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Organization Theory and Organization Design

Ultimately, executive leaders are vital for influencing the

overall environment within which all innovation and learningoccurs. Good design will not create commitment and

energy, but poor design will surely thwart them. 1

This lecture series will cover two topic areas: organization

theory and organization design. Organization theory is a specialty

within sociology. Its practitioners note that all organizations are not

the same and seek to explain the reasons for differences among

organizations. Why do some organizations have an extended

hierarchy with limited spans of control at each level while other

organizations have an abbreviated management structure and several

people reporting to each manager? Is there an independent variable

(size of the firm, technology employed, stage of development of the

firm) that can be used to predict organization structure, and if so,

what is it/are they?

Organization design attempts to translate the findings of

organization theory into recommendations for management practice.

If certain types of organization are particularly likely under a given setof circumstances, then it would behoove managers to design their

organizations appropriately when they face those circumstances.

Organization design is a prescriptive rather than an abstract branch of

the field.

In this lecture we will try to cover both bases, beginning with

organization theory and proceeding to organization design. The text,

no matter what it says it is doing, does not really present organization

theory. The only theorists of organizations mentioned in the

bibliography are Weber and Mintzberg, and Weber is severely

1PM Senge, Leadership in living organizations, in Hesselbein F Goldsmith M andSomerville I, Eds, Leading Beyond the Walls (Jossey-Bass Publishers, San Francisco),

1999, p 89

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misinterpreted. Rather, the text focuses on organization design,

partially by creating a straw man labelled "the classical view."

For why this topic is important, I refer to the quote above from

Senge, best known for his theories regarding learning organizations.

Good design is a necessary underpinning w/o which excellence cannot

be achieved.

Organization Theory

We begin with an interesting epistemological insight.

Organizations, as distinct from the property they may own, are

intangible. A building with an assortment of high-tech goodies in it isnot a hospital. That same building inhabited by humans with a variety

of skills--nurses, physicians, nutritionists, dishwashers--is not a

hospital. The building and the people only become a hospital when

their efforts are rationally structured: when they are organized. This

last principle, organization, is, like the soul, invisible.

The intangibility of organizations leads theorists to take what

one might call a metaphoric view of organizations. The metaphor or

paradigm used in describing organizational structure, and thus both

the descriptions and the recommendations that emerge, varies over

time and across authors. Each metaphor carries with it a distinctive

manner of conceptualizing the structure of the organization. Early

theorists tended toward a mechanistic view of the organization,

spurred, no doubt, by the machine-dominated organizations that filled

the Industrial Age. The logic of technology created wonders--bridges,

railroads, factories, "progress"--surely the same logic applied to

humans would produce similar wonders. The machine image stilldominates our thinking about organizational structure.

In the past 30 or 40 years, other images have emerged:

organizations as open systems, organizations as brains, organizations

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as cultures, organizations as political systems, and so on.2 Katz and

Kahn's3 open system concept is an organic metaphor; it draws

attention to the environment in a way that a machine metaphor does

not. March and Simon4 visualize the organization as a means for

making decisions; the uncertainty in decision making is highlighted

from their work in a way that a machine paradigm would not allow.

Each of these metaphors points to an element necessary for

organizational survival. Each of them is, we must emphasize, a

construct, not a thing.

It is impossible to speak of organizations without using

metaphor. This makes RLD's presentation, and ours, somewhat

schizophrenic: each theorist brings a whole new set of terms. Oneapproach is to review the history of organization theory, but the field

has been getting broader with time.5 RLD's distinction between

"classical" and "modern" theory is inadequate, largely because they

barely scratch the surface of the field and don't always scratch well.

(Maybe they're smart; they don't want to confuse you with too much

"stuff.") Our approach will be eclectic: we will present the work of a

few theorists with whom you should be familiar, as exemplified in their

organizational metaphors. Thus, with the text, we will look at

bureaucracy (a machine image), open systems (an organic metaphor),

and what one might call networks (project organization and matrix

organization).

