Organizations Structures, Processes, and Outcornes Ninth Edition Richard H. Hall State Universi of New York Pamela S. Tolbert Upper Saddle River, New Jersey 07458Chapter 3 Organizational Structure: Explanations OVERVIEW ‘also contain elements of organizational theory as it ‘organizational structure, The first. ‘which an organization operates. play roles in determining organi- here and then add some other im- portant considerations. Our conclu ional structures are consequence of the simultaneous imps64 Organizational Structure: Expl them. They are designed jons of various sizes—no sane architect would design a corporate headquarters and state capitols do not take the form they do by accident ings is not perfect, since organizations are not ‘but by the people within them. ‘Those people are not necessari bout how the organization should be arranged. Just as one building can be a copy of another, organizational struc- tures can be copies of other organizations. Like buildings, they can also reflect the particular fads or fashions popular at the time of their construction. And, just as buildings can be renovated, organizations can be redesigned. “The present chapter isan attempt to explain the variations in organizational forms. There is no single explanation forthe forms of or ‘This is not a simple matter. Some factors operate togeths - lated manner, as when large size and routine technology combine to yield ahighly formalized situation. In another situation size and technology might operate in a fashion, as when large size and nonroutine technology are Explanations of factors affecting structure fall into two major categories, ‘The first is the context in which organizations operate. Contextual explanations include organizational size, technology, intemal culture (or organizational cli- mate), the environment, and national cultural factors. Context here means the situation in which an organization is currently operating. This situation is si- smultaneously within and beyond an organization's control. For example, an or- Organizational Structure: Explanations 65 ‘made to move the organization toward a higher level of effectiveness, Whether this worked or not is another matter. ‘The second category of explanations of structure is design. By design we ‘mean the choices made in an organization about how the organization is to be structured. The major approaches here aro strategic cls of structure. Any study of design must consider ‘organization will have the same judgment in rogard to the design of structure. (Organizational design is by def al issue but, again, a political issue linked to our notion of effectiveness, CONTEXTUAL EXPLANATIONS Size ‘an organization. In a penetrating artic ‘having been used in problem with using this compon -aning of the number of person- nel is ambiguous. For some religious organizations be such factors as the number of inmates housed in a prison. A ci ‘and an important one when intercollegiate athletic programs are ‘Sales volume is an important output measure for many businesses. Kimberly cor- rectly suggests that this measure is limited in its usage to comparisons between organizations ofa similar or net assets. Fora college ora uni sizeof its endowment is an important consideration. This is conceptually from the other aspects of size. ‘The components of size may be hi and indeed they are, but the concept that each should be trested separately. These stru66 Organizational Structure: Explanations ‘consequence, a covariant, or a determinant of size, making the utility of the size variable even more uncertain. “Much of the work relating size to organizational structure was conducted sw some of that literature now, with the Imost exclusively on the number of per- lable. These stodis do inate rections that ave bec tke a sit tein of 1s of the importance of size as a determinant of struc- ‘and Klataky, 19704). Their data were cole from studies of government agencies, such as state employment, services and municipal finance divisions, with supplementary data from univer ‘and department stores, The data reveal some fesc in i and also some important considerations about the role of organiza tions in contemporary society Blau's studies are concerned primati organizational size and vertical wapter 3. The research findings indi- creasing complexity. The rate of com- increasing size. Administrative overhead is -ontrol for supervisors is greater plexity decreases, however, wi lower in larger organi ind size to be the major determinant Asa erowp in Eagan (oe Ph study, which used a subj between size and perct another study, utilizing an approach similar to that of Blau and the Aston group, they came up with mixed findings in regard to size and structure, Using data from, ‘set of seventy-five organizations of highly varied types, they concluded: Organizational Structure: Explanations 67 In general the findings ofthis study in egacd research which is relationship prove to be strong. On ot any, established