Cyhe^ ^Jneasuremeni of

Uraamzalion StrLwlures

DOES CONTEXT DETERMINE FORM,?

D. S. Pugh

his article will give some answers, admittedlypartial and preliminary, to the following ques-tions: Are there any general principles of or-ganization structure to which all organizationsshould adhere? Or does the context of theorganization—its size, ownership, geograph-ical location, technology of manufacture—de-termine what structure is appropriate.'' Last,how much leeway does the management of acompany have to design the organization ini-tially and tamper with it later on? Obviously,

the questions are interdependent. If the con-text of the organization is crucial to determin-ing the suitable structure, then managementoperates within fairly rigid constraints; it caneither recognize the structure predeterminedby the context and make its decisions accord-ingly or it can fail to recognize the structureindicated by the context, make the wrongdecisions, and impair the effectiveness or eventhe survival of the organization. This assumes,of course, that management retains the lati- 19

D. S. Pugh is professor and chairman oforganizational behavior at the LondonGraduate School of Business Studies. Duringhis career he has been concerned with re-searching, teaching, and writing about organi-zational behavior at the Universities of Ed-inburgh, Aston, and London. For a numberof years he u/as at the head of the researchgroup at the University of Aston in Birming-ham that carried out the studies that are de-scribed in this article, and that have beencontinued at the London Business School andelsewhere. He is the joint author of two bool^s.Exercises in Business Decisions and Writ-ers on Organizations, and the editor of athird. Organization Theory: Selected Read-ings. He is the general editor of the Libraryof Moe/ern Management for Penguin Educa-tion Boof(^s. Professor Pugh also has beendeeply involved in the development of man-agement education in Britain and is currentlythe chairman of the Association of Teachersof Management of Great Britain and Ireland.

tude to make the wrong decisions on struc-ture.

Even more obviously, these questionsarc difficult to answer. Let's begin with thefact that systematic and reliable informationon organizational structure is scarce. We havea plethora of formal organization charts thatconceal as much as they reveal and a quantityof unsynthesized case material. What we needis a precise formulation of the characteristicsof organization structure and the developmentof measuring scales with which to assess dif-ferences quantitatively.

20 We do know something about the de-

cisions that top managers face on organiza-tions. For example, should authority be cen-tralized? Centralization may help maintaina consistent policy, but it may also inhibitinitiative lower down the hierarchy. Again,should managerial tasks be highly special-ized? The technical complexity of businesslife means that considerable advantages canaccrue from allowing people to specialize ina limited Held. On the other hand, these ad-vantages may be achieved at the expense oftheir commitment to the overall objectives ofthe company.

Should a company lay down a largenumber of standard rules and procedures foremployees to follow? These may ensure acertain uniformity of performance, but theymay also produce frustration—and a tendencyto hide behind the rules. Should the organiza-tion structure be "tall" or "flat"? Flat struc-tures—with relatively few hierarchical levels—allow communications to pass easily up anddown, but managers may become overloadedwith too many direct subordinates. Tall struc-tures allow managers to devote more time tosubordinates, but may well overextend linesof command, and distort communications.

All these choices involve benefits andcosts. It also seems reasonable to suppose thatthe extent and importance of the costs andbenefits will vary according to the situation ofthe company. All too often in the past theseissues have been debated dogmatically in an"either/or" fashion, without reference to size,technology, product range, market conditions,or corporate objectives. Operationally, the im-portant question is: In what degree shouldorganizational characteristics such as thoseabove be present in different types of com-panies? To answer this question there mustobviously be accurate comparative measuresof centralization of authority, specialization oftask, standardization of procedure, and so on,to set beside measurements of size, technology,

ownership, business environment, and level ofperformance. A program of research aimed atidentifying just such measurements—of or-ganization structure, operating context, andperformance—was inaugurated in the Indus-trial Administration Research Unit of theUniversity of Aston a number of years ago,and continues in the Organizational Behav-iour Research Group at the London BusinessSchool and elsewhere. The object of the re-search is threefold:

(a) To discover in what ways an organiza-tion structures its activities,

(b) To see whether or not it is possible tocreate statistically valid and reliable meth-ods of measuring structural differencesbetween organizations,

(c) To examine what constraints the organi-zation's context (i.e., its size, technologyof manufacture, diffusion of ownership,etc.) imposes on the management struc-ture.

FORMAL ANALYSIS OF ORGANIZATION

STRUCTURE

Measurement must begin with the ideas onwhat characteristics should be measured. Inthe field of organization structure the problemis not the absence of such ideas to distill fromthe academic discourse, but rather variablesthat can be clearly defined for scientific .study.

