to
understanding structure lay in identifying organizational attributes and
aligning them to contextual factors (see Woodward, 1965; Pugh et al., 1969;
Lawrence and Lorsch, 1969). However, these two broad views have been widely
criticized for treating organizations as though they are detached from the
people who manage them (see Child, 1972; Wood, 1979), and for ignoring the
evolutionary nature of organizations (McKelvey and Aldrich, 1983; Hannan
and Freeman, 1989).
Recent research interest has moved away from the evaluation of the merits
and problems of traditional forms of organizing to the investigation of new
ways of structuring organizations. Interestingly, while many structural
congurations that are described as innovative lack a concrete theoretical
base (see Snow, 1997), managers frequently perceive such structures as solving
their organizational problems (Miles and Snow, 1992; Pettigrew et al., 2000). As
such, research into innovative organizational structures is driven more by
practice than by theory (Miles and Snow, 1992) while the developed theories are
largely framed around the structures that are viewed as successful (see Snow,
1997).
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In a recent article published as part of the INNFORM program, Pettigrew
et al. (2000) conclude that both European and Japanese organizations are
increasingly adopting innovative structural practices, although there were
signicant differences in the rate of change in the two regions. Other studies of
innovative forms of organizing tend to focus on providing descriptive accounts
of change efforts designed to achieve particular types of structures (for
example Romme, 1997; Black and Edwards, 2000). Of this genre, by far the
most common form studied is the network. While this label is ascribed to
almost every organizational transformation (see Charan, 1991; Grabher and
Stark, 1997), a degree of conceptual clarity on network structures is provided
by researchers who present network structures as exible organizational
arrangements which are created and coordinated by market mechanisms (see
Miles and Snow, 1992; Hanssen-Bauer and Snow, 1996; Achrol, 1997) and other
theorists who generate interesting insights into intra-organizational networks
(see Quinn et al., 1996; Miles et al., 1997).
A consistent issue in the literature to date is that the capacity to respond
quickly to environmental pressures is a major structural predictor of business
success (see Snow, 1997; Pettigrew et al., 2000). However, the critical quality of
such quick responses are frequently attributed not to technical optimization,
but to the ability of an organization to harness its human resources through
structural transformations (for instance Mintzberg et al., 1998; Whittington and
Mayer, 1999). In this regard, research studies into the so-called high
performance work organizations reveal that such organizations increasingly
adopt a range of innovative human resource practices which have variously
been described as process innovation (Pettigrew et al., 2000), workplace
innovations (Ichniowski et al., 1996) or the newmanagement model (Bacon et al.,
1996).
An examination of the literature nds that there are two important
explanations to the emergence of new forms of organizing. First, there are the
theoretical explanations that are derived from the literature on organizational
structure and design. For example, as discussed earlier, contingency theorists
see the design of organization as a necessary managerial response to various
contextual factors including size, environment and technology (see Lawrence
and Lorsch, 1969; Pugh et al., 1969; Woodward, 1965). More recent theoretical
explanations can be derived from the work of institutional theorists (see
Di Maggio and Powell, 1983; Baum and Oliver, 1991; Roberts and Greenwood,
1997). Such researchers have argued that organizations secure their legitimacy
and or resources by conforming to institutionally prescribed logic and business
recipes, a phenomenon that is described as institutional isomorphism by
Di Maggio and Powell (1983).
Second, there are the range of practical factors which have been seen as
driving the new innovative forms of organizing (for example, Ezzamel et al.,
1996; Ichniowski et al., 1996). Pettigrew et al. (2000) argue that the
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intensication of changes to economic, technological, informational and
political factors are forcing managers to seek new ways of organizing and
responding to the challenges they face. Similarly, other researchers identify
increasing globalization as a key factor wherein managers resort to aping the
successful practices of companies in other parts of the world in an effort to
generate superior performance (see Hanssen-Bauer and Snow, 1996).
Possibly the strongest indication that innovative organizational forms are
linked to performance is derived from the argument of researchers that many
innovative organizational structures have the advantage of correcting the
inherent weaknesses of traditional organizational forms (see Bahrami, 1992;
Pettigrew et al. 2000).
However, in the absence of comprehensive empirical evidence linking
innovative organizational structures directly to performance, indirect evidence
can be derived from studies that have linked innovative work organizations to
businesses success. In this regard, there has been extensive interest in the
performance implications of what has been popularly described as high
performance work organizations (see Whiteld and Poole, 1997; Osterman,
2000). For example, Ichniowski et al. (1996) demonstrate that steel mills which
adopted innovative work practices (combined with appropriate human
resource management (HRM) policies) achieved better results than
organizations adopting traditional systems. Similar conclusions have been
reached by other researchers (see Batt, 1995; Batt and Applebaum, 1995;
MacDufe et al., 1996).