relationship. all, Haas, and Johns ting in several regards. He the reliance on official descriptions of organizational structures, studies that have found that organization charts are nonexistent or inaceurate, and that members of top management cannot always accurately describe their own Argyris wonders if the approach that Blau has taken might not results, He also suggests that size may be correlated with, but ‘Anar oaloe cous thai actully depenent vara: ei reser degre of specialization, formalization, and noitorng of le pesfarance, simply ne © employ a lager workforce than lest tue is, ecology emerges as he 7. we should note some additional matters re ional design efforts are ‘more direct consequences for the organization. Geeraerts (1984) foun that the heads of small organizations who were professional managers were more likely to adopt bureaucratic 1a8 consistently shown (sce Starbuck and ‘pew organizations have a low survi “nearly all small organizations are not as protected as many people think. is that large organizations are more li \wonld permit them to enter new markets, At the same time, large organizations(68 Organizational Structure: Explanations Organizational Structure: Explanations 69 dio tend tobe more bureaucratic, and this would operate against entering new mat ‘iayeman, 1993). Large organizations are also more likely to have more ly developed internal labor markets. Paradoxically, rapid growth may hinder ‘organizations bring in pet- 1992). Larger organizations do provide better pay and fringe benefits (Kalleberg and Van Buren, 1996)—these but they certainly are important. factor for much of what goes on vat one of the contextual factors that are impor however, a8 we move to a consideration of technology. ‘Woodward's findings show that the nature of the technology vitally affected. the management structures of the firms studied. The numberof levels in the man- ‘agement hierarchy, the span of control of first-line supervisors, and the ratio of ‘managers and supervisors to other personnel were all affected by the technology employed. Not only was structure affected, but also the success or effectiveness of the organizations was related to the “fit” between technology and structure, essful firms of each type were those that had the appropriately id id ils" are central to Perrow's ( 57) approach to technology. I ving being, human or otherwise, a symbol or an inanimate objet. People terials in people-changing or psople-processing organizations, symbols nls in banks, advertising agencies and some researc organ of people are raw materials to be manipulated by admunist ‘bourds of directors, commitees and co Technology ‘The relationship between technology and organizational structure is not easy to ‘understand. It may seem easy if you consider something like pro- ‘essing of checks in a bank. This is usual h formalization, and high central ‘The nature of the raw mat and operated. According to Perr ‘material, and hence the nature ofthe technology employed to work on it, are the number of “exceptional cases encountered in the work” and the nature of the “search proc ional cases are found (pp. 195-96). Few exceptional cases are found when is some objector objects that do not vary in their consistency or mal Many exceptions siate athletics program. All colleges and universities ‘Athletic Association (NCAA) members have LAB the issue of ger less obvious cases of many craft spe: Search processes range from those that are logical and anal ‘ust rely upon intuition, inspiration, chance, guesswork, or some other nonstandardized procedure. The first form of search may be found in the engi- neering process in many industries. The secon: search may be found in industry” we have a wide orton of men std women ecology inti exmpe Tenn es a om oe Sate to noe,» The object cm Rune sect (Goodman Gif and Ferner, 19904) The AAB vas ih compen symbols. Ost technology ive dscusion, con yn values, thinking about the coaches and players involved, ‘our own values, thinking. vad iy, the processing of the is- 1g on and/or changing an object studies find that routineness is related to high for (Hage and Aiken, 196; Interest in technology as a major component of orgar . sparked by the work of Woodward (1958, 1965) and Perrow (1967). Woodward's is particularly interesting because she stumbled) ene rar ‘project in the United Kingdom, She found preted uring the course ofa ceee iked to the nature of the a ‘01s. Inthe first place, there has been uncertainty about the level at which tech. is operative in the organization. The Aston group sheds som: subject. Hickson, Pugh, and Pheysey (1969) break down the general concept of ‘mast-production organi the organization that utilizes continuous pro duction, as do chemical or petroleum manufacturers70 Organizational Structure: Explanations technology into three components: operations technology—the techniques used in the workflow actvitis ofthe organization; materials technology—the materials, ted technique can