Daniel Sam, SAM09122798, Business Functions, Tony Nutt

From: Daniel Sam

To: Manager
Date: 22/02/2010
Title: How is the typical large corporation of today organised in contrast to how that same organisation
was probably organised in the 1970’s

Introduction
This report will be looking at organisational structures, and will also compare the way a typical large
corporation was organised in the 1970’s to today. In the 1970’s most large organisations were
structured around bureaucratic types and tall structures, but with the emergence of technologies and
increase in corporation size, organisational structure has changed over the years to make them more
leaner and fit for the markets in which they operate. We will be looking at the various types in the
following paragraphs and see how they now compare to the 1970’s.

Organisations can normally be defined as a group of people working together to achieve a common
goal or objective. Organisations have to be structured to enable the free flow of operations and to
ensure that there is a hierarchical structure to show leadership and command. It defines how job tasks
are formally divided, grouped, and coordinated to produce products and services according to
organisational missions and objectives.

Organisational structures normally differ from organisation to organisation and this largely depends on
the individual organisations Strategy; Organisation Size; Technology and the Environment.

‘’Structure is the pattern of relationships among positions in the organisation and among members of
the organisation. Structure makes possible the application of the process of management and creates a
framework of order and command through which the activities of the organisation can be planned,
organised, directed and controlled.’’ –Mullins, Laurie J, (2005) Management and Organisational
Behaviour.

However, with increasing organisations sizes it has become more important to carefully design
structures that will keep up with the times and can adapt easily to changes. ‘’There is also need for a
continual review of structure to ensure that it is the most appropriate form for the particular
organisation, and in keeping with its growth and development. This is likely to be of particular

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importance for the very large companies such as, for example, British Gas.’’ –Mullins, Laurie J,
(2005) Management and Organisational Behaviour.

‘’The government’s decision to introduce competition to the entire gas market in Great Britain has
stimulated rapid and profound change in the structure and regulation of the gas industry. Change on
this scale, without precedent elsewhere, was bound to require major change within British Gas. New
systems and business practices had to be designed and implemented throughout our organisation and
the cultures and values, which served the company well in the past, had to adapt to the new
competitive environment. By far the most significant change was the completion of the demerger…
Two independent companies, BG plc and Centrica plc, are now launched. Both are endowed with the
assets and capabilities to shape their very different roles in the era of competitive gas markets, and
each can now focus more sharply on its respective challenges and opportunities, benefiting customers,
employees and shareholders.’’ – Richard V. Giordano, (Chairman BG plc) Annual Review (1996)

In every organisation there are certain elements that define that particular organisations structure but
across board it can be argued that the elements that define an organisations structure are similar is all
aspects.

An organisation structure, according to Mintzberg (1979) is:

‘The sum total of the ways in which it divides its labour into distinct tasks and then achieves
coordination between them.’ – Cole G A, Management, Theory and Practice. (2000)

According to Drucker it is the correct design of structure which is of most significance in determining
organisational performance
‘’Good organisation structure does not by itself produce good performers. But a poor organisation
structure makes good performance impossible, no matter how good the individual managers may be.
To improve organisation structure...will therefore improve performance.’’ – Drucker P.F. The Practice
of Management, Heinemann Professional (1989) p.223.

The key elements that define an organisations structure can therefore be seen as follows:
1. Work Specialisation – This looks at the extent or degree to which tasks are further subdivided
into separate jobs
2. Departmentalisation – Considers the basis on which jobs or tasks will be grouped together so
as to develop some form of synergy within the organisation.

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3. Chain of Command – This sets the Hierarchy of the organisation and sets out a formal system
of responsibility and establishes whom individuals and groups report to.
4. Span of Control – This correctly identifies the length to which authority can be extended, and
looks at the issue of how many individuals a manager can effectively and efficiently direct.
5. Centralisation and Decentralisation – Clearly a very important element in any organisations
structure as it addresses the question of where the decision making authority will lie.
6. Formalisation – Another key element that defines an organisations structure as it considers the
degree to which rules and regulations will be used to direct employees and managers.

In looking at a large corporation of today as compared to one in the 1970’s, the key elements still
remain the same, but the way in which they are implemented has changed dramatically.

The last century saw the perfection of the bureaucracy - a form of organization that has been
enormously successful and is the result of thousands of years of trial and error evolution. Max Weber
outlined the key characteristics of a bureaucracy:

1. specification of jobs with detailed rights, obligations, responsibilities, scope of authority

2. system of supervision and subordination
3. unity of command
4. extensive use of written documents
5. training in job requirements and skills
6. application of consistent and complete rules (company manual)
7. assign work and hire personnel based on competence and experience

Today, many of these principles seem obvious and commonplace. However, they are all inventions –
organizations did not always have these features.

