Studying Organizational Types

Studying Organizational Types

We have suggested that the study of organiza- tional design may have declined because of its increasing complexity and the demands on re- sources and time. Our preferred approach to over- coming this complexity is to return to the study of types of organizations. Such an approach is pred- icated on the argument that, given the vast diver- sity of today’s types of organizations, it is necessary to partition and parse that variety by returning to the comparative study of organizations (Mc- Kelvey, 1982; Miller & Friesen, 1984). One can no more generalize about the design requirements of a small high-technology company, a public utility, a hospital, and a multinational network organiza- tion than one can generalize about the heartbeats of elephants and mice. This point is particularly

apposite if it is accepted that organizational de- signs are best understood by characterizing their overall architecture: their structures, their systems, their processes, and their central tasks. Designs differ widely across different types of organiza- tions, and thus those types must be analyzed indi- vidually. Only then can we comprehend the complementarities or inconsistencies among the elements and thus their ability to achieve organi- zational objectives (Nadler & Tushman, 2003). A focus on types, in other words, encourages the search for richer portrayals of organizations and pushes the researcher to treat these entities re- spectfully as complex phenomena (McKelvey, 1982; Miller & Friesen, 1984).

Merton’s (1957) classic work on mid-range theory in sociology suggested the need to fragment social systems into more homogeneous parts in order to partition complexity and arrive at a more profound application and understanding. Simi- larly, as noted in our reference to March’s Hand- book, early theorists did not unthinkingly lump all organizations together as though their very differ- ent purposes, challenges, and sources of legitimacy did not matter. They distinguished among organi- zational types based on their different purposes, constituencies, stakeholders, strategies, and ra- tionales. They recognized that fundamentally different organizations confronted distinct chal- lenges that required very particular design re- sponses. This recognition of the significance of organizational differences has, until very recently, been relatively lost or ignored. As King, Felin, and Whetten (2009, p. 4) lamented: “The tendency has been to wipe away differences altogether and to prioritize abstraction over contextual specificity . . . [even though] . . . understanding [the] variety of organizing and organizations is central to orga- nization theory.” It is through a focus on specific types of organizations, in short, that the intricacies of their particular challenges and their design op- tions are revealed.

We can illustrate the advantage of focusing on a type of organization by drawing on an ongoing program of study into transnational professional service firms (PSFs), such as the largest account- ing, consulting, and law firms. These firms include some of today’s most complex organizations. They

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are extremely large, as measured by numbers of employees, and geographically dispersed, and they provide intangible, knowledge-based services tar- geted at the world’s largest international compa- nies. These clients demand not only seamless global provision, but services based on deep and up-to-date professional expertise, customized to industry and market contexts.

These features—scale, geographical scope and complexity, customization—are associated with distinctive managerial and organizational chal- lenges, not least the need to simultaneously orga- nize around knowledge-intensive services, the in- dustries and markets of clients, the regulatory jurisdictions of different countries, and the clients themselves (Brock & Yaffe, 2008; DeLong & Nanda, 2003; Greenwood, Diaz, Li, & Cespedes Lorente 2010). The organizational challenge is to devise structures, accountabilities, and informa- tion and reward systems that will coordinate and balance these axes to best exploit and hone orga- nizational resources—in short, systems that will flexibly apply the right resources to the right op- portunities in a timely fashion (Eisenstat, Foote, Galbraith, & Miller, 2001; Hansen, Mors, & Lo- vas, 2005; Miller, Hope, Eisenstat, Foote & Gal- braith, 2002). All large professional service firms are confronted with these challenges.

For organizations generally, the balancing of multiple axes of accountability is not a new prob- lem. Until the 1920s or ’30s most firms were organized around business functions: marketing, production, finance, and so on. The emergence of the multiproduct firm with divisions responsible for different lines added a second product dimen- sion, creating new modes of accountability and thus of authority and information (Chandler, 1962). But for the transnational professional ser- vice firm, growing globalization has added a third—the geographical—axis, complicating de- signs further and contributing to the trend toward matrix structures in which individuals wearing multiple managerial hats are accountable to both functional and geographic superiors (Galbraith, 1999). Further, there is an additional fourth axis: the need to leverage and customize resources, knowledge, and relationships with clients across

the dispersed parts of the firm (Rose & Hinings, 1999; Segal-Horn & Dean, 2009).

In the transnational PSF, reconciling the mul- tiple axes is particularly complicated because ser- vice delivery is through a highly professionalized workforce, a mode of delivery that requires firms to develop organizational arrangements that strike an appropriate balance between professional inde- pendence and firm-level control. But professionals resist certain forms of organizational control, and a balance has to be found between allowing profes- sionals sufficient discretion to enable services to be tailored to each client’s demands and protecting the firm from wayward professional behavior (recall the Enron fiasco)—and, at the same time, accomplish- ing the “seamless” provision of global services in order to ensure commercial viability.

Thus, the design problem may be an old one, but its specifications are more complex and nu- anced for the contemporary transnational PSF. For us, the particular configuration of design chal- lenges outlined above defines the transnational PSF as a distinctive organizational type. It com- bines multiplexity with a normative, professional core. It would be unhelpful and misleading, given their very distinctive organizational and manage- rial challenges, to lump these organizations into a broader category; doing so stretches and breaks the link between empirical complexity and theo- retical nuance, thus diminishing rather than en- hancing understanding.

The first step toward understanding contempo- rary organizational designs, therefore, is to ac- knowledge differences across organizations and to narrow the complexity of the challenge by iden- tifying and then analyzing one such organizational type. That, however, is only the first step. The second is the application of theories in concert.

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