Organizations as Machines

Organization as Tool: The Classic Writers

2This conceptualization of metaphors comes from Gareth Morgan (1986) Images of Organization (SagePublications, Beverly Hills, CA. The relevant theorists are Katz and Kahn (open systems); March and

Simon (brains), Ouchi and others (cultures) and Mintzberg (political systems).3Katz, D and Kahn, R.L. (1979) The Social Psychology of Organizations (John Wiley & Sons, New

York)4March, J.G. and Simon, H.B. (1958) Organizations (John Wiley & Sons: New York).5For a sophisticated but humorous summary of organization theory from an historical perspective, see C.

Perrow, "The Short and Glorious History of Organizational Theory, Organizational Dynamics, Summer,

1973.

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The "classical" writers referred to in your text--Henri Fayol, F.W.

Taylor, and Chester Barnard--defined the terms that we use in

discussing organizational structure. All the elements that RLD place in

their somewhat exaggerated classical-contemporary dichotomy were

created at the turn of the century. The informing metaphor of the

earliest writers on management is the machine. Workers are not

valued for their intelligence, but for their ability to contribute carefully

defined actions to the machine that management has created. The

object of organization design is to reduce ambiguity (who ever heard

of an ambiguous machine?), so that each and every part has been

carefully integrated into a whole that, when management puts it in

operation, will ceaselessly turn out product. (see chart at top of p.

211)

Work is divided into parts, like the cogs in a machine (division of

work). An assembly line carries the division of work to its logical, or

illogical, maximum: the task at hand has been completely subdivided

into constituent parts and each worker attends only to that part.

Hospitals have an extensive and legally defined division of labor.

Further, not only are the roles of the professions clearly delineated,

the professions themselves are organized by patient type when

actually on the work floor--there is a neonatal ICU and a cardiac ICU,

for example, and a pediatric wing, a medical wing, a psychiatric wing,

and so on.

Since the cogs are closest to the work, they should be

responsible for any routine decisions necessary to accomplish it

(authority and responsibility relationships). The pulleys of the

machine. This concept is ambiguously implemented in medical care,

where the specific decisions that different professionals may make areusually outlined in law. Routine decisions are not routinely delegated

when they pertain directly to medical care. Generally, nurses can

decide about administering medication only if the physician has

indicated "as needed" on the orders. The centrality of the physician

as the basic source for all orders permeates care decisions. On the

other hand, it is possible for the non-medical functions of care--the

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hotel services of a hospital, for example--to delegate in the manner

envisioned here.

In the classical view, power begins at the top of the organization

and is parceled out downward in a logical fashion. This is

accomplished through delegation, which transfers power from a

supervisor to a subordinate. Ideally, both authority and responsibility

are transferred! Delegation is all linked upward into a single stream

unity of command. Finally, because the writers recognized that

some folks have no apparent function in the machine, a distinction is

drawn between those who are actually part of the production process

and those who only advise (line and staff). Line people are part of the

machine. They are part of the power stream, the sequence of I-tell-you-you-tell-him, that flows from the top of the organization to the

lowest cog who actually puts hand on product. Staff people make

suggestions; they have no power to order anyone.

One principle for directing the streams of power is

departmentalization. In essence, when one divides work (divison of

labor) one creates the needs to coordinate the divided workers. One

way to group workers for easy coordination is by function. As

elucidated by Mintzberg and reviewed in your text, bases for grouping

workers include

o Knowledge and skills

o Work process and function

o Time

o Output

o Cliento Place

The cogs are linked to cogs that precede and follow them by

coordination mechanisms. Hierarchy is the most common

coordination mechanism: A's efforts are linked to B's efforts by their

mutual boss, C, who can oversee them both. A and B should only take

orders from one person if ambiguity is to be avoided (unity of

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command); this is why hierarchy is an important mechanism of

coordination. Unity of command also implies that all orders flow down

the hierarchy in a single stream. A pyramidal structure is implied.

