Thursday, October 18, 2012

Reading :: The Structuring of Organizations

The Structuring of Organizations
By Henry Mintzberg

 I've been researching adhocracies lately, beginning with Toffler's book Future Shock, and one of the names that often comes up is Henry Mintzberg's. Mintzberg, a management professor at McGill University has published a remarkable number of books; in his 1979 synthesis The Structuring of Organizations, he synthesizes the research on how organizations are structured and why.

I'm no professor of management, and I doubt I'll be able to do justice to this book in a review. But the book itself is not intimidating or difficult. Mintzberg patiently and clearly synthesizes the extant management literature, pointing out its gaps and developing a systematic account of how organizations structure themselves under different circumstances. It's a fascinating read.

But it's also an introduction to an entire subfield, so Mintzberg cautions us in the preface to read it in order. The fundamental concepts laid down in earlier chapters are necessary for understanding the later chapters. Mintzberg courteously puts the most important information in bold type, a convention that I'll preserve in the quotes below.

Organized human activity, Mintzberg tells us in Chapter 1, requires two opposing things: "the division of labor into various tasks to be performed and the coordination of these tasks to accomplish the activity. The structure of an organization can be defined simply as the sum total of the ways in which it divides its labor into distinct tasks and then achieves coordination among them" (p.2). In fact, Mintzberg identifies five fundamental coordinating mechanisms: "mutual adjustment, direct supervision, standardization of work processes, standardization of work outputs, and standardization of worker skills. These should be considered the most basic elements of structure, the glue that holds organizations together" (p.3).

Those mechanisms are as follows:

  1. Mutual adjustment: "achieves the coordination of work by the simple process of informal communication" (p.3)
  2. Direct supervision: "achieves coordination by having one individual take responsibility for the work of others" (pp.3-4)
  3. Standardization of work processes: achieved "when the contents of the work are specified, or programmed" (p.5; cf. Castells on programmable labor)
  4. Standardization of outputs: achieved "when the results of the work, for example, the dimensions of the product or the performance, are specified" (p.6)
  5. Standardization of skills: achieved "when the kind of training required to perform the work is specified" (p.6)
Mintzberg furthermore claims that these "seem to fall in a rough order": "As organizational work becomes more complicated, the favored means of coordination seems to shift... from mutual adjustment to direct supervision to standardization, preferably of work processes, otherwise of outputs, or else of skills, finally reverting back to mutual adjustment" (p.7). In other words, work coordination becomes more standardized and controlled as the work becomes more complex—but at a certain point, work becomes too complex to be adequately coordinated via these controlled mechanisms; they become "impossible to standardize" (p.8). At that point, a highly complex organization reverts to informal communication, at least in some aspects of its work. This final development is not a shock if you've read Toffler, or field research into organizations for that matter (such as, ahem, my books). But Mintzberg gives us tools to systematically think through how organizations get there—as well as well-sourced research supporting each point. 

To better explore the five different organizational structures that spring from these types of coordination, Mintzberg introduces nine "design parameters, the basic elements used in designing organizational structures" (p.14). These include:

individual parameters such as
  • job specialization
  • behavior formalization
  • training and indoctrination
superstructure parameters such as
  • unit grouping
  • unit size
lateral linkage parameters such as 
  • planning and control systems
  • liaison devices
and decision-making parameters such as 
  • vertical decentralization
  • horizontal decentralization (p.14)
In Chapter 2, Mintzberg tours the five basic parts of the organization: 
  • The operating core, "wherein the operators carry out the basic work of the organization";
  • The strategic apex, including "those at the very top of the hierarchy, together with their own personal staff";
  • The middle line, which "joins the strategic apex to the operating core through the chain of command";
  • The technostructure, "wherein the analysts carry out their work of standardizing the work of others, in addition to applying their analytical techniques to help the organization adapt to its environment"; and
  • The support staff, which "supports the functioning of the operating core indirectly" (p.19)
In fact, Mintzberg writes that large organizations tend to take on a great number of support units outside their core work, providing services that the organizations could easily buy from outside suppliers. Why? Mintzberg speculates that the support staff "reflects the organization's attempt to encompass more and more boundary activities in order to reduce uncertainty, to control its own affairs" (p.32). (Note that this trend reversed late in the 20th century, and now the trend is to outsource noncore functions). 