Overall, the review of the literature on innovative organizational forms
shows that this topic has attracted widespread interest over the last few years.
Academics and practitioners appear to agree that the increasingly turbulent
business environment requires organizations to adopt innovative ways of
organizing their activities in order to maintain an advantage in the market
place. However, the links between innovative structures and performance
remains under-studied. Similarly, many studies of innovative structures are
based on the activities of large international companies in a handful of business
sectors.
Research design and methods
Given recent calls for greater understanding of the dynamics of new
organizational structures (Biemans, 1996) and the recent prompting for more
systematic theory development in the area (Snow, 1997), it is useful to broaden
investigations of innovative forms of organizing.
The choice of research method reects the nature of the phenomenon under
investigation in that insights were sought into interpretations and perceptions
of change as well as more objective data regarding performance outcomes.
As the literature review demonstrates, there is little conceptual agreement on
what constitutes an innovative structure (see Miles et al., 1997).
Innovative
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Consequently, research on innovative organizational forms is heavily informed
by practice (see Pettigrew et al., 2000). This indicates that empirical
investigations in this area should place a high premium on the researchers
descriptions and accounts of intricate structural arrangements. In this regard,
the need for both depth and rich understanding resulted in the adoption of an
in-depth case study approach (see Dyer and Wilkins, 1991). The research
design is partly exploratory (in order to expose issues and describe concepts
see Ghauri et al. (1995) and partly descriptive (to describe organizational
characteristics and activities).
The key form of data gathering was in-depth semi structured interviews. A
total of 50 such interviews were conducted with employees at all levels
(including head ofce directors and managers and other employees at different
levels of the organizational hierarchy). Each interview lasted between one hour
and 90 minutes. Data were also generated from a vast array of company
archival information that included commercial reports, internal memoranda,
minutes of board meetings and strategy documents. In addition, the
researchers used non-participant observation data collection techniques
including work shadowing, attendance at training sessions, attendance at
management meetings, and formal and informal visits to the companys
outlets. Observing the current practices of the rm contributed to the
development of a broader understanding of the culture and climate of the rm.
Similarly to the work of Dawson (1994, 1997; (see also Pettigrew, 1997)), such
strategies not only facilitated the validation of the accounts of the interviewees,
but also helped to highlight alternative interpretations thereby revealing the
issue of polyvocality in change (see Buchanan, 2001). All interviews were
audio-tape recorded and transcribed verbatim.
The analysis adopted a discovery-oriented approach that was akin to
grounded theory (see Strauss and Corbin, 1990). Specically, open coding
was used to identify and determine the properties and dimensions of concepts
in the data, axial coding was employed to link the core categories together,
and, nally, selective coding was used to integrate and rene theory.
The Zenith Group: groovy community centers
To frame future discussions, it is useful to dene the notion of groovy
community center[1]. This term was rst used by one of the senior managers
during the initial phase of data collection to describe the work atmosphere that
emerged fromthe structural transformation. By the end of the data gathering, it
became clear that groovy community center was used throughout the
company to denote a trendy, innovative and creative work environment
wherein individual outlets are empowered to tailor their activities toward
satisfying the needs of their targeted community. Interestingly, this view of
groovy community center was promoted not only to the internal employees,
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but also to external customers to the extent that it has become a dening
characteristic of the climate of the organization.
Prior to the presentation of the ndings, it is useful to provide a brief
background information on the case company. Zenith Ltd (a pseudonym) was
established by Mr Zenith in the early 1980s to compete in the growing
pub/wine bar market in the UK during that period. The company started with
four outlets but grew to the point where a bigger rm in the hospitality
industry (Bonds Inns plc) acquired it. Bonds Inns plc operated a chain of pubs,
taverns and wine bars and was relatively successful in the 1970s and 1980s.
Linked to this acquisition was the appointment of a new general manager
(Ms Jameson) to spearhead the activities of Zenith Ltd in 1992. Zenith grew to
become the most successful trading format under the Bond Inns portfolio.
However, while Zenith was relatively successful, archival information shows
that some executives believed that this brand was not performing to its full
potential. However, the performance of Zenith was put in a positive light by the
relative under-performance of many of the other brands owned by Bonds Inn.
These two factors were instrumental to the decision of the board of directors of
Bond Inns to focus a larger part of its resources on developing the Zenith brand
although the other businesses remained part of the group.