Other include mutual adjustment and standardization of work, of

workers and of output.

Because a boss has limited abilities, there are natural limits to

the number of persons s/he can supervise; these limits are in part a

function of the tasks s/he must oversee (span of control). All things

being equal, small spans of control will result in a tall organization

(many hierarchical levels), while large spans of control lead to a

relatively flat organization (few levels). When researchers look for

independent variables affecting organization structure, a relationshipbetween organization size and levels of hierarchy frequently emerges.

This notion has strong logical underpinnings: an organization of 4

persons is most likely to contain one manager and 3 employees (thus,

2 organization levels) rather than 1 CEO, 1 VP, 1 supervisor, and 1

employee (4 levels).

Other terms relevant to organization theory emerged later in the

discipline. The classical writers organized the discipline, and in their

machine approach gave us most of the terms, line and staff, span of

control, and so on, that we still use to describe intra-organizational

function. Their writings fell into disfavor because their reductionist

approach ignored the psychological element within organizations as

well as the influence of external factors on organizational activity. If

you take a further management course, you will probably not be

asked to study the writings of Fayol or Taylor.

Organizations as Power Tool: Weber and Bureaucracy

You will, or should, be required to study the work of Max Weber.

RLD do profound disservice to Weber and his insights. Weber was an

organizational theorist, not an organization designer. When Weber

refers to an "ideal" bureaucracy, he is speaking of a prototypical

specimen, not of a goal to be pursued. When Weber says, "the

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decisive reason for the advance of bureaucratic organization has

always been its purely technical superiority over any other form of

organization,"6 he is making an accurate observation, not a

recommendation. RLD quote Robbins to the effect that "the

characteristics of Weber's ideal bureaucracy became 'the design

prototype for almost all of today's large organizations.'" This is not

true; until his works were translated into English in 1947, Weber had

little influence in the development of management theory in the

English-speaking world. Large bureaucracies, however, were

widespread. Bureaucracy is by no means an outdated form of

organization. As noted by Perrow, "nearly all large, complex

organizations in the United States ... are best classified as

bureaucracies."

7

RLD make Weber appear quaint and outdated, naively

recommending some sort of Prussian organization totally foreign to

the modern world. Nothing could be further from the truth. Weber

recognized a fact generally glossed over by most writers on

organizations--that bureaucracy legitimizes the exercise of power.8

What Weber sought in his exploration of bureaucracy was to identify

those elements which made it "a power instrument of the first order--

for the one who controls the bureaucratic apparatus."9 The detailed

procedures for governance of hospitals outlined by RLD in Chapter 7

represent society's attempt to control the power of those who control

the health care bureaucracy. Weber's definition of bureaucracy,

created in 1906, still has relevance.

6Gerth, H.H. and Mills, C.W., translators. (1958) From Max Weber: Essays in Sociology (A GalaxyBook: New York); p. 214.7Perrow, C. (1986) Complex Organizations (Random House: New York) p. 38Perrow and Henry Mintzberg--from very differing perspectives--are two writers who do not overlook the

question of power. Perrow notes that bureaucracy enables those who control the organization to

appropriate the work of its members, while Mintzberg attempts to justify the power wielded by

organizations by tracing it to the legitimate wishes of stockholder/owners. Mintzberg, H. (1983) Power In

and Around Organizations. (Prentice Hall, Inc: Englewood Cliffs, NJ).9Gerth, H.H. and Mills, C.W.,op cit, p. 228

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Although their emphases are cutesy and condescending, RLD

summarize Weber's description of bureaucracy reasonably well (p.