Today we also think of bureaucracies as inefficient, slow and generally bad. In Weber's time, they
were seen as marvellously efficient machines that reliably accomplished their goals. And in fact,
bureaucracies did become enormously successful, easily out-competing other organization forms such
as family businesses and adhocracies. They also did much to introduce concepts of fairness and
equality of opportunity into society, having a profound effect on the social structure of nations.

However, bureaucracies are better for some tasks than others. In particular, bureaucracies are not well-
suited to industries in which technology changes rapidly or is not yet well-understood. Bureaucracies

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excel at businesses involving routine tasks that can be well-specified in writing and don't change
quickly. - http://www.analytictech.com/mb021/bureau.htm (assessed 21/02/2010)

The Matrix organisation is a combination of functional departments which provide a stable base for
specialised activities and a permanent location for members of staff; and units that integrate various
activities of different functional departments thereby combining vertical and lateral lines of
communication and authority. Mostly, Matrix structures came about as a result of coordination
problems in highly complex industries such as aircraft manufacture where functional and product
types of structure have not been able to meet organisational demands for a variety of key activities and
relationships arising from the required work processes.

A Matrix form helps to clarify who is responsible for the success of the project; it also encourages
functional managers to understand their contributive role in the organisations productive efforts which
ensures that one of the principal disadvantages of the purely functional form is avoided, i.e. individual
empire building by the functional heads.

The Matrix form probably offers the best answer to date to the issue of handling the tension between
the need to differentiate and the need to integrate the complex activities of modern organisations. -
Cole G A, Management, Theory and Practice. (2000)

In contrast to the 1970’s, most large corporations today will adopt a virtual approach to conducting
business and this has been the case in rapidly changing economic climates mixed with technological
advances and improvements.

A Virtual Organisation can be described as ‘’ an organisation that has few full-time employees and
temporarily hires outside specialists to work on specific opportunities, then disband when objectives
are met.’’ – Daft R.L. Management (2003) p.335

Lipnack & Stamps (1997) define a virtual team as "a group of people who interact through
interdependent tasks guided by common purpose" that "works across space, time, and organizational
boundaries with links strengthened by webs of communication technologies" (p. 7). - Lipnack, J., &
Stamps, J. (1997). Virtual teams: Researching across space, time, and organizations with technology.
New York: John Wiley and Sons.

A virtual organisation has certain characteristics and these are outlined below

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• Virtual Organisations exists for a specific purpose, e.g. to implement a long-term marketing
strategy, to launch a new groundbreaking product or to achieve some scientific goal. Non-
standard product is the end-goal of a Virtual Organisation. VOs quickly deliver
products/services that are innovative and customized.
• Membership and structure of a VO evolve over time.
• Switching: VO members can switch from one project to another.
• Dynamic VOs have a capability to unite quickly.
• Usually members of a VO have shared responsibilities, shared control, shared leadership,
shared access to computing resources and services and shared loyalty.
• Resources, services and people that comprise a VO can be single- or multi-institutional,
homogenous or heterogeneous.
• Principle of synergy (many-to-one): VO exhibits a unifying property because it is constituted
from different organizational entities that create an effect of a single organization.
• Principle of divergence (one-to-many): a single organization can exhibit multiplication
property by participating in many VOs at the same time.
• Virtualness is a matter of degree rather than a categorical property of an organization.
Organization can choose to virtualise its different parts, like production core, front end or back
end.
• The presence of IT infrastructure is a necessary but not sufficient condition for a VO
formation. Examples of IT that can be used are email, electronic file transfer, telephone, fax,
screen sharing applications, videoconferencing, groupware tools, project management
applications etc.
• VO is dependent on electronic linking, lies on the electronic space and is characterized by
loose coupling.
• Spatial dispersion: VOs can be formed across country borders throughout the world.
- www.sics.se/~olgace/VO1_Olga.doc (assessed 21/02/2010)

Boundaryless Organisations

A model that views organizations as having permeable boundaries. An organization has external
boundaries that separate it from its suppliers and customers, and internal boundaries that provide
demarcation to departments. This rigidity is removed in boundaryless organisations, where the goal is

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to develop greater flexibility and responsiveness to change and to facilitate the free exchange of
information and ideas. The boundaryless organization behaves more like an organism encouraging
better integration between departments and closer partnerships with suppliers and customers. The
concept was developed at General Electric and described in the book The Boundaryless Organization:
Breaking the Chains of Organizational Structure by Ron Ashkenas et al, which was published in 1995.
- http://dictionary.bnet.com/definition/boundaryless+organization.html (assessed 21/02/2010)

The main concepts of a Boundaryless Organisation are to (i) Eliminate vertical (hierarchical) and
horizontal (departmental) internal boundaries and (ii) To breakdown external barriers to customers and
suppliers.