In 1997, Ms Jameson was appointed to the board of directors of Bonds Inns
plc. Her central task was to take the group forward in a market that was largely
dominated by large breweries with extensive market power. The elevation of
Ms Jameson to the board of directors provided her with a suitably inuential
forum which she vociferously used to expound the virtues of radically
overhauling the activities of Bonds Inns plc. In 1998, Bonds Inns plc was
renamed The Zenith Group plc and Ms Jameson was appointed the managing
director of the group. A strategic decision was also made to reposition the other
brands within the portfolio of Bonds Inns and to sell those that did not t with
the Zenith brand. At the end of this process, The Zenith Group was left with
only 11 outlets.
The rationale for adopting a new organizational structure
In order to illustrate the extent of structural change, it is rst worthwhile
providing an overview of the old structure. Archive material and discussions
with long serving organizational members show that Bonds Inns plc could be
categorized as a highly bureaucratic, overly centralized and strongly
hierarchical organization wherein any form of dissent was viewed as
dysfunctional. Indeed, certain top managers were far from content with the
appropriateness of the structure and practices at that time. The comments of
the present managing director of The Zenith Group (who joined Bond Inns as a
manager in 1992) help to explain the perceived weaknesses of the previous
structure:
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When I arrived, I noticed that everybody went about their business in suits with big fat
briefcases. It was a very formal place and the culture was very much control-orientated. You
had a large head ofce which was full of people writing letters to managers telling them what
they have not done. Letters would be written to managers telling them that if they dont get
their wage percentage down next week they will be red! (managing director, eight years
service).
Other managers who experienced work under the old structure made similar
observations. For example:
It was really a traditional company. I thought that a lot of the things they did were
absolute rubbish. The senior people were a bunch of stuffy old farts that didnt know
anything. They just relied on their tried and tested system . . . (regional manager, ten
years service).
However, this is not to suggest that all employees disliked the old structure.
Indeed, analysis of the interview data found some competing anecdotal
evidence that suggests that particularly older employees found the traditional
structure a comfortable and predictable working environment. In this regard,
one managers comment which equated the old structure with discipline and
consistency was particularly instructive.
Interestingly, the previous structure of Bonds Inn plc was consistent with
the prevailing structure of other companies in the industry (a point which
supports the institutional perspective forwarded by researchers such as
Di Maggio and Powell, 1983; Baum and Oliver, 1991; Roberts and Greenwood,
1997). However, the present managing director argued that the old structure
stied creativity. Indeed, she attributed the relatively poor performance of
Bond Inns plc to the old organizational structure:
You are never going to become a prosperous organization if you have people who spend all
their time complying to rules and regulations. You will also nd that all the creative people
will feel frustrated in this type of organization and some of them will leave the company
(managing director, eight years service).
In some respects, it would appear that in order to seize the political initiative
and promote the idealized structure, Ms Jameson and her trusted associates
(the dominant management team) were attempting to manipulate the
organizational discourse and direct sense making by employing positive
symbolism expressed through the use of the terms creativity and
prosperity in relation to the espoused change.
Following the appointment of Ms Jameson as director of the Bond Group in
1997, she embarked on a campaign to persuade her fellow board members that
the existing structure was not suited to the future direction of the organization.
However, not every manager agreed with the rationale for change or indeed
even cooperated with the change effort. Of particular signicance is that the
small numbers of managers who were labeled resistant to change by
executives viewed Ms Jameson as nothing more than an astute instrumental
manipulator. As one manager notes:
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Ever since she came here she has been trying to re-write all the rule books . . . She has
surrounded herself with some cronies who never stop praising her . . . They are like robots . . .
Ms Jameson this and that, they never question her. They think she is god . . . Well, I disagree
(outlet manager, eight years service).
Overall, while there were some dissenting voices, there was general agreement
among many of the interviewees that the old structure of The Zenith Group
was inappropriate and dysfunctional. This concern was presented by the
management as the rationale for the adoption of a neworganizational structure.
The development of a new organizational structure
The evidence from the case study suggests that a number of factors were
instrumental to the success of Ms Jameson in overcoming (or suppressing) an
entrenched systemand adopting a different way of operating. Perhaps the most
important factors were her leadership skills and managerial abilities which
enabled her to spearhead the companys revival following the economic
recession of the late 1980s and early 1990s. Linked to this was her political
skills (or what a few people in the company refer to manipulative skills)
which greatly aided her in her efforts to persuade people to support her vision.
As mentioned previously, her success in increasing the protability of Zenith
Ltd helped her to persuade the board of directors to rename the holding
company from Bond Inns plc to The Zenith Group plc. As the head of the new
group, she was able to develop a considerable power capacity, and one that she
used tactically to inuence the direction of the company. For example:
It was very difcult to change anything . . . I had to threaten to resign each time so that I can
be given the freedom I wanted to change things. I didnt always get all the things I wanted
and we had to negotiate all the time . . . If I want to do X and Y they will say why dont you do
X and we see how it goes (managing director, eight years service).