From the literature we have selectedsix primary variables or dimensions of or-ganization structure:

Specialization—the degree to which an organi-zation's activities are divided into spe-cialized roles.

Standardization—the degree to which an or-ganization lays down standard rulesand procedures.

Standardization of employment practices—the

degree to which an organization hasstandardized employment practices.

FormalJzation—the degree to which instruc-tions, procedures, etc., are writtendown.

Centralization—the degree to which the au-thority to make certain decisions islocated at the top of the managementhierarchy.

Configuration—the "shape" of the organiza-tion's role structure, e.g., whether themanagement chain of command is longor short, whether superiors have limitedspan of control—relatively few subordi-nates—or broad span of control—a rela-tively large number of subordinates,and whether there is a large or smallpercentage of specialized or supportpersonnel. Configuration is a blanketterm used to cover all three variables.

We need to distinguish between thetwo forms of standardization because they arefar from synonymous. High standardizationof employment practices, for example, is a dis-tinctive feature of personnel bureaucracies butnot of work flow bureaucracies.

In our surveys, we have limited our-selves to work organizations employing morethan 150 people—a work organization beinganalyzed as one that employs (that is, pays)its members. We constructed scales from dataon a Hrst sample of fifty-two such organiza-tions, including firms making motor carbumpers and milk chocolate buttons, munici-pal organizations that repaired roads or taughtarithmetic, large department stores, and smallinsurance companies, and so on. Several fur-ther samples duplicated the original investiga-tion and increased the number of organiza-tions to over two hundred.

Our problem was how to apply oursix dimensions—how to go beyond individualexperience and scholarship to the systematicstudy of existing organizations. We decided 21

to use scales in measuring the six dimensionsof any organization—so that the positions of aparticular organization on those scales forma profile of the organization.

Our approach to developing com-parative scales also was guided by the need todemonstrate that the items forming a scale"hang together," that is, they are in some sensecumulative. We can represent an organiza-tion's comparative position on a characteristicby a numerical score, in the same way as anI.Q. score represents an individual's compara-tive intelligence. But just as an I.Q. is a sampleof a person's intelligence taken for com-parative purposes and does not detract fromhis uniqueness as a functioning individual,so our scales, being likewise comparativesamples, do not detract from the uniquenessof each organization's functioning. They do.

however, indicate limits within which theunique variations take place.

We began by interviewing at lengththe chief executive of the organization, whomay be a works manager, an area superin-tendent, or a chairman. Then followed a seriesof interviews with department heads ofvarying status, as many as were necessary toobtain the information required. Interviewswere conducted with standard schedules list-ing what had to be found out.

We were concerned with makingsure that variables concerned both manufac-ing and nonmanufacturing organizations.Therefore we asked each organization, forexample, for which of a given list of poten-tially standardized routines it had standard-ized procedure. (See Figure 1 for sample ques-tions in the six dimensions.)

22

Figure 1SAMPLE QUESTIONS IN SIX DIMENSIONS

SPECIALIZATION

1. Arc the following activities performed by specialists—i.c., those exclusively engaged inthe activities and not in the line chain of authority.^a. activities to develop, legitimize, and symbolise the organizational purpose (e.g., pub-

lic relations, advertising).b. activities to dispose of, distribute, and service the output (e.g., sales, service).c. activities to obtain and control materials and equipment (e.g., buying, stock control).d. activities to devise new outputs, equipment, processes (e.g., R&D, development).e. activities to develop and transform human resources (e.g., training, education).f. activities to acquire information on the operational field (e.g., market research).

2. What professional qualifications do these specialists hold?

STANDARDIZATION

1. How closely defined is a typical operative's task (e.g., custom, apprenticeship, rate fix-ing, work study) ?

2. Are there specific procedures to ensure the perpetuation of the organization (e.g., R&Dprograms, systematic market research) ?

3. How detailed is the marketing policy (e.g., general aims only, specific policy workedout and adhered to) ?

4. How detailed are the costing and stock control systems (e.g., stock taking: yearly,monthly, etc.; costing: historical job costing, budgeting, standard cost system) ?

STANDARDIZATION OF EMPLOYMENT PRACTICES

1. Is there a centra! recruiting and interviewing procedure?2. Is there a standard selection procedure for foremen and managers?3. Is there a standard discipline procedure with set offenses and penalties?

FORMALIZATION

1. Is there an employee handbook or rulebook?2. Is there an organization chart."*3. Are there any written terms of reference or job descriptions? For which grades of em-

ployees ?4. Are there agenda and minutes for workflow (e.g., production) meetings?

CENTRALIZATION

Which level in the hierarchy has the authority toa. decide which supplies of materials are to be used?b. decide the price of the output?c. alter the responsibilities or areas of work of departments?d. decide marketing territories to be covered?