Most managers of today advocate for a boundaryless structure because there is an ease of
communications and less obstacles when trying to achieve organisational objectives, it can be argued
that it is sometimes the opposite of bureaucracy and facilitates faster decision making within
organisations.

There are also Mechanistic and Organic structural models and we will be looking at the contrast
between the two models. In contrasting between the two models, the dimensions we will be looking at
are; Stability, Specialisation, Formal Rules and Authority.

In Mechanistic structures Stability tends to be quite rigid, in which change is unlikely whereas in
Organic structures change in very likely.

Many Specialists tend to be present in Mechanistic structures and with Organic structures there are
many generalists.

Rigid rules exist in Mechanistic structures whilst there is considerable flexibility in Organic structures.

With authority there is a centralised form in Mechanistic structures where authority is centralised in a
few top people whereas in Organic structures it tends to be more decentralised, diffused throughout the
organisation.

MECHANISTIC MODEL ORGANIC MODEL

• High Specialisation Cross-Functional Teams

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• Rigid Departmentalisation Cross- Hierarchical Teams

• Clear Chain of Command Free Flow of Information
• Narrow Spans of Control Wide Spans of Control
• Centralisation Decentralisation
• High Formalisation Low Formalisation

- Robbins Stephen P. Organisational Behaviour, 11th Ed, Prentice Hall

Behavioural Implications of Different Organisational Designs.

Organisational design or structures do differ a great deal from organisation to organisation and
generally the size of an organisation also affects its structure, as an organisation grows larger it
becomes more Mechanistic as it will require more units of specialization, more vertical level and more
rules and regulations to cope with the size.

Robbins (2005) identified Organizational Designs and Employee Behavior and came up with the ff:

• Work specialization contributes to higher employee productivity, but it reduces job

satisfaction.
• The benefits of specialization have decreased rapidly as employees seek more intrinsically
rewarding jobs.
• The effect of span of control on employee performance is contingent upon individual
differences and abilities, task structures, and other organizational factors.
• Participative decision making in decentralized organizations is positively related to job
satisfaction.

Organizations might design their structure for a variety of reasons and the most common of them
being Strategic, Technology, and Environment.

STRATEGY – Can be divided into 3 parts namely;

(i) Innovation Strategy - Is one that emphasizes the introduction of major new products and
services. Its structural option would be Organic having a loose structure; low specialization,
low formalization and decentralized.

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(ii) Imitation Strategy – this seeks to move into new products or new markets only after their
viability has already been proven, the structural option for this would be Mechanistic having
tight controls; extensive work specialization, high formalization and high centralization.
(iii) Cost-Minimization Strategy – Emphasises tight cost controls, avoidance of unnecessary
innovation or marketing expenses, and price cutting. Mostly characterized by both
Mechanistic and Organic having a mix of loose with tight properties; tight controls over
current activities and looser controls for new undertakings.

TECHNOLOGICAL - characterized by tall, departmentalized structures and formalization in

organizations.

ENVIRONMENT – This considers the institutions or forces outside the organization that potentially
affect the organizations performance.

CONCLUSION

Hence it can be seen that organizations tend to evolve with time alongside technologies and changing
environments. Back in the 1970’s most organizations were of the bureaucratic structures and having
tall structures. With the shift in the way consumers demand goods and services, organizations have to
change their structures to be able to cope with rising demand and to be competitive as was evidenced
in the example with British Gas.

BILIOGRAPHY

1. Cole G A, Management, Theory and Practice. (2000)

2. Daft R.L. Management (2003)
3. Drucker P.F. The Practice of Management, Heinemann Professional (1989)
4. Lipnack, J., & Stamps, J. (1997) Virtual teams: Researching across space, time, and
organizations with technology, New York: John Wiley and Sons.
5. Mullins, Laurie J, (2005) Management and Organisational Behaviour.
6. Richard V. Giordano, (Chairman BG plc) Annual Review (1996)
7. Robbins Stephen P. Organisational Behaviour, 11th Ed, Prentice Hall
8. www.sics.se/~olgace/VO1_Olga.doc
9. http://dictionary.bnet.com/definition/boundaryless+organization.html
10. http://www.analytictech.com/mb021/bureau.htm

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