Nevertheless, it was interesting to note that many managers conceded that
luck played some part in the success of Ms Jameson in transforming the
organization. Indeed, Ms Jameson accepted the extent of her good fortune in her
role as the general manager of Zenith. Information from the company reports
indicate that under Ms Jamesons leadership, Zenith was transformed into the
most popular and fashionable eating and drinking places in the South East.
Indeed, Ms Jameson believed that her success in transforming Zenith led to an
escalation of commitment to undertake further changes when she was
appointed the managing director of The Zenith Group.
By the time she was appointed managing director of The Zenith Group plc in
1998, Ms Jameson had come to the conclusion that a widespread restructuring
of the entire organization was not only desirable, but also critical to the
long-term survival of the organization. Minutes of board meetings held in June
1998 indicate that she was able to elicit the support of two of the other three
directors in this regard. The third director disagreed with both the rationale for
the structural change and the approach to change. The minutes of the board
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meeting held in December 1998 show that the director was particularly critical
of Ms Jamesons informal management style which he saw as leading to a lack
of discipline amongst the rank and le. This director left the company in
February 1999 by what was described in the company newsletter as a mutual
agreement.
The above discussion highlights a range of interesting issues regarding
both the change program at Zenith and the leadership style of Ms Jameson.
In particular, the accounts of the disillusioned director revealed through
archival search suggests that there was (single denitive view of both the
change process and Ms Jamesons role in the process. Similarly, although it
was impossible to ascertain fully the reasons and manner of the departure
of this director, the ofcial explanation from the company (leaving by
mutual agreement) suggests that he may have been forced out of the
company probably because his potential for insurrection was perceived to
be potentially disruptive or damaging to the change process. This
interpretation suggests that Ms Jameson is a complex personality who
appears to shift from being caring to exhibiting authoritarian and
bullish behavior, thereby indicating that a control-oriented leadership
perspective dominated management dialogue at Zenith (see Watson, 1995).
Although the remaining directors agreed, were persuaded or were
sufciently manipulated to argue that The Zenith Group needed a new
structure, there was (consensus regarding the type of structure that was
required. As one director explained:
We were sold the idea of a new structure by [Ms Jameson] but she was not quite clear
as to what this structure would be. We just liked the relaxed atmosphere and the
superior nancial performance of the bars she was responsible for before her promotion
to group managing director . . . (head ofce director, six years service).
Consistent with the contention of a number of theorists (see for example Miles
and Snow, 1992), it appears that the new structure at The Zenith Group
emerged after experimentation and a series of small-scale trial and errors. For
example, in early 1998, the directors and senior head ofce managers
undertook a number of consultation exercises with managers and shopoor
workers at all of the companys outlets. However, this process was more ad hoc
than prescribed:
We spoke to as many people as we could just to gauge the strength of the force to
change. We had a vision of what we wanted but we didnt have a clear feel for how we
were going to achieve this. At that point, it didnt seem to matter. All we wanted was to
make sure that people were behind us (managing director, eight years service).
The comments of one assistant manager provide some support not only for the
fear and discomfort that some employees experienced with the change process,
but also their anxiety with the apparent lack of direction and articulation of the
likely future shape of the organization by the top management:
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The meetings we had with people from head ofce were very informal. We were told that the
structure had to change but (one quite knew what the new structure would be like. All they
kept saying was that they wanted more openness and exibility. It was really scary for those
of us who were used to a structured way of life (assistant outlet manager, four years service).
However, the analysis of the interview and archival data reveals an
overwhelming desire by Ms Jameson and many employees in The Zenith
Group to be different from the rest of the industry. Although there were some
competing accounts of both the rationale for change and the direction of the
change, Ms Jamesons perspective on the change and her approach appeared to
exert a particularly strong inuence on the structure that emerged.
Organizational structure at The Zenith Group
Management at The Zenith Group claim that the changed organizational
structure is distinguished by a number of characteristics including lack of
formalization, decentralized decision making, lack of hierarchical arrangement
and a high degree of empowerment. The structure described is best portrayed
as organic with conventional hierarchical charts discarded in favor of a
wheel structure somewhat akin to the structure and cultures described by
Handy (1985) and Harrison (1972). Management typically claim that this
structure has exible functional boundaries with tasks and activities loosely
connected into broad and general remits of responsibility.