CONFIGURATION

1. What is the chief executive's span of control?2. What is the average number of direct workers per first-line supervisor?3. What is the percentage of indirect personnel (i.e., employees with no direct or super-

visory responsibility for work on the output)?4. What is the percentage of employees in each functional specialism (e.g., sales and

service, design and development, market research)?

On the other hand, because this wasdescriptive data about structure, and was per-sonal to the respondent, we made no attemptto standardize the interview procedures them-selves. At the same time, we tried to obtaindocumentary evidence to substantiate theverbal descriptions.

ANALYSIS OF SIX STRUCTURAL PROFILES

For purposes of discussion we have selectedsix organizations and have constructed thestructural profiles for each one. Two are gov-ernmental organizations. The other four arein the private sector of the economy but thenature of the ownership varies drastically—one is family owned; another is owned jointlyby a family and its employees; the third is asubsidiary of a large publicly owned com-

pany; the fourth is a medium-size publiclyheld company. The number of employees alsovaries widely from 16,500 in the muncipal or-ganization to only 1,700 in the manufacturingorganization owned by the central govern-ment. We selected these six from the manyavailable in order to demonstrate the sortof distinctive profiles we get for particularorganizations and to underscore the way inwhich we can make useful comparisons aboutorganizations on this basis.

With all this diversity, it is not toosurprising that no two profiles look alike.What is surprising, and deserves further com-ment, are the similarities in several of the sixdimensions between several of the six organi-zations (see Figure 2 below).

Organization A is a municipal de-partment responsible for a public service. Butit is far from being the classic form of by- 23

reaucracy described by Weber. By definition,such a bureaucracy would have an extremelyhigh-score pattern on all our scales. That is, itwould be highly specialized with many nar-rowly defined specialist "officers," highlystandardized in its procedures, and highlyformalized, with documents prescribing all ac-tivities and recording them in the files asprecedents. If everything has to be referredupward for decision, then it would also scoreas highly centralized. In configuration itwould have a high proportion of "supportive"or administrative or "non-workflow" person-nel. But clearly this example does not fit thispattern completely; it is below standard inboth specialization and configuration, whichdemonstrates the effectiveness of this methodof determining empirically what profile ac-tually exist5 in overcoming stereotyped think-ing-

Organization B represents a relativelyunstructured family firm, relying more ontraditional ways of doing things. Although ithas the speciaUties usual in manufacturing in-dustry (and hence a comparatively high spe-cialization score) it has minimized standard-ized procedure and formalized paperwork.

Organization C represents "big busi-ness." It is the subsidiary of a very large com-pany, and its profile shows the effects of size:generally, very high scores on specialization,standardization, and formalization, but de-centralized. The distinctively different rela-tionship of centralization is typical. Centrali-zation correlates negatively with almost allother structural scales. The more specialized,standardized, and formalized the organiza-tion, the less it is centralized, or to put it theother way around, the more it is decentralized.Therefore these scales do not confirm the

24

90

80

70

60

Standard 50scores

40

30

20

Ownership:

Figure 2.STRUCTURAL PROFILES OF SIX ORGANIZATIONS

^

Amunicipal

Purpose: public service

Size (employees): 16,500

Market: dominatesmarket

Bfamily

manufacturing

1.350

largestmanufacturer

60%

subsidiary ofpublic major

company

manufacturing

6,500

largestmanufacturer

40%

family andemployees

manufacturing

1,350

marketvery

competitive

Ecentral

government

manufacturing

1,200

monopoly

Fpublic

company

retailing

1,400

marketvery

competitive

Functionalspecialization

Formali-zation DStandardi-

zationStandardization

iof selection,I advancement, etc.

Centrali-zation

Configuration:e.g. % non-work-flow personnel

common assumption that a large organizationand the routines that go with them "passthe buck" upward for decision with elaboratestaff offices; in fact, such an organization isrelatively decentralized.

But it is not only a question of size,as the profile of Organization D shows. Ithas the same number of employees as Organi-zation B, yet its structure is in strikingcontrast and is more nearly that of a muchlarger firm. Clearly the policies and attitudesof the management of an organization mayhave a considerable effect on its structure,even though factors like size, technology, andform of ownership set the framework withinwhich the management must function.

Organization E is an example of amanufacturing unit owned by the govern-ment and is characterized by a high centrali-zation and a high formalization score. Com-parison of the profiles of D and E bringshome the fact that two organizations may be"bureaucratic" but in quite different ways.

Organization F is included as anexample of the relatively low scores oftenfound in retailing.