210). Rational-legal bureaucracy is characterized by:

o A consistent system of abstract rules. This is the heart of

bureaucracy. Quoting Weber: "...management...follows general

rules, which are more or less stable, more or less exhaustive, and

which can be learned. ... This stands in extreme contrast to the

regulation of all relationship through individual privileges and

bestowals of favor ..."10 For all the hazards of dealing with the Social

Security Administration, or Blue Cross/Blue Shield, the situation is a

marked improvement over dancing attendance on Caligula, or George

III, or the feudal powers dominant in most of European history.

o Positions arranged in a hierarchy. Hierarchy allows for a

career within the organization. It also creates further recourse for

those affected by the bureaucracy: "Such a system offers the

governed the possibility of appealing the decision of a lower office to

its higher authority ... (p. 196)."

o Specialization and division of labor "...the principle of fixed

and official jurisdictional areas ..." (p. 196)

o Impersonal relationships. Notes that "the political

official ... is not considered the personal servant of a ruler" (p. 199)

The position may not be exploited for personal gain; organizational

assets are differentiated from those of the individual. This is why

Holderman's name was so much in the papers: he wss held to have

misappropriated the resources of the bureaucracy he headed. It is

also why Ms. Tamposi was recently dumped from the StateDepartment for allegedly initiating the search of Clinton's passport

files: in so doing, she was acting the the personal interests of the

ruler (President Bush) rather than in the relatively impersonal

interests of the nation.

10Weber, op. cit, p. 198. Rest of quotes are to this book, pages given above.

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o Technical competence. Members of a bureaucracy are

given "...thorough and expert training."(p. 198).

Bureaucracy gets a bum rap, principally from our experiences of

"the insolence of office" when we interact with members of poorly run

bureaucracies. We tend to forget, perhaps, what it replaced: the

whim of feudal despots. The genius of bureaucracy is that it binds

both bureaucrat and customer to the rules. Bureaucracy is criticized

for being slow to change and for suppressing its employees. Perrow

notes, however, that the opposite of slow to change might be

considered, "stability, steadfastness, and predictability."11 He also

points out that the loss of individuality on the part of bureaucraticemployees has benefits for the rest of us. We don't want the clerk at

the hospital to bill his brother in law half his actual costs, while billing

us twice as much because he doesn't know us. The opposite of

"impersonal" can be "corrupt." A better option to ridding the world of

bureaucracy may be reforming bureaucracy. We should, according to

Perrow, avoid bloated organizations: "huge inflexible firms

dominating markets...[lead to] "outdated rules, improperly invoked

hierarchies, partcularism, and favoritism"(p. 47).

Perrow also suggests that bureacratization, aka rationalization,

of medical services is a function of increased demand for service. We

cannot all afford personalized attention. How many people, for

example, could afford round the clock in-home nursing care if they fell

ill? We tolerate systems that treat patients as input to be slotted to

the right professional in the most efficient possible manner (e.g.,

cataract days or lower GI days at ambulatory care centers) because,

regardless of the effects bureaucracymay have on workers orpatients, it makes some level of care available to all of us. This is

preferable to the alternative, no care except for the extremely

wealthy.

11Perrow, op.cit, Chapter 1, "Why Bureaucracy"p. 5

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Most members of this class will work in bureaucracies. The

question you will face, which we will return to in the organization

design section of this lecture, is shaping the elements of your

bureaucracy so as to maximize its strengths (efficiency, equal

treatment of all, and so on) while at the same time avoiding its pitfalls

(stagnation, encrustation with rules, and so on).

Shaping the Machine: Contingency Theory

"Contingency theory" is the most common subset of

organizational theory. (It is generally within a machine metaphor: the

organization as a structure that can be rationally created.)

Contingency theory holds that the elements of organization structureare dependent (contingent) upon various factors within the

organization. The two biggest contingencies, as researched in the

literature, are size and technology; age of the firm also appears as a

significant contingency.

Size has a certain appeal as a key contingency in organization

structure. It's easy to conceptualize. Pretend you have a 5-person

firm. How are they likely to be organized? Okay, now let's assume

that you have 50 people. How many layers now? Most of us would

say: more layers. That, in a nutshell, is the size argument, as tested

by Blau.12 Investigating social service agencies (technology is similar

here), he found that the more staff they had, the more organizational

layers were present.