Discussions with both head ofce and branch managers at The Zenith
Group uncovered a generally consistent account of the new organizational
structure and what it symbolized. As the managing director observes:
We describe our structure as a bicycle wheel where we have the principal people in the
business, the customers and the outlets, in the center. The rest of the people are really
providing a service to the center. Making the center work is all we are about (managing
director, eight years service).
Another manager provides an equally eloquent description of the functioning
of the structure:
I call it the wheel of fortune, other people just call it the bike or a wheel. We have the pubs in
the center, they are the cash. And then from the pubs we have the spokes and on those spokes
you have the different functions where the head ofce ts in . . . (head ofce manager, 18
months service).
These views reect the ways in which the language of senior management
focus on metaphor and discourse that emphasizes not only a preference to
discard the old for the new, but also a value that promotes the merits of
non-traditional approaches and even trendy structural designs.
The uncovering of such general support among managers of all types may
be explained in a variety of ways. First, and possibly least likely, is that a
genuine consensus regarding the nature of change has emerged among
managers indicating a surprisingly consistent change process. Second, this
nding may suggest that the training and education programs that
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complemented the change process successfully indoctrinated managers (see
Casey, 1999) to the extent that a single dominant narrative emerged (and was
probably intentionally reinforced by top management). Third, it could be that
competing interpretations and narratives regarding change have either been
suppressed or that top management promoted cultural norms are precluding
managers from communicating alternative interpretations to researchers (see
Buchanan, 2001). Such issues are important and will be explored later in this
paper.
Although there was general agreement among managers regarding the
nature of the changed structure (although not necessarily about the change),
typically frontline employees perceived the newstructure somewhat differently
to the way in which it was understood by management. Many branch frontline
employees were confused about the division of responsibility and whilst each
recognized and identied with the Wheel structure, in some cases their
interpretation was orthogonal to the Ms Jamesons espoused view. For
example:
There are certain people who have certain jobs. It seems to be as soon as you get settled
to learn who to speak to in Head Ofce someone decides to change everything around
again. I cant keep up with all the changes (head chef, four years service).
The uncovering of views regarding the changed structure that were
different to those of management may well reect hierarchical cultural
dynamics, in that the hierarchical position of frontline staff has previously
been linked to a fragmented cultural perspective. Further, as Dawson
(1994) has argued, there are frequently differences between senior
management interpretations of change and those of shopoor employees.
However, an equally valid explanation may well be that frontline workers
(perhaps not constrained by career aspirations) felt more willing to
communicate their views regarding the changed structure and less bound
by the culture and control of management. In this sense, the fragmented
views of frontline workers may well reect a competing but equally valid
narrative of the change program at Zenith Group plc (see Dawson, 1997;
Buchanan, 2001).
Whatever the nature of the developed structure, the changed structure has
many unusual attributes. Consistent with existing theory on new forms of
organizing, the new organizational structure was designed to improve the
competitiveness of the company (see Bahrami, 1992; Miles et al., 1997;
Pettigrew et al., 2000). However, the organizational structure adopted by The
Zenith Group contrasts with the existing industry and sector recipes (see
Di Maggio and Powell, 1983; Baum and Oliver, 1991; Roberts and Greenwood,
1997). In this sense, the structure is described in this article as innovative.
The remainder of the Findings section is dedicated to discussing the
performance implications of the new structure.
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The performance of the new structure
The diverse nature of the activities of Bond Inns plc makes it difcult to
provide comprehensive and comparable data on performance before and after
the structural changes. However, in order to aid the evaluation of the wheel
structure adopted by Zenith Group, it is worthwhile supplying some
comparative information on performance pre-and post-structural changes.
Table I provides some quantitative measures of performance over a ve-year
period.
Interestingly, although many of the performance indicators examined were
favorable to Ms Jameson, data analysis suggests that the generation,
evaluation and selective dissemination of these indicators were central to the
change strategy of Ms Jameson. The judicious dissemination of performance
statistics was used politically to prove the veracity of the change objective
and to encourage recalcitrant individuals to become more involved. Anecdotal
evidence indicates that those resistant to change unsuccessfully attempted to
use alternative performance indicators to counter the performance claims of Ms
Jameson. As one manager argues:
Mr Martins [the director that left the company] once tried to convince us [outlet managers]
that we were better off under the old system . . . This wasnt very successful as people could
see that that they had better career prospects here and that they generally had money in their
pockets at the end of the day (outlet manager, four years service).
The above comment highlight an interesting issue in the management of
complex organizational change in that opposing managers frequently invoke
contradictory performance indicators to support their positions. This raises the
question of whether it is ever possible to uncover a true version of change
(Dawson, 1994, p. 4) and whether truly objective indicators of performance
could ever be achieved in politicized contexts wherein the dominant groups
attempt (directly or indirectly) to suppress any information or opinions that are
inconsistent with the prevailing orthodoxy (see Buchanan and Boddy, 1992;
Dawson, 1994, 1997; Buchanan, 2001).