If we look closely at all the profiles,we can spot several that have pronouncedfeatures in common. For example, organiza-tions C and D both score high on functionalspecialization, formalization, and standardiza-tion. Moreover, by using the statistical methodof principal components analysis, we emergewith a comparatively few composite scoresthat sum up the structural characteristics ofeach organization. Plotting the compositescores reveals several closely related clusters,four of which we will discuss in detail. (SeeFigure 3 for a visual representation of theclusters.)

The first cluster the reader may al-ready have recognized from studying the sixprofiles in Figure 2. It indicates that high spe-cialization, high standardization, and high

formalization are a pattern that prevails inlarge-scale manufacturing industry. Amongthe examples are factories in the vehicle ac-cessory and vehicle assembly industry, thoseprocessing metals, and those mass-producingfoodstuffs and confectionery. Organizationslike this have gone a long way in regulatingtheir employees' work by specifying theirspecialized roles, the procedures they are tofollow in carrying out these roles, and thedocumentation involved in what they have todo. In short, the pattern of scores amongspecialization, standardization, and formaliza-tion denotes the range and pattern of struc-turing. So manufacturing industry tends tohave highly structured work activities—pro-duction schedules, quality inspection proce-dures, returns of output per worker and permachine, forms recording maintenance jobs,etc. We can call this the u/orl^fiow bureauc-racy kind of organization. In Figure 2, Or-ganizations C and D follow this pattern. Thiskind of organization (placed in the lowerright front box in Figure 3) usually has ahigh percentage of "non-workflow" person-nel (employees not directly engaged in pro-duction). Many of these are in the large spe-cialized sections such as production planningand scheduling, quality inspection and testing,work-study, and research and development,which generate standardization and formali-zation.

To some it may be surprising that theworkflow structured organization is relativelydecentralized. The explanation appears to bethat when the responsibilities of specializedroles are laid down, and activities are regu-lated by standardized procedures records,top management can afford to decentralize be-cause the organizational machine will run asit has been set to run, and decisions will bemade in the way they were intended with lessneed to refer them to the top.

Grouped in the upper left back box 25

Figure 3.RELATIONSHIPS BETWEEN THE CLUSTERS

Centralized

Decentral ized

Line Control

Preworkf lowBureaucracy

NascentFull

Bureaucracy

NascentWorkflow

Bureaucracy

FullBureaucracy

WorkflowBureaucracy

ImpersonalControl

Unstructured •*• Structured

26

are organizations with a high centralizationof authority and low structuring of activities.The authority of these organizations is cen-tralized, usually concentrated in a controllingcommittee outside and above the unit itself,and in most cases, such organizations do notstructure daily work activities very much.However, their scores on a scale of proceduresfor standardization of selection, advancement,and so on indicate that they do standardizeor structure the employment activity. Theyhave central recruiting, selecting, discipliningand dismissing procedures, conducted by for-mally constituted boards, appeal procedures,and the like. Such an organization is called apersonnel bureaucracy, since it bureaucratizeseverything relating to employment, but notthe daily work activity to anything like thesame degree. Personnel bureaucracies are typi-cally local or central government departments(for example, a municipal education depart-ment or the regional division of a governmentministry) and the smaller branch factories oflarge corporations.

In general, there is less formal struc-turing of activities in service organizationsthan in manfucturing industries. Also, whenservice organizations are geographically dis-persed over many sites or are publicly owned,the concentration of authority increases andthey become personnel bureaucracies. An ex-ample of the influence of public ownership isthe difference between one motorbus organi-zation owned by a local government authorityand another, one of the largest remaining"private" transport organizations in the coun-try. The central government, through a hold-ing corporation, owns 50 percent of the equityof the private company, but takes no directpart in its operations. They have identicaltechnologies (scores of 6 each on the scale ofworkflow integration) and are in the samesize range (8,618 and 6,300 employees); there-fore they are very close in structural profile,except for the higher concentration of au-thority of the municipal undertaking thatreflects its high dependence on local govern-ment.

A cluster of organizations can be seenin the lower left back box, which at firstglance are low on both structuring and cen-tralization. This minimal structuring and dis-persed authority suggests unregulated chaos.Not so; instead, this indicates that such organ-izations score low on the structural charac-teristics because the scales reflect overtregulation. Such an organization we call animplicitly structured organization. These or-ganizations are run not by explicit regulationbut by implicitly transmitted custom, a com-mon condition in small organizations wheremanagement and ownership overlap. On in-vestigation, this hypothesis was supported.These implicitly structured organizations arccomparatively small factories (within the sizerange of the sample); they tend to be in-dependent of external links and they havescores on concentration of ownership that in-dicate that the operating control of the organi-zation has remained with the owning direc-tors.

