Organizations Book – B200 Chapter 11
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Organizations Book – B200
Organizational structuring and re-structuring are fundamental to the idea of a
strategic approach to managing human resources.
The main aim of this chapter is to explore how organizational structuring and restructuring
impact upon strategic human resource management. In pursuit of this
aim, this chapter will examine the potential for organizational re-structuring; the
dimensions of structure which are amenable to change; the type of structure
which have been designed; the principles underlying design and re-design
attempts; and we will also explain the key developments by presenting a new
classification of organizational design.
Recent years have been witness to a bewildering array of examples of extensive
drives to re-structure. For much of the twentieth century there seemed to be an
inexorable concentration of power in large corporations.
In order to help manage the large organizations, multi-divisional structures were
created. Such structures were designed to allow whole-company strategic issues
to be handled at the central‘corporate’ level while developing other major
business decisions relating to marketing, business positioning and the like to the
At the same time, the growth of larger and larger firms and larger work
establishments has halted as the large bureaucracies have‘downsized’. Along
with the smaller scale have been ushered-in a whole battery of‘new’ managerial
methods. Flexible organizations, responsive organizations, lean organizations,
process organizations, re-engineered organizations, delayered,‘flatter’
organizations, empowered, cross-functional teams – these are just a few of the
more significant attempts in recent times to restructure the organization of work.
Changes of these kinds constitute a key element in human resource strategies and
also, in turn, they carry important additional human resource implications.
Organizational structures and SHRM: the background
Central to the very idea of HRM are the ideas of flexibility, responsiveness,
‘ownership’ of organizational problems by as many employees as possible,
empowerment and the winning of commitment. On the surface at least, each one
of these appears to be the objective of contemporary restructuring attempts.
Organizations in recent years have sought to enhance business and customeroriented
behaviours and priorities through the creation of Strategic Business Units
To a large extent the aspirations and principles underlying the recent structural
changes seem to reflect those which also underpin the ideas of HRM. There are
even the same hard and soft logistic at play. From an organizational re-structuring
point of view the‘hard’ aspects are to be found in the drastic cuts in ‘headcounts’,
the‘downsizing’ and the ‘outsourcing’.
The soft side of the rationale is to be found in the ideas of‘empowerment’ the
‘learning’ that is required to cope with multiple demanding tasks, and the
‘teamworking’ that is invoked. Both sets of facets appear to constitute, above all,
a critique end of escape from bureaucracy.
Organizational structuring and re-structuring are intimately intertwined with many
aspects of human resource management. Different structures carry implications
for career opportunities, for job design and job satisfaction, for learning and
development opportunities, for power distance, work content and skill levels.
Bureaucracy was used to command and control. Initiative was stifled. In these
ways the departure from the bureaucratic control system could be interpreted as
actually rather more in tune with the principles of human resource management
than would its preservation.
An analytical framework
To assist the analysis in this and the ensuing chapter a conceptual framework can
be suggested, which arises out of the juxtaposition of different dimensions which
appear to have been critical in recent re-structuring attempts.
This figure uses three cross-cutting dimensions. On the top horizontal axis is the
dimension of‘centralized’ to ‘decentralized’; on the vertical axis is the
dimension from‘directive’ to ‘autonomous’; and on the horizontal axis at the
base of the figure is the dimension relating to size. For illustrative purposes, a
selection of different organizational arrangements are shown. At the bottom left,
the bureaucratic form is located to suggest a centralized, directive mode.
Ascending the ladder and moving to the right, one progressively moves to
divisonalized arrangements, to the use of strategic business units(SBUs) and then
to autonomous, empowered teams.
The key attributes of bureaucracy in the descriptive, social science, sense
can be summarized as follows:
1.A clear division of work with stipulated boundaries to responsibilities.
Officials are given authority to carry out their assigned functions.
2.Referral by role occupants to formal (written) rules and procedures which
ensure predictability and routinization of decisions.
3.A well-defined hierarchy of authority.
4.Appointment to posts arranged not through patronage or bribery but on
the basis of technical competence.
5.A system of rules with formal (written) documentation of actions and
The model in its totality gave rise to impersonality – this was one of its untended
characteristics. It had the advantage of overcoming nepotism, favouritism and
arbitrary decision making. The principles seemed well suited to the administrative
needs of the new democratic states and the emerging large industrial enterprises.
Three sets of ‘unanticipated consequences’ and ‘dysfunctions’ of bureaucracy
have been pointed out by various organizational analysts.
1.The first derives from the emphasis on control. This can prompt rigidity of
behaviour and defensive routines.
2.The second focuses on the implications for the behaviour of subunits.
Division of task and responsibility can elevate departmental goals above
whole system goals – that is, lead to suboptimizing behaviour.
3.And thirdly, as a result of the impersonality of rules the minimal
acceptable standards can become transformed into targets and behavioural
norms. Rules and procedures can also become ends in themselves.