In Chapter 3, Mintzberg describes the organization as a system of flows, including flows of authority, material, information, and decision processes. These flows include "rich networks of informal communication [that] supplement and sometimes circumvent the regulated channels" (p.46). And "the organization takes on the form of a set of work constellations, quasi-independent cliques of individuals who work on decisions appropriate to their own level in the hierarchy" (p.54). Such work constellations are sometimes functionally grouped, sometimes crosscut (p.56). 

With this background, Mintzberg is ready in Part II to discuss the design parameters. First up, in Chapter 4, is job specialization. Mintzberg differentiates between horizontal job specialization, which separates work by function (pp.69-70), from vertical job specialization, which "separates the performance of the work from the administration of it" (p.71). In fact, "jobs must often be specialized vertically because they are specialized horizontally" (p.72): because the task becomes narrow, the worker doesn't have the perspective to control it. Interestingly, Mintzberg argues that specialization in the 1950s had a lot to do with the scarcity of labor—since employers had to hire unskilled workers (p.74). (Today, labor is much less scarce and much more likely to be educated; does this mean that we can expect a swing away from generic labor and back to self-programmable labor, to use Castells' terms?)

Let's pause to briefly note that Mintzberg doesn't discuss extra-organizational workers at all (e.g., independent or dependent contractors). The discussion is entirely about what goes on inside a given organization. I'm not criticizing this decision—after all, the book is on organizations, not networks of organizations, and Mintzberg also makes it clear that in 1979 the trend was to do work in-house rather than via suppliers when possible. But the omission does suggest that we will need to look farther than this excellent book to understand the current dynamic in organizations.

Back to the book. In Ch. 5, Mintzberg discusses behavior formalization via the mechanisms of job, work flows, and rules. In all cases, "organizations formalize behavior to reduce its variability, ultimately to predict and control it" (p.83; cf. Zachry & Thralls). In fact, "organizations that rely primarily on the formalization of behavior to achieve coordination are generally referred to as bureaucracies" (p.84). Drawing on Weber and others, Mintzberg says that "we can define a structure as bureaucratic—centralized or not—to the extent that its behavior is predetermined or predictable, in effect, standardized" (p.86). Drawing on Burns and Stalker, Mintzberg argues that bureaucracies are good for addressing stable circumstances, but bad for innovation or adaptation to changing environments (p.86); for those requirements, one needs a more networked structure. Mintzberg summarizes: "In effect, whereas bureaucratic structure emphasizes standardization, organic structure as described by Burns and Stalker is built on mutual adjustment. However, we shall here define organic structure by the absence of standardization in the organization... we put bureaucratic and organic structure at two ends of the continuum of standardization" (p.87).

Mintzberg also notes that one can substitute training for formalization—that is, an organization can try to control behavior either directly (through procedures and rules) or indirectly (by hiring professionals that have been trained to do work in a standardized way) (p.101). But "the professional organization surrenders a good deal of control over its choice of workers as well as their methods of work to the outside institutions tht train and certify them and thereafter set standards that guide them in the conduct of their work" (p.102). (One side effect, noted by Toffler in 1970, is that professionals begin to hold allegiance to their professions rather than their organizations.)