Technology is the principal rival to size as an hypothesized

predictor of structure. A technology that can be reduced to routine

repetitive elements, for example, will lead to a different organizationalstructure than one which must deal with constantly changing

problems that require original thinking to be overcome.13 The original

12Blau, P.M. (1970) "A formal theory of differentiation," Americal Sociological Review, 35:2, 201 -

218. Also, Blau, PM, Falbe, CM, McKinley, W and Tracy, PR (1976) "Technology and Organization in

Manufacturing," Administrative Sciences Quarterly, 21:20 - 40.13Perrow, C. (1967) "A Framework for the Comparative Analysis of Organizations," American

Sociological Review, 32: 194 - 208. This is a relatively old but seminal article.

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exponent of this line of thought was Joan Woodward, who studied

manufacturing firms in Great Britain.14 Overall, the link between

technology and organization structure has been studied most

thoroughly and has the most relevance to organization within the

health care industry.

Investigating the link between technology and span of control,

Bell found that the more complex the tasks, the smaller the number of

people supervised, and vice versa.15 Leatt and Schenk16 found that

Homogeneity in certain technological dimensions was the

apparent criterion used by hospitals to select the method of

grouping nursing subunits. Specifically, instability anduncertainty in the technology were shown to be of major

importance; variability had little predictive power.(p. 162)

Of course, there is a minority view: One researcher, through case

studies of the introduction of CT scanners at different hospitals,

asserts that structure is not in fact determined by technology, but

emerges as a result of negotiations among the parties who use it.

Barley asserts that ...technological undertainty are complexity are

social constructions that vary from setting to setting even when

identical technologies are deployed." Thus, the influence of

technology, although real, "depends on the specific historical process

in which [it is] embedded."17

Although the size versus technology battle in the '60's

parallelled the "tastes great--less filling" debate in beer commercials,

most present day researchers use both criteria, rather than either

single issue, For example: Comstock and Scott found that18

14Woodward, J. (1965) Industrial Organization: Theory and Practice. (London: Oxford University Press)15Bell, G.D. (1967) Determinatns of Span of Control," American Journal of Sociology, 100 - 109.16Leatt , P. and Schneck, R. (1984) Criteria for grouping nursing subunits in Hospitals. Academy of

Management Journal, 27:1, 150 - 165.17Barley, SR (1986) "Technology as an Occasion for Structuring: Evidence from Observations of CT

Scanners and the Social Order of Radiology Departments," Administrative Sciences Quarterly, 31:78-108.

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"both [technology and size] were important predictors of RN

ratios, staff differentiation, and centralization of routine

decisions.(p. 196)."

Transaction Cost Theory

There is one additional line of thought regarding organization

theory that I would like to toss out: economic paradigms. If you will

remember, we just said that structure can depend on size. Okay.

Now, what does size depend on? What, if anything, defines the limits

of an organization's growth?

To answer this question, you get into the fascinating world oftransaction costs. The concept was pioneered by Coase,19 who won

the Nobel for economics last year; it was used to explain the size of

firms by Williamson.20 Traditional economics sees the marketplace as

a frictionless place: goods are produced and sold, and the cost of

goods is derived from some production/demand function. In the real

world, however, every transaction has a cost associated with it. There

are costs associated with handling a transaction, and for the buyer,

costs associated with discovering appropriate products.

Transaction processing costs: Williamson sees all transactions

as involving a contract. Williamson begins by analyzing the

contracting situation, exploring two behavioral assumptions, bounded

rationality and opportunism, and one situational variable, asset

specificity. "Bounded rationality" implies that the purchaser cannot

know everything about the intended product. If he/she could, then

planning on the part of both organizations would be sufficient. If both

parties were totally free of self interest, or opportunism, then apromise and a handshake would be sufficient. If assets are completely

18Comstock, D.E. and Scott, W. R. (1977) "Technology and the structuring of subunits: Distinguishing

individual and work group effects.) Administrative Sciences Quarterly, 22: 177 - 202.19Coase, RH (1937) "The nature of the firm," Economica, 4:386-405.20Williamson, O.E. (1975) Markets and Hierarchies, (New York: The Free Press); Williamson, OE.