However, although a wide variety of performance indicators were employed
by both Ms Jameson and her detractors, the turnover statistics (which worked
in Ms Jamesons favor) appeared to be viewed as especially pertinent by the
powerful board of directors. As Table I demonstrates, The Zenith Group
1995 1996 1997 1998 1999
Turnover (000s)
14,608 19,488 23,803 22,660 26,351
Turnover per employee
41 39 40 41 42
Gross prot (%)
56 55 56 62 70
Net operating prot (%)
5 3 4 6 11
Source: Compiled from annual reports and various internal documents
Table I.
Performance gures for
The Zenith Group plc
(1995-1999)
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achieved a remarkable increase in the turnover per employee during the 1999
nancial year. Similarly, although there was a 16 percent increase in turnover
between 1998 and 1999, this was not matched by a corresponding increase in
staff costs indicating a greater level of staff efciency. It is also signicant that
the company enjoyed an 8 percent increase in gross prot and a 5 percent
increase in net prot between 1998 and 1999.
Although the evidence above suggests that the performance of The Zenith
Group plc has improved in recent years, it is important to note that the research
design adopted for this study precludes denitive claims of causality regarding
whether the structural transformation alone accounted for the performance
improvements. Similarly, it is acknowledged that, like all measures of
performance, some of those presented by the organization (and reported in this
paper) may be misleading. For example, a comparative analysis of outlet
growth since restructuring is potentially misleading since Bond Inns plc traded
under different brands which have now been integrated. This said, it is worth
noting that The Zenith Group is considered highly protable not only by
internal management with vested interest, but also by independent investment
analysts who frequently recommend the companys shares as prudent
long-term investment. Indeed, a recent prole of the company in a popular
trade magazine commented positively on the transformation of The Zenith
Group and praised the management for making Zenith one of the most
desirable brands in the sector.
Although there is some quantitative evidence to suggest that the
company has been especially successful over the last two years, the
qualitative evidence of the performance of the new structure is also worthy
of discussion (see the discussion of the merits of such subjective measures
of performance by Venkatraman and Ramanujam (1986)). For example,
there was a widespread belief in the company that the new structure
facilitated greater levels of exibility, teamwork and community-focused
responsiveness throughout the organization (perceived limitations of the
structure are discussed later). The comments of many head ofce managers
conrm this point. For example:
I think we have succeeded in having a uid organization. We are very quick to adapt to
changes in the environment . . . It is very different from any other organization I have worked
for (head ofce manager, six years service).
Similarly, several employees pointed to the high level of decentralization and
devolution in the new structure which they perceive to have facilitated more
devolved responsibilities and involvement in decision making:
They [the HQ] dont really impose things. Take this place for example. Were the test pilot for
the area we try everything new out for a few months if we like it everybody else gets the
opportunity to have it . . . if we hate it phhhuttttt . . . it just dies here (outlet manager, two
years service).
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The point is [The Zenith Group] isnt about you will or else. Its about whatd think? do
you want to try?. Just a different approach altogether (shopoor worker, 15 months service).
Although many employees discussed the positive aspects of the new structure,
it is important to note that an alternative interpretation of these events could be
that performance improvements may have arisen from the self-control which
resulted from the new organizational culture that followed the structural
transformation. In this regard, there is substantial evidence in the literature
which suggests that self-discipline is a more effective form of control than
externally imposed control (see Ogbonna and Wilkinson, 1990; Sewell and
Wilkinson, 1992; Oglensky, 1995; Casey, 1999). In The Zenith Group, many
employees who reported that they felt more empowered under the new
structure also indicated that they were under a self imposed pressure to
perform at consistently high levels. Such views highlight a paradox in
structural change. That is, whilst the new structure appears to empower
people, it also makes individual conduct more critical to organizational
performance. This paradox has been recognized previously in studies of
management attempts to empower employees (see Harley, 1999; Sewell, 2001).
One managers comments illustrate this:
Managing other people is easy its a matter of experience. Now, managing yourself is
something different altogether. At The Zenith Group its not about the head ofce checking up
on you all the time but its more down to you as the manager. I mean, were given the power to
make the decisions not just a set of procedures to follow. Thats okay most of the time but it
does mean that you end up making the choice and living with the consequences. If you
screw up, you cant blame head ofce but head ofce can sure as hell blame you (outlet
manager, six years service).