On to Ch.7, on unit grouping. As Mintzberg argues, "grouping is a fundamental means to coordinate work in the organization" (p.106). It 
  1. "establishes a system of common supervision among positions and units"
  2. "typically requires positions and units to share common resources"
  3. "typically creates common measures of performance"
  4. "encouages mutual adjustment" (p.106)
Unit size (Ch.8) also has an impact on coordination. For instance, "a tall structure has a long chain of authority with relatively small groups at each hierarchical level, while a flat structure has few levels with relatively large work groups at each" (p.136). Consequently, the flat structure provides for faster information flow, but at the cost of more discussion and consultation, which exerts its own costs on the organization (p.137). Mintzberg argues that "unit size is driven up by (1) standardization of all three types, (2) similarity in the tasks performed in a given unit, (3) the employees' needs for autonomy and self-actualization, and (4) the need to reduce distortion in the flow of information up the hierarchy; and it is driven down by (1) the need for close direct supervision, (2) the need for mutual adjustment among complex interdependent tasks, (3) the extent to which the manager of a unit has nonsupervisory duties to perform, and (4) the need for members of the unit to have frequent access to the manager for consultation or advice" (p.143). 

Let's skip a bit. In Ch.10, Mintzberg discusses liaison devices. One particular structure he describes is the matrix structure, which groups on two bases simultaneously: functional and market-based (p.169). It sacrifices the unity of command (pp.169-170). The matrix structure turns out to be "a most effective device for developing new activities and for coordinating complex multiple interdependencies, but it is no place for those in need of security and stability" (p.173). Indeed, the shifting matrix structure (as opposed to the permanent matrix structure) is well suited for project work, which focuses on temporary tasks (p.172; again, cf. Toffler). 

In Ch.11, Mintzberg discusses vertical and horizontal decentralization, particularly in terms of power over decisions in organizations (p.181). Vertical decentralization is "the dispersal of formal power down the chain of line authority" (p.185), while horizontal decentralization is "the extent to which nonmanagers control decision processes" (p.186). Interestingly, "the more professional an organization, the more decentralized its structure in both dimensions" (p.201). In fact, Mintzberg summarizes one study: "the more decentralized networks tended to use more messages to accomplish their tasks and to make more errors," and "the decentralized, all-channel network eventually settled down to nearly the same operating efficiency as the centralized wheel [an alternate, centralized structure]" (p.206).

Let's skip to Chapter 13, where Mintzberg discusses age and size. He argues that organizations go through "distinct transitions between 'stages of development'" (p.227). These include:

1a. Craft structure, with one group, informally organized, coordinated via mutual adjustment and via standardization of skills (p.242).
1b. Entrepreneurial structure, involving a vertical division of labor, coordinated via direct supervision, but still characterized by an informal, organic structure (pp.242-243).

2. Bureaucratic structure, involving the specialization of jobs, a hierarchy of authority, and coordination via direct supervision and standardization (pp. 243-246).

3. Divisionalized structure, in which the functional bureaucracy splits into distinct Stage 2 bureaucracies with their own operating cores and markets (pp.246-247).

4. Matrix structure—and Mintzberg follows this heading with a question mark. "There are hints in some of the more recent literature that divisionalized structure may itself be an intermediate stage before a final transition, to matrix structure" (p.247). 

In Chapter 14, Mintzberg moves on to the technical system. Let me pick out just one interesting claim here: "Automation of routine tasks ... eliminates the source of many of the social conflicts, throughout the organization" (p.265). 

Chapter 15 is about the environment in which the organization operates. Mintzberg presents five hypotheses from the literature:
  • "The more dynamic the environment, the more organic the structure" (p.270)
  • "The more complex the environment, the more organic the structure" (p.273)
  • "The more diversified the organization's markets, the greater the propensity to split it into market-based units" (p.278)
  • "Extreme hostility in its environment drives any organization to centralize its structure temporarily" (p.281)
  • "Disparities in the environment encourage the organizaiton to decentralize selectively to differentiated work constellations" (p.282)
Based on these, Mintzberg provides a matrix for understanding how the environment affects the organizational structure. It's instructive (p.286):
(standardization of skills)
(mutual adjustment)
(standardization of work processes)
(direct supervision)

Notice that in complex, dynamic environments, organizations will tend to be decentralized and organic, coordinating via mutual adjustment. We'll return to a variation on this table in a little while.