(1985) The Economic Institutions of Capitalism, (New York: The Free Press.

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interchangable, not at all specific to a particular use, then the

purchaser can obtain them anywhere; competition will ensure product

quality. But in certain situations, the purchaser and seller cannot

completely forsee everything about the product, each looks after their

own corporate interests, and assets to be purchased are specific: a

particular type of machine made to specifications, for example. In this

situation, "governance" is required, whether the governance of a

contract, or governance through bringing the supplier into the

organization (vertical integration). What determines whether you buy

something or make it yourself? The transaction costs.

The establishment of a contract between two organizations for

the purchase of a specific type of widget that meets oneorganization's needs will tie up the time of technicians, accountants,

and ultimately, lawyers. They negotiate terms, set up and enforce

payment schedules, and all that. These processes are a cost of the

transaction itself, pure and simple, which both buyer and seller bear.

A firm will expand till it meets the point where the cost of having a

service within the organization (perhaps because of unused time)

exceeds the cost of obtaining it elsewhere. Thus, for example,

construction firms generally employ their own carpenters, laborers,

masons--crafts that are used throughout much of a building project--

but contract for electrical and plumbing, because those skills are

needed only for a short time on any given unit. Small rural hospitals

typically do not have salaried radiologists.

An interesting point about transaction cost analysis is that is

applies well to service industries, and in particular to health care.

Jones, for example, has used this theory to explore the relationship

between client and provider. Jones explored organization structure interms of :

o transaction uncertainty How specific is the product to the

client? How frequentlyis the purchase made? How long does it take

to complete a transaction (duration)? Highly specific, infrequent, and

high duration transactions all have a high degree of uncertainty, or

better, a high degree of cost if the whole thing blows up. And:

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o performance ambiguity . Can the client measure quality?

When uncertaintainty and ambiguity are high, he suggests, vertical

complexity (hierarchy) will be high. Also under these conditions,

supervision will not be able to rely on behavior or output controls,

because the product is to complex to be standardized. In addition,

When performance ambiguity and transaction costs [in this case,

the cost to the patient of finding a new physician] are high, an

organization will need to convince clients that it is acting in their

interest by developing a governance structure that reassures

them it will not act opportunistically towards them . . . hospitals

will respond by controlling who provides services and how they

do so. Specifically, high professional qualifications, intensivesocialization, and the development of medical norms . . . [will

develop]21

The relationship between cost/ambiguity and structure makes

intuitive sense when applied to health care. Patients experience

relatively low transaction costs when evaluating different ambulatory

care physicians. If the doc fails to diagnose your ear infection, the

continuing pain should eventually lead you to another physician, and

you are only out $30 or $40 for the first visit. And in fact, ambulatory

care practice is relatively unregulated. Physicians are free to practice

alone, in groups, with an office manager, without one--pretty much

however they like. Hospitals, however, deal only with very expensive,

very ambiguous care. And hospitals are highly regulated, and in turn

are very careful about dispensing practice privileges.

Organizations as Organisms

Views of the organization as a machine lead to images of a

closed system: the cogs clink and mesh, turning out whatever in

majestic isolation. Open systems theory perceives the organization

through an organic metaphor. The emphasis is on the organization

21Jones, G. r. (1987) Organization-client transactions and organizational governance structures"

Academy of Management Review, 30: 197 -

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solving those problems that a living creature must solve: importation

of energy, transformation of energic input into work, and so on.

Because creatures live in an environment of other creatures, the use

of an organic metaphor calls to the mind the influence that the

environment has on organizations. Given the degree to which hospital

structure, for example, is affected by actions of legislators, payors,

other hospitals and the community at large, the open systems

metaphor brings significant advantages. It emphasizes the degree to

which management must be sensitive to external influence if the

organization is to survive.