Interestingly, those judged to be consistent poor performers are encouraged to
leave the organization. As one manager notes:
I think were as forgiving of failure as anybody else. I mean if people screw up and things go
wrong, its not about giving you a b*********g but about trying to help you turn things
around. Im not saying theyll let it go on for ever you get a fair run at it but if you keep on
letting em down youre out.
Later:
I guess 10 percent move on and I guess they get rid of about another 5-10 percent a year
(outlet manager, three years service).
Although the change in The Zenith Group was pervasive and affected both
employees and managers, subsequent analysis suggests that managers
considered themselves to be more affected by the change than frontline
employees. The veracity of such a viewis debatable indeed structural change
was not only limited to management, but also profoundly affected the working
lives of frontline staff. However, given the alterations to levels of managerial
responsibility and ways of working, it was not surprising to nd evidence of
stress more commonly among supervisors and managers.
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Discussion and implications
The structural change process and resulting organization that emerged at The
Zenith Group plc is interesting for a number of reasons. Of particular
signicance is that this structure is different and appears to be pivoted on the
desire to differentiate the company from its competitors. In this regard, the
structure is inconsistent with contemporary literature on industry recipes and
institutional isomorphism(see Baumand Oliver, 1991; Roberts and Greenwood,
1997). Thus, although many companies in the sector adopt conventional
hierarchical organizational structures, The Zenith Group transformed their
organization into a structure that was fundamentally different in shape, scope
and boundaries. The adoption of such an innovative structure and the
subsequent performance successes linked to such a radically different
approach by The Zenith Group may suggest either that:
.
the traditional sector recipes have become out-dated or superseded by
environmental events; or
.
the company has identied and developed a new superior recipe for
success in the industry.
This indicates that the notion of industry recipes is temporal and/or
environmentally contingent. However, these ndings may also suggest that
traditional conceptions of sector and industry (and thus sector/industry recipes
for success) are invalid under many environmental conditions, particularly
those which are rapidly changing and subject to intense competition (Hamel,
1996). Indeed, it could be argued that the recent trend towards the development
of innovative organizational structures (see Miles and Snow, 1997; Hustad,
1999; Eisenbach et al., 1999; Pettigrew et al., 2000) is tangible evidence of a
desire to avoid traditional structural formulae which could even be recipes for
strategic inertia and stagnation (see for example Huff et al., 1992).
Furthermore, such was the unusualness of the transformed organization that
such a structure has not been identied nor discussed in the literature on
innovative organizational forms or change management (see for example
Bartlett and Ghoshal, 1993; Romme, 1997; Miles and Snow, 1997; Lillrank and
Holopainen, 1998), although some similarities exist with the views of Handy
(1985) and Harrison (1972). However, general parallels may be found between
the wheel structure of The Zenith Group and existing theory through the
exibility and horizontal information ow of network structures (see Biemans,
1996; Quinn et al., 1996) and some correspondence to teamworking in so-called
cellular organizations (Miles and Snow, 1997). Nevertheless, the change
process, the overall structural design, the degree of power and responsibility
devolution, the extent of frontline empowerment and horizontally and
vertically-blurred functional and task boundaries constitute a signicant
deviation with the majority of earlier conceptualizations (for instance Achrol,
1997; Whittington et al., 1999; Black and Edwards, 2000) and all of the
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traditional designs propounded in popular pedagogical texts (for example
Robbins, 1987; Mullins, 1999). This indicates that not only is existing
knowledge incomplete, but also that, recently, insufcient research has been
devoted to the study of innovative organizational structure formation and
change. The nding of such a strange structure in a traditional industry may
imply that many different forms of innovative structure are yet undescribed
and unstudied by theorists but are obviously well-known by the participating
practitioners. This may indicate that the current focus on deductive theory
development is leading to ungrounded and incomplete conceptualizations. This
supports the argument of Biemans (1996) who extols the virtue of studying
novel organizational practices to aid theory development.
The rationale for the study (in part) stemmed from the inattention of
existing research to the issues of structural transformation and change
within smaller rms in traditional industries. The exploration of these
issues within this context revealed an innovative and unusual form of
structure that contrasts with those models or ideal types typically
forwarded based on research into transnational organizations. This
highlights the merit of exploring these phenomena in multiple contexts.
The ndings of the study clearly indicate that innovation in change and
structure is not limited to large rms but extends to the arguably more
exible and more responsive smaller organizations. Although research into
structural congurations in hypercompetitive environments suggests that
intense competition is related to structural innovation and change (see
Miles et al., 1997; Black and Edwards, 2000), the results of this study
suggest that this is not universal. In the current study, changes that could
be described as innovative occurred despite a relatively stable environment
and in a traditional industry. This suggests that a re-evaluation of such
theories may prove fruitful.