Skipping a bit, we get to Part IV, Structural Configurations. Now that we have the necessary background, we can understand the five configurations (p.301):

Structural ConfigurationPrime Coordinating MechanismKey Part of OrganizationType of Decentralization
Simple StructureDirect supervisionStrategic apexVertical and horizontal centralization
Machine BureaucracyStandardization of work processesTechnostructureLimited horizontal decentralization
Professional BureaucracyStandardization of skillsOpeating coreVertical and horizontal decentralization
Divisionalized FormStandardization of outputsMiddle lineLimited vertical decentralization
AdhocracyMutual adjustmentSupport staffSelective decentralization

Mintzberg says that "the organization [is] being pulled in five different directions, one by each of its parts," and when one part is dominant, we get a specific structural configuration (p.301). I'm personally most interested in adhocracy: "the support staff gain the most influence in the organization not when they are autonomous but when their collaboration is called for in decision making, owing to their expertise. This happens when the organization is structured into work constellations to which power is decentralized selectively and which are free to coordinate within and between themselves by mutual adjustment. To the extent that conditions favor this pull to collaborate, the organization adopts the Adhocracy configuration" (pp.302-303).

So let's skip all the way to Ch.21, "The Adhocracy." Here, Mintzberg lists the structure's characteristics:

  • Prime coordinating mechanism: Mutual adjustment
  • Key part of the organization: Support staff (in the administrative adhocracy; together with the operating core in the operating adhocracy)
  • Main design parameters: Liaison devices, organic structure, selective decentralization, horizontal job specialization, training, functional and market grouping concurrently
  • Contingency factors: Complex, dynamic, (sometimes disparate) environment, young (especially Operating Adhocracy), sophisticated and often automated technical system (in the Administrative Adhocracy), fashionable (p.431)
Mintzberg explicitly credits the term to Toffler (p.432). "Sophisticated innovation requires a fifth and very different structural configuration, one that is able to fuse experts drawn from different disciplines into smoothly functioning ad hoc project teams" (p.432). Adhocracies involve a highly organic structure; high horizontal job specialization (i.e., formally trained specialists); small market-based teams; liaisons to encourage mutual adjustment; selective decentralization; and the avoidance of any standardization for coordination (pp.432-433). Indeed "The Adhocracy must hire and give power to experts—professionals whose knowledge and skills have been highly developed in training programs"—and "it must treat existing knowledge and skills merely as bases on which to build new ones" (p.434). "In Adhocracies the different specialists must join forces in multidisciplinary teams, each formed around a specific project of innovation" (p.435). Adhocracies tend to use the matrix structure (p.435). Adhocracies tend to be decentralized both horizontally and vertically (p.436).

As we saw earlier, "The Adhocracy is clearly positioned in an environment that is both dynamic and complex" (p.449). Such environments include the moon program, but also guerilla warfare (p.449). Furthermore, adhocracies tend to be young organizations, since "Adhocracy is the least stable form of structure" and "All kinds of forces drive the Adhocracy to bureaucratize itself as it ages" (p.455). For all that, adhocracy is tomorrow's structure: "This is the structure for a population growing ever better educated and more specialized, yet under constant exhortation to adopt the 'systems' approach—to view the world as an integrated whole instead of a collection of loosely coupled parts" (p.459). 

Of course, adhocracies face various challenges. Two are:
  • Constant ambiguity. It's true that "Adhocracy is the only structure for those who believe in more democracy with less bureaucracy," perhaps (p.460), but it requires workers to have a high tolerance for ambiguity.
  • Problems of efficiency. "No structure is better suited to solving complex, ill-structured problems than the Adhocracy. None can match it for sophisticated innovation. Or, unfortunately, for the costs of that innovation. ... Adhocracy is simply not an efficient structure.... Adhocracy is not competent at doing ordinary things" (p.463). Adhocracies thrive when solving unique problems, but get bogged down in heavy communication costs that are not tenable for dealing with routine problems.
And with that, we conclude the book. It's really an excellent, systematic, thorough, thought-provoking book, and if you're even marginally interested in how organization structures work, I highly recommend it. Doubtless parts have aged, been superseded, or not stood the test of time since it was published in 1979—but the basic structure works well, particularly if you're as interested in adhocracies as I've been lately. 

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