Downsizing and lean production
Faced with rapidly changing environments many employers have responded by
downsizing and in the process have also retreated from long term commitments to
employees, which the internal labour market model allowed and facilitated.
In the United States it is estimated that over one million middle managers lost
their jobs as organizations flattened organizational structures. The strategy of
many companies over the past few years has been to reduce their size;‘take costs
out of the business’; increase productivity by having fewer people undertake the
same or even more work; and re-focus activity on the core business. Senior
executive were rewarded for so doing; share prices tended to rise when these
steps were taken and top management salaries increased.
Devolved management: divisionalization and strategic business units
Perhaps the most obvious way to respond to the catalogue of problems associated
with bureaucracy is to seek in one way or another to‘decentralize’.
Be that as it may, for the past 20 years or so the cycle would seem to have been
very much on the downswing – that is, in favour of decentralized units. The
tendency began with a wholesale switch to divisional zed structures.
Hamel and Prahalad argue that senior managers should ‘seek to identify and
exploit the interlink ages across units that could potentially add value to the
corporation as a whole.
The devolution has been seen as part of a move to enable personnel practitioners
to play a greater strategic role and yet the logical consequence of devolution is to
make the implementation of the strategy extremely difficult.
By this term we mean to cover the collection of types of structural innovations
variously described as high performance organizations, knowledge creating
companies, empowered teams, ad hoc, boundaryless, and process-based
organizations – among other similar terms.
Despite the range of titles, the underlying ideas are similar: they point to a
departure from traditional bureaucratic forms with their formal rules, hierarchy of
office and vertical communication, and circumscribed role responsibilities and
celebrate instead the breaking down of internal barriers and formal structures.
The new watchwords are teams(preferably cross-functional), lateral
communications, the minimization(if not outright removal) of hierarchy, and the
sparse use of rules.
With some variance in emphasis, the same basic tents can be found underpinning
the so-called‘high performance work systems’ and the ‘knowledge creating
The Boundaryless Organization and sub-title in Breaking the Chains of
Organizational Structure. No longer will organizations use boundaries to separate
people, tasks, processes and places; instead, they will focus on how to permeate
those boundaries – to move ideas, information, decisions, talent, rewards and
actions where they are most needed. This amounts to a‘paradigm shift’ towards
The organizational attributes which formerly conferred advantage can, under the
new conditions, constitute disabling impediments.In summary from the contrast
can be depicted in the two lists below:
Old success factors:
New success factors:
For example, according to Nonaka and Takeuchi (1995), the source of corporate
success under contemporary conditions resides in the ability of a company to
create new knowledge, disseminate it throughout the organization, and embody it
in new services and products. Japanese companiessuch as Canon, Matsushita,
NEC, Kao and Sharphave been identified as special in their use of knowledge
management to create new markets and develop many new products.
Making choice about organizational structure
What are the factors affecting the choice of the organization’s structure?
1.The factors which could be said to constitute ‘rational’ considerations.
These include the desire to hold individuals and sub-units accountable for
the use of resources and the achievement of targets. Lines of reporting and
the use of job descriptions are the kind of devices used for this purpose.
Another criterion is usually to ensure the flow of communication.
2.It has to be realized that particular structural forms can also arise from
reasons other than the technical reasons suggested above. Top managers
may judge it safest simply to follow the ‘industry recipe’.
3.Various contingent factors such as technology have been argued as
exerting an influence on organizational structure. Rarely, if ever, is this a
determining factor, but the scale required in technological investment, in
say an oil refinery, is likely to have some influence in the nature of the
organization which is formed in order to exploit those technological assets
4.In a global marketplace, the need to ‘act local’ and yet take advantage of
the benefits of a transnational organizational resource is also likely to
influence organizational structure. Organizational ‘size’ as a possible
contingent factor has long been a topic of contention.
In practice, managers are usually faced with a need to balance series of divers and
sometimes conflicting considerations. Centrally, there is a need for balance
between differentiation and integration. Formal organizations are notable for the
way in which they divided-up tasks and responsibilities(differentiation) and yet
also require some mechanisms for co-ordinating and controlling in order to pull
these separate activities together(integration).
A classic dilemma is between structuring in the basis of management function or
on the basis of products. Under the former, each functionsuch as production,
marketing, finance, and saleshas its own hierarchy.
It is particularly favoured by small and medium sized enterprises. The emphasis is
upon technical quality and cost control. On the positive side it is the least
complex of structures; it allows economies of scale; enables in depth skill
development, achievement of functional goals and clear accountability.
On the negative side it is slow to respond to environmental change, is poor at
encouraging horizontal co-ordination and communication and is not conducive to
innovation. It also tends to encourage a restricted view of organizational overall
Product-based structures are more likely to be found in large organizations and in
environments of moderate to high uncertainty. They are more able to respond to
unstable environments, and the units should be better able also to tailor
themselves to client’s needs.
On the other hand, such structures tend to involve some duplication of resources,
they fail to fully exploit economies of scale in functional departments and, if fully
deployed in a pure from may sacrifice in-depth technical competence.