The hidden part of the iceberg

Has well as you can’t manage what you don’t measure, you can’t measure what you don’t understand or don’t know. That’s why I was writing in the past posts about systems, then about organisational systems.

During last years companies were trying, without really achieving any interesting result, to implement data driven cultures as a way to combat the disorientation generated by the surfeit of information. The failure can be explained by the non-systemic view managers normally has about organisations.

They addresses the problem in the same way they converted they companies in Green Companies, by adding an isolated area in the corner of the office that is just connected to the PR department.

So, I’ll take part of the work of Henry Mintzberg to really know the animal we are going to deal with.

According to his the organizational configurations model of Mintzberg each organization can consist of a maximum of six basic parts:

 

mintzberg_2b-3

 

  1. Strategic Apex (top management)
  2. Middle Line (middle management)
  3. Operating Core (operations, operational processes)
  4. Technostructure (analysts that design systems, processes, etc.)
  5. Support Staff (support outside of operating workflow)
  6. Ideology (halo of beliefs and traditions; norms, values, culture)

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Regarding the coordination between different tasks, Mintzberg defines the following mechanisms:

  1. Mutual adjustment, which achieves coordination by the simple process of informal communication (as between two operating employees).
  2. Direct supervision, is achieved by having one person issue orders or instructions to several others whose work interrelates (as when a boss tells others what is to be done, one step at a time).
  3. Standardization of work processes, which achieves coordination by specifying the work processes of people carrying out interrelated tasks (those standards usually being developed in the technostructure to be carried out in the operating core, as in the case of the work instructions that come out of time-and-motion studies).
  4. Standardization of outputs, which achieves coordination by specifying the results of different work (again usually developed in the technostructure, as in a financial plan that specifies subunit performance targets or specifications that outline the dimensions of a product to be produced).
  5. Standardization of skills (as well as knowledge), in which different work is coordinated by virtue of the related training the workers have received (as in medical specialists – say a surgeon and an anesthetist in an operating room –responding almost automatically to each other’s standardized procedures)
  6. Standardization of norms, in which it is the norms infusing the work that are controlled, usually for the entire organization, so that everyone functions according to the same set of beliefs (as in a religious order).

 

coordi3

 

Mintzberg’s Organizational Types

Mr. Minzberg classified organizations in five types:

  1. The entrepreneurial organization.
  2. The machine organization (bureaucracy).
  3. The professional organization.
  4. The divisional (diversified) organization.
  5. The innovative organization (“adhocracy”).
  6. So, let’s take a quick look at each one.

1. The Entrepreneurial Organization

This type of organization has a simple, flat structure. It consists of one large unit with one or a few top managers. The organization is relatively unstructured and informal compared with other types of organization, and the lack of standardized systems allows the organization to be flexible.

A young company that’s tightly controlled by the owner is the most common example of this type of organization. However, a particularly strong leader may be able to sustain an entrepreneurial organization as it grows, and when large companies face hostile conditions, they can revert to this structure to keep strict control from the top.

The entrepreneurial organization is fast, flexible, and lean, and it’s a model that many companies want to copy. However, as organizations grow, this structure can be inadequate as decision-makers can become so overwhelmed that they start making bad decisions. This is when they need to start sharing power and decision-making. Also, when a company’s success depends on one or two individuals, there’s significant risk if they sell up, move on to new entrepreneurial ventures, or retire.

2. The Machine Organization (Bureaucracy)

The machine organization is defined by its standardization. Work is very formalized, there are many routines and procedures, decision-making is centralized, and tasks are grouped by functional departments. Jobs will be clearly defined; there will be a formal planning process with budgets and audits; and procedures will regularly be analyzed for efficiency.

The machine organization has a tight vertical structure. Functional lines go all the way to the top, allowing top managers to maintain centralized control. These organizations can be very efficient, and they rely heavily on economies of scale for their success. However, the formalization leads to specialization and, pretty soon, functional units can have conflicting goals that can be inconsistent with overall corporate objectives.

Large manufacturers are often machine organizations, as are government agencies and service firms that perform routine tasks. If following procedures and meeting precise specifications are important, then the machine structure works well.

3. The Professional Organization

According to Mintzberg, the professional organization is also very bureaucratic. The key difference between these and machine organizations is that professional organizations rely on highly trained professionals who demand control of their own work. So, while there’s a high degree of specialization, decision making is decentralized. This structure is typical when the organization contains a large number of knowledge workers, and it’s why it’s common in places like schools and universities, and in accounting and law firms.

The professional organization is complex, and there are lots of rules and procedures. This allows it to enjoy the efficiency benefits of a machine structure, even though the output is generated by highly trained professionals who have autonomy and considerable power. Supporting staff within these organizations typically follow a machine structure.

The clear disadvantage with the professional structure is the lack of control that senior executives can exercise, because authority and power are spread down through the hierarchy. This can make these organizations hard to change.

Our article on Professional Services Organizations tells you more about working within this kind of structure.

4. The Divisional (Diversified) Organization

If an organization has many different product lines and business units, you’ll typically see a divisional structure in place. A central headquarters supports a number of autonomous divisions that make their own decisions, and have their own unique structures. You’ll often find this type of structure in large and mature organizations that have a variety of brands, produce a wide range of products, or operate in different geographical regions. Any of these can form the basis for an autonomous division.

The key benefit of a divisional structure is that it allows line mangers to maintain more control and accountability than in a machine structure. Also, with day-to-day decision-making decentralized, the central team can focus on “big picture” strategic plans. This allows them to ensure that the necessary support structures are in place for success.

A significant weakness is the duplication of resources and activities that go with a divisional structure. Also, divisions can tend to be in conflict, because they each need to compete for limited resources from headquarters. And these organizations can be inflexible, so they work best in industries that are stable and not too complex.

If your strategy includes product or market diversification, this structure can work well, particularly when the company is too large for effective central decision-making.

5. The Innovative Organization (“Adhocracy”)

In new industries, companies need to innovate and function on an “ad hoc” basis to survive. With these organizations, bureaucracy, complexity, and centralization are far too limiting.

Filmmaking, consulting, and pharmaceuticals are project-based industries that often use this structure. Here, companies typically bring in experts from a variety of areas to form a creative, functional team. Decisions are decentralized, and power is delegated to wherever it’s needed. This can make these organizations very difficult to control!

The clear advantage of adhocracies is that they maintain a central pool of talent from which people can be drawn at any time to solve problems and work in a highly flexible way. Workers typically move from team to team as projects are completed, and as new projects develop. Because of this, adhocracies can respond quickly to change, by bringing together skilled experts able to meet new challenges.

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