The upper right front box of Figure3 includes those organizations that are highon both structuring and centralization, andtherefore show the characteristics of a work-flow bureaucracy (for example, standardiza-tion of task control procedures), as in largemanufacturing corporations, together withthe characteristics of personnel bureaucracy(for example, centralized authority for de-cision making), as in government depart-ments. This was in fact found to be the case. Acentral government branch factory, govern-ment-owned public services, and nationalizedindustries fit this pattern. Thus, we may re-gard them as examples of full bureaucracy.

of different size have different kinds of struc-ture?" Similarly, organizations can rangefrom being technologically very advanced tobeing very simple, or from being owned andcontrolled by one man to being owned bymany people and controlled (i.e., actuallyrun) by none of them. Clearly we must em-ploy as much vigor in measuring the non-structural or contextual aspects of organiza-tions as we did in measuring the structuralfactors. To guide the measuring, we haveidentified the principal dimensions of contextas follows:

Origin and History—whether an organizationwas privately founded, and the kinds orchanges in ownership, location, etc. ithas experienced.

Ownership and Control—the kind of owner-ship (e.g. private or public) and itsconcentration in a few hands or dis-persion into many,

i/̂ rtf^—number of employees, net assets, marketposition, etc.

Charter—the nature and range of goods andservices.

Technology—the degree of integrationachieved in an organization's workprocess.

Location—the number of geographically dis-persed operating sites.

Interdependence—the extent to which an or-ganization depends on customers, sup-pliers, trade unions, any owning groups,etc. Figure 4 lists some examples of theinformation that was obtained.

EXPLORING STRUCTURE AND CONTEXT

ANALYSIS OF ORGANIZATIONAL CONTEXT

Once we have measured organization struc-ture, the question arises, "Do organizations

Now it has become possible to explore in awide range of diverse work organizations therelationship between structural and contextualcharacteristics. How far, for example, is spe-cialization a function of size.'' Note that the 27

question is not "Is specialization a result oflarge size or is it not.-*" Now we are in a posi-tion to rephrase the question: To ti/hat extentis size associated with speciaHzation ? Thecorrelation between size and overall role spe-cialization in the first sample was 0.75—thussize is the most important single element. Butwhat part do other factors play? The correla-tion of "Workflow Integration"—a scale thathas been developed for measuring compara-tive technology (see Figure 4)—and overallspecialization was 038. This is not very largein itself, hut since there is no relationshipbetween size and technology (correlation of0.08), we should expect an analysis usingboth dimensions to produce a higher relation-ship than size alone. This is in fact what hap-pens, and the multiple correlation of size withtechnology and specialization is 0.81. Thusknowing an organization's score on our scalesof size and technology, we can predict towithin relatively close limits what its speciali-zation score will be. Likewise, knowing anorganization's dependence on other organiza-tions and its geographical dispersion oversites tells a great deal about the likely cen-tralization of authority in its structure (multi-ple correlation of 0.75).

These relationships of context andstructure we have found to be reasonablystable in surveys of different samples. Wheredifferences in the relationships have beenfound they have been easily related to thevarying characteristics of the samples studied.In general, the framework has been adequatefor thinking about the degree of constraintthat contextual factors place on the design oforganizational structures. The degree of con-straint appears to be substantial (about 50 per-cent of the variability between structures maybe directly related to contextual features suchas size, technology, interdependence, etc.) butit allows considerable opportunities for choice

28 and variation in particular organizations based

on the attitudes and views of the top manage-ment.

In other words, context is a determin-ing factor—perhaps overall the determiningfactor—designing, shaping, and modifying thestructure of any organization. But withinthese contextual limits, top management hasplenty of leeway left to make its influencefelt—50 percent is a major margin of freedom.With this approach, we can discuss a numberof basic issues of organizational design, such asthose indicated at the beginning of this article.And we can conduct the discussion on thebasis of a number of comparative empiricalfindings—which inevitably underline therange of variation possible—rather thanmerely on individual views and experiences—which inevitably tend to dogmatic overgen-eralization. The two issues we'll focus onare the relationship between size and formali-zation (paperwork procedures) and the effectsof technology on organizadon structure.

FORMALIZATION OF PROCEDURES

Using the measures that we have developed,we can explore systematically the relationshipbetween a structural feature of organization,such as the degree of formalization of paper-work procedures, and a contextual one, suchas size of operation—indicated by the numberof personnel employed.