conceivably be ap- vely simple materials); and knowledge technology—the varying sin the knowledge system used in the workflow. In theit own re- s authors have been concerned with operations technology. the English organizations they studied, operations technology had a sec- ondary effect in relationship to size. They conclude: ns will be relatively unaflected by the operations xm of the knowledge technology, which was not sdge technology can be seen in Meyer's (1968a) examination of the introduction of automated procedures into the administrative structures of state and local departments of finance, This resulted in more levels ‘communications responsibilities—for members who are nominally in supervi- sory positions. In these particular organizations, the kn¢ technology ‘changed from simple to relatively complex. Inthe second place a basic problem with the studies on technology has been industry and its technology are relat book publishing industry—so that sampling diff increase or decrease the relationship between technology and structure (Child and Mansfield, 1972). ‘The technology. structure issue has been approache ferent manner by Glisson (1978), He found thatthe struct sion of labor and procedural specifications determined the degree of routinization and thus the nature of service delivery among a set of human-service organiza- ierature on size and technology has been presented in an either-or fashion, with either technology or size being proposed as the key struc- tural determinant. This was, infact, a major debate in the early 1970s, Fortunately, Organizational Structure: Explanations 71 researchers dropped the debate and began to examine size and technology together, A study of e large state employment security agency examined task uncer- tainty, task interdependence ( ‘elated to coordination mechanisms (Van de Ven, Delbecg, and Koenig, 1976). AS ‘asks increased in uncertainty, mutual work adjustments through horizontal com ‘munications channels and group meetings were used instead of hierarchical and {impersonal forms of control As task interdependence increased, impersonal coot= dination decreased and more personalized and interactive modes of coordination, inthe form of meetings, increased. Increasing size, on the other hand, was related {o,an increased use of impersonal modes of coordination, such as, cedures and predetermined work plans. Ina related study, Ouchi (1977) found that both size and homogeneous tasks were related to output controls on workers study of architectural firms revealed that structural complexity and task were dependent upon size when there were uniform 1) study and suggest ‘were probably aresul of organizations studied—state employment agencies that had very nologies. Beyer and Trice's own data show that in el specialization generates horizontal different ry eause of organizational compl there should be a focus on the st ay be an important step forw ide this issue ata later point, idered in regard to the size-technology issue is ‘The final study to be that of Daft and Bradshaw (198( growth in administrative departments was in academic departments had more of a tec 0 on to consider some additional explanations. They suggest organization's environment, such as pressures from the commu and offer the interesting, ‘decision to add a de- partment or a program and an earlier decision by someone who senses a problem {and becomes an idea champion—who pushes for the formal decision, They are ‘correct in this regard, of course, since the idea to make some kind of structural ‘change has to begin somewhere. They do mi that decisions in organi- zations are highly political and that many id are developed never see the light of day in the sense that there is no formal action on them because they died in some committee. A final suggestion of Daft and Bradshaw's is that financial72 Organizational Structure: Explanations ost never consid= tit would appear resources affect decisions about structural change. This is ered by organizational analysts (economists aside, of course) advance affects organizational these levels and at the Ievel of the world economy” 1990:2). For our purposes here, of course, technology is jecting organizational structure. just one of the fact Internal Culture ‘The importance of the internal culture factor has received varying degrees of at- ‘and practitioners. At one time it was referred received prominence in Bamard’s (1938) important analysis of d he entire organization. ‘vengeance in the 1980s as organizations "(Peters and Waterman, 1982). Culture became a facts, and patterns of behavior” (Ott, 1989; p. 1) slang, humor and jokes, and other such form als 2) analysis of feminist health centers indicates. Strong ide- ‘make an organization conservative, since actions and decisions are made ‘within a particular ideological framework. People come and go, stability and robustness of internal cultures culture beeame such a theoretical and managerial buzzword Organizational Structure: Explanations 73 ize and technology, its part ofthe configuration of internal organi- that have been formed in interaction to yield structure and that nal contextual factors, ‘The Environment In later chapters we will deal with organizational environments in detail; here oar ‘or geography, can affect that physi- walla, 1972), icy cro is supportive, pro- Ine support. In a hostile environment the very underpinnings of the organization are threatened. The grave doubts raised about the nuclear plus other assorted problems with the is organizations in that industry in the Uni friendly environments during the 1960s and early 1970s. Money poured in for new facilities and personnel, and there was a general belief that to solving social and international problems, Obvious! ‘moved from one of friendliness to one of neutral ‘Khandwalla suggested that ina friendly structurally differs personnel who are then integrated by a series of mech ‘and ad hoe coordinating groups. Ifthe environment tion will “tighten up” by cent i {greater specification of decision procedures, When competi there are more frequent changes in product design, production processes, and ‘number of products. Less competition provides some “slack zation can afford to do more than its routine com —, a cee, study of a set of newspaper companies found that in a competitive environment — for example, where there was more than a single newspaper in a city—the74 Organizational Steucture: Explanations st F there ‘Thus, the community, such as minority groups. Without competition, those groups ‘Thus, competition here is vices as each hos- expensive equipment and yamental demands are conflicting, as inthe case of community ‘move into drug abuse treatment, organizations can and inconsistent structures and ironment on organizational se who have attempted to compare organizations ferent social settings. Meyer and Brown (1977) made a historical analysis of ‘government organizations in the United States, They found that the era of origin fts was related to the degree of formalization, ted to multiple levels of hierarchy and the delegation of per- Is in the organization. Although the era-of- snmental shifts force the organization to ich it is found. effects are pervasive, the e ally adjust to the context in National Culture Ik out the gate and get on the airplane. Everything else about airline organiz the same—the airplanes, the flight atendants, the ticket ing, ete.—but national culture makes the difference in terms of using structured ‘Organizational Structure: Explanations 75 compared, fes in the United States, Ouchi and Jaeger (1978) and Ouchi and Johnson (1978) found the following general differences between Japanese and American firms: SEB ec Individoal decision making (Consensual decision making Individual responsibility Collective responsibility Repid evaluation and promotion Stow evaluation and promotion Explicit, formalized contol Implicit informal controk ‘Spocializedeareor path [Nonspecialized career path ‘The Ouchi analyses found that the Japanese firms with operations in the United ‘States resembl in model, again sug- esting that ona cultural dfleences and ther impacts on organizations international religious organi only need think about the ‘Roman Catholics and the Vatican operation icized policy differences betwe: {ota glimpse of national cultural factors in For othei ither extreme argument can be tional banks in Hong Kong, Bimbaum and Wong nd support for a “cult letermination of structure. Centralization, and formalization were not related to the76 Organizational Structure: Explanations 1g with culture, Conaty, organizations in pre-Revolutionary Iran arguments of the “culture-bound” an in France, West Germany, and Great ional processes of different are particular to a society and resul ‘Twat and Montat and Singh, 1991; Gupta and Govindarajan, 1991 portance of | possible explanations for these differences. Quite obviously different research. Jjologies were used in the various ties (Taye, 1987). Different coneep- iguing explanation f rates sha of Bimbo and Wong (1985) They suggest that ultra ences themselves might be the source ofthe different findings, Where par- ganization fos ae acepible nthe as of Wextr ors ine, ‘one would expect to find such forms. In post-revolutionary Tran, onthe eter hand, one would be suprised to find preponderance of such ‘Western forms. . FEincoln, Hanada, and 186) suggest that national culture effects are additive inthe sense that they a (othe variations in structure introduced by operations technology, size, and market constraints, These authors go on to note that there may be situ ‘ould override technology. Japanese, and Taiwanese organizations, explain organizational growth but that gies best explain organizational stru that will be developed in later pages: that explanations of organizations must be used together rather than in opposition Hall and Xu (1990) disogree with Hamilton and Biggart in regard to Chinese and Japanese differences They