Implications can also be derived from the process through which The Zenith
Group plc achieved its new wheel structure. The success of the structural
change pivoted on a range of contingencies. These included:
.
a transformational (or politically astute) managing director who
succeeded in promoting the idea that the old structure was inadequate
to meet the needs of the organization;
.
the acceptance by the dominant majority that change was required;
.
the widely-held trust and belief in the skills of the managing director;
.
the commitment and support of top management;
.
the acceptance of the need for experimentation (and thus successful trial
and occasional error); and nally
.
the use of internal marketing (Gummesson, 1987) to sell the idea of change
and to promote the change itself.
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Although many of the these variables have been identied in past studies of
organizational change (see for example Quinn, 1980; Mabey and Mallory, 1995;
Romme, 1997; Westwood and Kirkbride, 1998), the current study identies
some novel variables and furthermore suggests that the factors are temporal
and interrelated.
Although a number of novel factors are identied in the study, the nding
that internal marketing activities were undertaken and played such an
important role is an issue that deserves further note. A review of change
literature nds that the role of internal marketing has been surprisingly
neglected in the HRM-dominated literature on organizational transformation
and change. In this regard, the ndings of this study highlight the value of
embracing a broad array of perspectives and literatures in the examination of
change. Indeed, the ndings indicate that the incorporation of theories and
insights from alternative literatures can aid in the development of a greater
understanding of the phenomena of change and transformation.
Signicant implications are also derived from the role of leadership and the
political processes that characterize structural transformations. In the current
case, the evidence from the interviews generally portray the managing director
as a having qualities which are commonly described as transformational in the
leadership literature (Eisenbach et al., 1999; Hinkin and Tracey, 1999) and
employing participative styles of management. However, interestingly, more
critical examination of the evidence (including the analysis of archival data)
suggests that such a single view of change may mask important political
issues and processes which were not readily reported by the interviewees. In
particular, the nding that some managers had different and frequently
competing interpretations of both the rationale, approach and outcomes of
change was instructive. Indeed, the unearthing of archival data which suggest
that the one director who was critical of the change was labeled resistant and
was encouraged to leave the company highlights the extent to which the
managing director and her supporting board of directors were willing to go to
ensure that a single view of change prevailed. Quite what impact the treatment
of this director may have had on the views and responses of the remaining
(perhaps career conscious) managers who were generally positive about the
change is clearly a matter worthy of further research attention.
Furthermore, although evidence was found to indicate that the changed
structure had positive performance consequences for the company and
individuals within the rms, evidence was also uncovered of a range of more
negative impacts of the change which were under-played by many senior
managers. The ndings indicate that some employees perceived the structural
changes as directly causing negative effects on their working lives. For
example, the devolved nature of the new structure was perceived by some as
placing a signicantly greater (and stressful) burden of self-control. Similarly,
some anecdotal evidence suggests that employees who were unable to cope
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with an unstructured work environment were excluded or as Willmott (1993)
will put it excommunicated. These have clear implications for labor process
debates. In particular, the uncovered innovative structure appeared to facilitate
the exclusion of recalcitrant individuals and seemingly aided in generating
unresisting employee capitulation to management desires. Whether this was an
intentional consequence or incidental by-product of the change is something
that clearly requires additional study.
The ndings of this article also suggest important implications for
practitioners. Indeed, it would appear that some transforming organizational
structure might have direct nancial performance consequences as well as less
tangible (but equally important) employee motivational and commitment
impacts. Thus, executives desiring improved performance may well nd it
worthwhile to investigate and implement novel organizational designs. This is
not to suggest that all changes will improve performance. However, the
judicious innovation to shake tired industry recipes and break the boundaries
of outdated sector recipes is likely to prove advantageous.
Note
1. The term groovy community center was used by many of the employees and managers
interviewed to describe the transformed structure of the case study organization.
Interviewees used this term to characterize a trendy, innovative work organization wherein
individual outlets were empowered to tailor their activities to meet the specic needs of their
targeted communities. In this sense, the term was used to convey a structural form without
the formalization and hierarchies which are common in the industry.
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Buchanan, D.A. (1997), The limitations and opportunities of business process re-engineering in
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Managing Ambiguity and Change, Wiley, New York, NY, pp. 93-125.
Morgan, G. and Sturdy, A. (2000), Beyond Organizational Change, Macmillan, London.
Prahalad, C.K. and Hamal, G. (1990), The core competence of the corporation, Harvard Business
Review, Vol. 68 No. 3, pp. 79-92.
Yin, R. (1994), Case Study Research: Design and Methods, Sage, London.
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