Formalization indicates the extent towhich rules, procedures, instructions, andcommunications are written down. How doesthe weight of documentation vary from or-ganization to organization.-^ Definitions ofthirty-eight documents have been assembled,each of which can be used by any knownwork organization. They range from, for ex-ample, organization charts, memo forms,agendas, and minutes to written terms ofreference, job descriptions, records of main-

Figure 4SOME CONTEXTUAL SCALES

Wori(JIow integration

A highly workflow-integratcd technology is signified by:1. Automatic repcat<ycle equipment, self-adjusting.2. Single-purpose equipment.3. Fixed "line" or sequence of operations. '4. Single input point at commencement of "line."5. No waiting time between operations.6. No "buffer stocks" between operations.7. Breakdown anywhere stops workflow immediately.8. Outputs of workflow (production) segments/departments become inputs of others, i.e.,

flow from department to department throughout.9. Operations evaluated by measurement techniques against precise specifications.A technology low in workflow integration is at the opposite extremes on these items.

Vertical integration (component scale of dependence)

1. Integration with suppliers: ownership and tied supply/long contracts/single orders.2. Sensitivity of outputs volume to customer influence: outputs for schedule and call off/

order/stock.3. Integration with customers: ownership and tied market/long-term" contracts/regular

contracts/single orders.4. Dependence of organization on its largest customer: sole/major/medium/minor outlet.5. Dependence of largest customer on organization: sole/major/medium/minor supplier.

Dependence

1. Status of organizational unit: hranch/head branch/legal subsidiary/principal unit.2. Unit size as a percentage of parent-group size.3. Representation on policy-making boards.4. Number of specialist services contracted out.5. Venical integration.

tenance performed, statements of tasks doneor to be done on the output, handbooks, andmanuals of procedures. Scores range fromfour in a single-product foodstuffs factorywhere there are few such documents to 49 in ametals processing plant where each routineprocedure is documented in detail.

A large range of differences in paper-work usage is found in all our surveys. Whatrelation does this have to the size of organiza-tion? The correlations found range from 055to 0.83 in different samples, demonstrating astrong tendency for the two to go together

but still allowing many exceptions. Figure 5gives examples of three typical organizationsand also of two organizations that have con-siderably less paperwork, and two that haveconsiderably more, than would be expectedfrom their size alone.

The four unusual organizations em-phasize the range of variation possible andlead us to look for factors other than size inexplanation. Ownership patterns may play apart, the government-owned plant havingmore formalization than would be expected,the family retail firm having less. But the 29

Figure 5.FORMALIZATION: EXAMPLES FROM

SEVEN ORGANIZATIONS

3 Typical Organizations

Size

Ownership

Formalizationscore

Large(6,500 emplcyees)Limited company

Purpose Manufacturing

Medium(2.900)Municipal

Smail (300)

Subsidiaryof a iimitedcompany

Public service Foodmanufacturing

49

4 Unusual Organizations

30

SizeOwners iiip

PurposeFormalization

score

Large (16,500)MunicipaiProfessional Service

25

SizeOwnersiiip

PurposeFormaiization

Medium (1,400)FamiiyRetailing

Smail (300)GovernmentManufacturing

37

Medium (1.400)FamilyManufacturing

45

family manufacturing firm has considerablymore, so the attitudes of its top managementand their belief in the necessity for formalprocedures becomes relevant. Similarly, thepresence of a large number of professionalstaff in the municipal service is accompaniedby the belief that they do not require such ahigh degree of control on their jobs becauseof their professional training.

One further important factor relat-ing to formalization is clear: In our compara-tive surveys of international samples we havefound that formalization is the one aspect ofstructure that clearly distinguishes U.S. andCanadian organizations from British ones.Size for size. North American organizationshave a formalization score that is, on theaverage, 50 percent greater than their Britishcounterparts. Since the relationship with sizeholds up in both cultures, and since in gen-eral, American organizations are bigger thanBritish ones, the average American manageris subjected to considerably more controlthrough paperwork procedures than his Brit-ish opposite number. The reason for this cul-tural difference we can only speculate on. Itmay be that in the more homogeneous Britishculture more things can be taken for granted,whereas in the more heterogeneous Americanculture, controls even in smaller organizationsmust be spelled out formally to be effective.

THE EFFECTS OF TECHNOLOGY ON

ORGANIZATIONS

Does technology determine organization? Isthe form of organization in a chemical plant,for instance, dictated by the fact that it is achemical plant—that is, by its highly auto-mated equipment and continuous flow proc-ess.'' And is the organization of a batchproduction engineering factory shaped by theway its work is done—that is, by its rows of

machine tools and its varying batches.''This is a contentious question. It also

asks how far the number of levels of man-agement, the centralization of major decisions,the proliferation of standard procedures, thedevelopment of specialist "service" sections,and the many other features of the structureof an organization depend on its technology.

In a study that has had considerableimpact both on management and behavioralscience writers, Joan Woodward in Manage-ment and Technology maintains that "It waspossible to trace a cause and effect relation-ship between a system of production and itsassociated organizational pattern and, as aresult, to predict what the organizational re-quirements of a firm are likely to be, given itsproduction system."