believe that differences in family and Confucian values inthe two countries contribute to crucial differences in structure Organizational Structure: Explanations 77 between the two counties. They do not sare in regard ousng explana in combination. ee eed a ets butter final pom be made ne RADON OOOO Organizational design strategies are themselves affected by the cultures in which the design efforts are made (Schneider, 1989; Schreyogg, 1980). American, British, Japanese, and Chinese organizations would all have their own techniques of formulating their strategies. ORGANIZATIONAL DESIGN ‘The notion of organizational design has a very rational ting is to provide some degree ive approaches to orga nizational design will be present eg oe ‘The complicated na Starbuck and Nystrom (19% Evident, peopl nd erarizationssove problems by processes ta operate gute Separately trom the proctes by which hey sharactering and bien good and bad ones. Consequently, solution attempts become comy lems they address. The intial problems, if th Starbuck and Nystrom’s comments suggest that organizational design is smatic and un her observers are more sanguine and offer pre- 1976) book How to Run Any Organization. The very design, Peters and Waterman’s (1982)78 Organizational trace: Bxplanations long-running bestseller, n Search of Excellence, contains the kinds of prescrip- 8 can be the object of rational ‘A bias for setion—do it, yi, don't analyze the problem to death Stay cose tothe customer and understand the service or product needs. nirepreneurship and promote autonomy within the organization. {is though people and not technology. P z i eer eecepe pombe é ral Lo : From the perspective of Starbuck and Nystrom and that taken here, these prescriptions are far too simplistic. They ignore the perceptual and judgmental ffculties that Starbuck and Nystrom stress and the weigh ganizations. In the sections that follow, we will consider al ‘on organizational design, beginning withthe idea that orga sie choices in regard to how they are structured. Strategic Choice ‘The idea of strategic choice is not « new one. Chandler (1962) emphasized the importance of strategie choices for business firms such 2s Sears, Roebuck and General Motors as they 1987). The nature of rationality as a component of the decision-making process will be consides Organizational Structure: Explanations 79 ends. That is why the notion of choice is important. An organization is faced with lc environmental pressures and must choose one path among many options towatd one of many objectives, of their expertise; those doing routine tasks do not ha Power source. People with expertise can claim and receive more discreti froma position of po to describe power arrangements in organizations is the dominant Thompson, 1967). The “dominant coalition comprises a direct and in- or cross-section of horizontal constituencies ncies (such as employees, management rt and possibly competing expectations” Goodman, 1977:152). This approach does: the dominant coalition as representative democ- ition is the outcome of the power held by the var- rhus, some units are more powerful among the i there is obvious power differentiation among the vertical constituencies. The dominant coalition, then, comprises the power cen- ter in the organization. This power center or coalition is that which makes the ‘nating all others. In those eases, pe ecutive officers may be a key determinant of structure Decision makers in the domi ig the appropriate technology for implementing the perspective, technology is thus brows! ‘multidvisional form, such as that employed by General Motors, found that80 Organizational Structure: Explanations ‘roleum and agri firms dominated by banks or by family members were less diverse and dispersed and had fewer m onal forms. The industrial context in which firms oper- ated thus had a major impact on the form adopted. In recent years a new element has been added to strategic organizations are choosing the path of downsizing. This cen ving off ‘employees at all levels (except the very top, of course) and “outsourcing ‘activities—purchasing product in a location “offshore,” or buying janitorial or ide vendor. ms engage ina form of downsizing when they “pri- vatize” some of their activities. Privatization is a volatile issue, particularly for {implicit assumption that choices are made to increase organizational efficiency, The downsi tums this around and sees "structures as outcomes of efi straints” (Meyer, 1990-208), According to this point of view, finan- has become paramount. GREET 1 once ot dovasiing nas ; Sou eet sare Sr cit tcnmnane whether or not such choices can be rati _Y a ite athletic program was making major structural choice involved dropping some men’s teams and adding some women’s teams. At that point another part of the envi- ‘ronment came into the picture. Students, coaches, alumi, and parents of players locked it in court. the form of the amount of resources the internal organizational