Structure

Studies on formal structure in organizations have encompassed vertical and horizontal differentiation, hierarchies, formalization, delegation, specialization, and divisionalization. Some researchers have argued that structure results from functional imperatives such as size or technology. Managerial decisions on structure then reflect the inevitable logic of survival. Joan Woodward, however, noted that the scale she developed could only predict structure at its extremes; in the middle, managers had discretion in deciding on structure.

Almost all the studies on organizational structure have concentrated on the formal aspects of structure as in procedural manuals. Almost none of the researchers asked how the formal offices worked in practice and whether people lived up to their formal roles as the manuals defined them. Also, almost all the studies dealt with cross-sectional variables or snapshots in time, and so one cannot draw conclusions on causality.

Researchers have found some relationships between structure and technology at the organizational level, but not particularly strong ones. As technology becomes more explicit in manufacturing, the number of staff specialties increase, overall formalization increases, chief executives' spans of control increase, and the subordinate ratios first increase, then decrease. Specialization and certain aspects of formalization may stimulate innovation, but when researchers control for size this pattern becomes adversely affected. Chris Argyris has convincingly argued that rather than technology, leadership style may have a strong influence on structure.

Alfred Dupont Chandler, John Child, and others represented this open-system view in which managers could create and choose among alternative structures, many of which could facilitate organizational viability and effectiveness. Several questions then arose: Which structure provided the best choices? How did managers choose the best structure? What did “best” mean for the managers? Among other measures, studies have analyzed the relationships among formal structure, innovation, technology, and profits.

Peter Drucker labeled the process of developing a corporate structure as divisionalization or federal decentralization. According to management theory, decentralization comes from sheer necessity. Except in very small business groups, top managers cannot make all decisions and decentralize for efficacy. In large domestic U.S. corporations, divisionalization has moved from functional divisions (marketing, finance, and so on) to product divisions, to matrix structures that combine both functional and product divisions, and finally back to functional divisions for some corporations!

Several studies have explored the relationships between formal structure and organizational strategy. In his ground-breaking book, Strategy and Structure, and employing case analysis, Chandler illustrated the unique ways in which Dupont, General Motors, Sears Roebuck, and Standard Oil adopted decentralized, multidivisional structures after World War I. These corporations' changes in formal structure resulted from their managers' varying outlooks and approaches. Chandler argued that structure followed strategy for these large American corporations.

A number of historical studies have indicated that diversification by business corporations preceded their moves from functional to divisional structures, thereby supporting Chandler's dictum on strategy and structure. However, the time lags between strategic and structural changes have extended over very long periods, which again raises some questions about causal connections.

[Page 539]Other studies have displayed no relationship between structure and strategy. For example, Jerald Hage and Robert Dewar, analyzing data from 16 health and welfare agencies, discovered that program innovations correlated more closely with values of the organizational elites than with organizational structure.

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