Woodward took this view as a resultof comparing as many as 80 firms on a unitand small batch, large batch and mass, andflow process classification. She found, for ex-ample, that the line of command from thechief executive of each firm was shortest inunit and small batch firms, lengthened inlarge batch and mass, and was longest inprocess firms. Another example of this rela-tionship was the ratio of managers to totalpersonnel, which also increased from unit upto process technology.

In contrast, it appeared that the spansof control of the first-line production supervi-sors were widest in large batch and mass pro-duction (average 46), but dropped away inunit and small batch on the one side (toaverage 22) and in process industries to anaverage of 14. Other suggested examples ofthis pattern were clear definition of dutiesand amount of paperwork, which were alsogreatest in large batch/mass technology.

Woodward's study immediatelyraised the question of whether it was possibleto develop general management principles oforganization, as advocated by such writers as 31

Fayol, Urwick, Gulick, and Brown. Wood-ward maintained that this was now no longerpossible. The principles that they had ad-vocated—such as the necessity of clear lines ofauthority and responsibility (one man, oneboss, etc.) and limited spans of control foreffective supervision—might well apply inlarge batch and mass production forms, forthey rested primarily on the experience ofmanagers and consultants in this range oftechnology. But outside this range, in unit/jobbing and process technologies, differentprinciples probably would be required.

The studies that we have carried outinclude replications of the Woodward work,since technology is one of a range of con-textual factors that we examined. Equippedwith a much more comprehensive analysis oforganization structure than Woodward wecan explore much more systematically whatthe relative effects of technology are on or-ganization structure.

In addition to using Woodward'scategories, the present research program alsodeveloped a measure of technology basedon the items in Figure 4 and labeled"Workflow Integration." This discriminatesamong organizations on the basis of the ri-gidity or flexibility of the sequence of opera-tions carried out by the equipment on thework. This has affinities with the Woodwardclassification but is not equivalent to it. Thusit was possible to examine the relationships ofthese two measures with the dimensions oforganization structure.

Did the organizations with the mostprocess-oriented technologies have the largestscores on specialisation of management roles,standardization of procedures, etc.? In thefirst study, taking manufacturing organiza-tions only, a correlation of 0.52 was foundbetween Woodward technology and stan-dardization. This would suggest considerable

32 support for the proposition that the tech-

nology of manufacture has considerable bear-ing on the management structure. But theadvantage of a survey that takes a range offactors into account becomes immediately ap-parent when we consider the relationship ofother factors. The correlation of size withspecialization is 0.83, and with standardiza-tion it is 0.65, both of which are considerablyhigher than the technology relationships.When we recall that size and technology arecorrelated among manufacturing organiza-tions, and the effects of size are discounted bythe technique known as partial correlation,then the remaining relationships of technol-ogy to structure are slight indeed (0.26 withspecialization, 0.07 with standardization). Ingeneral, our studies have confirmed that therelationship of technology to the main struc-tural dimensions in manufacturing organiza-tions are always very small and play a second-ary role relative to other contextual featuressuch as size and interdependence with otherorganizations (such as owning group, cus-tomers, suppliers, etc.).

Where technology is shown to berelated to manufacturing organization struc-tures is in a number of highly specific jobsratios that we consider under the heading of"configuration" (see Figure 1).

The ratio of subordinates to first-linesupervisors is the only point at which theWoodward results and the present resultsagree exactly. Supervisors have most subordi-nates in large batch/mass production. This iswhere each foreman often has forty or fiftyworkers turning out large quantities of stand-ard items, whereas in jobbing or in processplants he has a smaller group.

Hence the proportion of employees ininspection work and in maintenance work isalso greatest at the large batch stage, andlower in both unit production and processing.

The proportions in production con-trol are highest from unit or jobbing to the

mass stage, dropping away in process tech-nologies where production control is builtinto the processes themselves and does notrequire the clerical and progress-chasing ef-fort imposed by complex assemblies.

The detailed examination of thesefeatures is interesting, but it is of much lessconsequence than their implications taken asa whole. What is distinctive about them, asagainst the range of organizational character-istics not related to technology ?

The first-mentioned characteristic,ratio of subordinates to first-line supervisors,is an element of organization at the level ofthe operative and his immediate boss. Ob-viously, the number of men a supervisor re-quires to run a row of lathes differs fromthe number he requires to run the more con-tinuous integrated workflow of an automatictransfer machine. Thus, subordinate/supervi-sor ratio is an aspect of organization thatreflects activities directly bound up with thetechnology itself. Also, it is the variety ofequipment and products in batch productionthat demands larger numbers of inspectorsand of maintenance personnel; unit andprocess technologies are less demanding inthis respect. It is the complexity of technol-ogy both in variety of equipment and insequences of operations that requires relativelylarge numbers o£ production control personneloutside the more automatic process-type tech-nologies.