culture, mal support for maintaining some of the (money) available for interes inthe form of tradition and strong: ‘Organizational Structure: Explanations $1 men’s teams and the environment, in the form of federal and NCAA mandates for gender equity na of organizational structre tobe considered i the tional model, HD as become a major contbtor to our under stant sre te qr ee eee red out in not-for-profit organizations with somewhat indeterminate technologies. jo and Fovell (983) att LOTTE = now oe ception ee eon aa y the aggregate, consti- ree ard product con. According to thi aig rs. , as do department stores, airlines, professional football teams, motor vehicle bureaus, and so on, DiMaggio and Powell cite three reasons for this isomorphism among o! tions in afield. First, hoped) to maintain minimum health standards, There is strong evidence i of the coercive force of government mandates. Both the adoption of disciplinary and grievance processes and the formation of internal labor markets have been.82 Organizational Structure: Explanations QR cee organizations te ner ado for answers 0 Bei uncertainty inthe ways in which other or - ilar uncertainties. Rowan (1982) argues, for exam and subtract administrative po prevailing norms, and Powell, s Japan's conscious modeling of ts courts, postal system, y, banking, and art education programs on Western models in the late nine=» teenth century, As DiMaggio and Powell note: orations are now returning the compliment by implementing (heir and personnel ss firms are establishing for- ‘on competitors from home and “understanding your competi a a the workforce, and especially management, becomes more professionalized. Both ining and the grovth and elaboration of professional networks elds leads oa situation in which the managerial person- the same field ao barely distinguishable from one another. As people participate in trade and professional associations, t omogenize. This normative factor was found to be import ‘Lal (1993) and Sutton et al. (1994) studies cited earlier. Here, along with the is- portance of government mandates, professional perso mental in bringing about employment reforms. Additional support is found in research on the financial reporting practices in Fortune 200 business research foun tha fnacialepatiagpracioes were based on the profesional fetias, 1990). Organizational Structure: Explanations &3 tutional theory is providing insights into important women in management and an increased awareness of work-family issues have been attibuted to both normative and coercive institutional processes (Blum, Fields, and Goodman, 1994; Goodstein, 1994, EXPLAINING ORGANIZATIONAL STRUCTURE We have been considering a series of explanations id be obvious by now th “all of the above" nor spree ye, A ognized among sociologists. For example, eel al perspectives inex plaining aspects of the admin 985) studied the spread of become the norm in org study ofthe importance of other example of this mul (1985) analysis ofthe structures of a set of employme found in Kraatz and Zaj where local economic and \were more important than inst84 Organizational Structure: Explanations ‘Similarly, a study ofthe development ofthe thrift industry in California found that ional forces (Haveman at market and task contingen- 1d Usdiken, 1997; Gupta ‘arious approaches to organizational design that were tempted in Sweden in the 1970s and 1980s. He concludes that these cannot Seo eee Gertie eetecteer et peer pecs ca nope ame caseaieteramee uy ecem or wt eee eee Sinaia ty sponsanon tev creens el re si ccxcge snes Buour move teks informe byte Bereta Insure toiat are ee (Gamat oa Qietie fey om onetisg Gorm 199) They mip tbo eck m GaGa nana fencer apni as nce cans ence oom ies lable and appropriate forthe or- ‘now to a consideration of organizational processes, it should be ‘organizational structures affect these processes and vice versa (Miller, 1987). Suucture affects the flow of information and the power arrange- ions. Decisions made in regard to attempted strategies affect the buildings in our analogy atthe outset of this chapter, strue- ve been developed to explain izational structure is dynamic, adopt new technologies, face changing environ- ‘onal cultures, adopt new strategies or find old ones, and adjust to other organizations in their field Organizational Structure: Explanations 8S Before turning to organizational processes, we must repeat tional structures are there fora purpose and thatthe purpose isto be as effe Possible. There are many sourees of deflection from the structure-effectiveness yystem of which it is a part tis within structure thatthe processes of power, conflict, leadership, de- cision making, communication, and change operate. We now turn to a consider- ation of those processes. EXERCISES 1. How well do the contextual explanations of organizational structure fit your two organizations? 2, Explain how well the organizational design explanations do or do not ft your two organizations.