The point is made more clearly bythe contrast with, say, activities such as ac-counting or market research that are not di-rectly implicated in the work technologyitself—where research results show no con-nection with the technological factors.

In this light, it may be suggested thatthe connections between the workflow inte-gration measure of technology and the num-bers engaged in employment and in purchas-ing and warehousing may be due to the

intermediate position of these activities. Theyare closer to the production work itself than,for example, accounting, but not as close asinspection.

So among the extensive range oforganizational features studied, only thosedirectly centered on the production workflowitself show any connection with technology;these are all "job-counts" of employees onproduction-linked activities. Away from theshop floor, technology appears to have littleinfluence on organization structure.

FURTHER DEVELOPMENTS

Our on-going research program is exploringnew areas. For example, what changes in or-ganization structure take place over time?In one small study that we have already un-dertaken, 14 organizations were restudiedafter a period of four to five years. The organi-zations were all manufacturing firms andworkflow bureaucracies in terms of Figure 3.There was an overall decrease in size of 5 to 10percent, as measured by number of employees,but the other contextual features remainedconstant. In spite of this stability there was aclear tendency for structuring scores to in-crease (more specialization, standardization,formalization), but with a decrease in central-ization. If within certain limits—imposed bythe organization's context—top managementmay be able to accentuate one of two broadstrategies of control, either to retain most de-cision making at the top and put up withwider spans of control or to delegate decisionsto lower-level specialists and rely on proce-dures and forms to maintain control, then onthis evidence they are consistently choosingthe second alternative, at least in manufac-turing.

Clearly, more evidence is required be-fore the significance o£ this trend can be 33

evaluated. And evidence is also required onthe processes by which organizaiion struc-tures get changed. What are the interdepart-mental power struggles, the interpersonalconflicts, the pressures for and resistance toproposed changes that make up the evolv-ing structure as it responds to changes in theorganization's context? Studies have alreadybeen carried out that show a clear relationshipof structure to organizational climate andmorale. One study, for example, has shownthat greater structuring of activities is accom-panied by more formal interpersonal relation-ships, and greater centralization of authorityleads to a greater degree of "social distance"between the levels in an organization—socialdistance being the degree to which a managerregards his supervisor as boss only and not asa colleague as well. These important con-comitants of structure need to be more fullyinvestigated.

IMPLICATIONS OF THE RESEARCH

It has long been realized that an organiza-tion's context is important in the developmento£ its structure. What is surprising is the mag-nitude of the relationships outlined above.People often speak as if the personalities of thefounder and directors of a business had beenthe most important influence in creating thepresent organization. Other people point tohistorical crises or to the vagaries of govern-ment policy as being the stimuli that causedthe business to develop in a particular way.Though we would certainly expect personal-ity, events, and policies to play their pan, thefact that information relating solely to anorganization's context enables us to makesuch good predictions indicates that contextis more important than is generally realized.

The manager of the future will haveavailable to him ever increasing amounts of

34 information, and will be anxious to know

what signals he should primarily attend to.If he knows what is crucial to organizationfunctioning he can manage by exception.What types and amounts of environmentalchange can occur before internal adjustmentsmust be made to maintain performance?

The fact that there are now valid andreliable comparative measures of organiza-tion context and structure placed in a general-izable framework of relationships enables themany managers who have collaborated inthese surveys to do a better job of placingtheir organizations in relation to others andto work toward evaluating the costs andbenefits of the forms of management struc-ture that could be developed to enable them tomeet the challenges of the future.

SELECTED BIBLIOGRAPHY

The full details of the research described in thispaper are given in a series of papers in Adminis-trative Science Quarterly.

The details of the way in which thedimensions of structure are developed and theorganizational profiles built up is given in D. S.Pugh et al., "Dimensions of OrganizationalStructure," A.S.Q. 1968, No. 18, pages 65-105.The relation of structure to the organizations'context is given in D. S. Pugh et al., "TheContext of Organizational Structure," A.S.Q.1969, Vol. 14, pages 47-61. The classification oforganizations is discussed more fully in D. S.Pugh ei al., "An Empirical Taxonomy of Struc-tures of Work Organizations," A.S.Q. 1969, Vol.14, pages 115-126. The particular relationshipsbetween the operating technology and the organi-zation structure are detailed in D. J. Hickson,D. S. Pugh, and D. C. Pheysey, "OperationsTechnology and Organization Structure: an Em-pirical Reappraisal," A.S.Q. 1969, Vol. 14, pp.378-397.