Open systems theory is generally attributed to Katz and Kahn.22

K&K identified 10 characteristics which are possessed by all opensystems. Since we've already covered these in an earlier lecture, I'll

just point to one:

o Homeostasis. Organisms that survive do so in a steady

state: people have skeletons yesterday, today and tomorrow. Their

structure is remarkably constant, although the actions a person

engages in will change from day to day. Mechanisms exist to ensure

this homeostasis, such as hunger when we need food, thirst when

water is required and so on. Organizations, like other organisms, will

resist environmental pressures to change shape. Organizations do

this through continued growth, which allows them to 1) ingest (K&K's

term) or control portions of the environment (think of hospitals

acquiring medical buildings to increase their control over physicians)

and thus 2) increase their power within the environment.

Survival through continued growth is an increasingly common

strategy in the health care industry. RLD discuss the increase in thenumber of hospitals participating in multi-institutional arrangements.

Longest, in an earlier article, made an important point: such increases

in size are not undertaken because size leads to efficiency, but

because size influences the power of corporations vis-a-vis the

22Katz and Kahn, op cit, esp Chapter 2, Organizations and the System concept. It is beyond me why RLD

do not cite this work.

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environment. In fact, as Smith and Kaluzny point out, multi-unit

systems have higher operating costs than single hospitals.23 However,

a large, multi-hospital corporation is in a much more powerful position

relative to a state Medicaid industry than is a single hospital. The

multi-hospital corporation can threaten to close a single hospital; the

single hospital does not have that option. Similarly, Smith and

Kaluzny24 point out that the first response of an organization to poor

performance (declining admissions, few new patients) is to attempt to

change the environment. Hospitals and professionals now advertise,

which is an attempt to change the responsiveness of the environment

to them. Hospitals and professionals lobby, which is an attempt to

manipulate the regulatory environment. The preference of

organizations for homeostasis rather than internal change is clearlyevident.

Refined Machines: Matrix Organization

Classical theories of organization and bureaucracy are not

outdated. General Motors is still with us, though limping along. For

many organizations, working one's way through Fayol's terms--span of

control, line versus staff, and all that--are perfectly applicable. Most

organization charts reflect Fayol. However, there are whole ranges of

situations for which traditional paradigms are not applicable. For

these new modes of theory have arisen to describe a reality at

variance with the traditional metaphors. RLD present two: Mintzberg

and his kidneys, and matrix organization, originally described by

Neuhauser.

"Matrix organization" is an attempt to draw a rational diagram of

the observed reality of multiple lines of power and authority in an

23Smith, D.B. and Kaluzny, A.D. (1986) The White Labyrinth: A Guide to the Health Care System

(Health Administration Press: Ann Arbor, MI), Chapter 9, "Endpoints."24 Smith and Kaluzny, op cit, Chapter 4, "Organization."

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organization.25 Duncan Neuhauser26 originally characterized hospitals

as matrix organizations: the vertical lines of authority (down through

nursing, social work, physical therapy, and so on) can be visualized as

intersecting with perpendicular horizontal authority from individual

physicians. The points of intersection are the individual patients.

Neuhauser roots his observations in contingency theory,

specifically in the notion that organization is a function of technology.

The technology of medical care requires a significant degree of lateral

as well as hierarchical coordination. Hospitals have a significant

number of management committees and task forces to provide such

lateral (horizontal) coordination. The greatest degree of coordination,

however, is achieved through the patient care team, using the medicalrecord as a device for communicating and coordinating action.

The text presents Mintzberg as the culminating word on

organization design. Well, maybe. Mintzberg and his kidneys (see p.

231) are actually fairly close to a traditional organization chart, which

has support staff off to the side, operations at the bottom and so on.

If I had to pick an element of Mintzberg that is really different from

that of other theorists, I would have to pick his naming of the five

units, together with his taxonomy of organizations.

"Operating core" is a fairly conventional name; it clearly reflects

Thompson and the "technical core" which is the heart of the

organization's productive processes. Similarly, "middle line" is a fairly

standard term. Originality emerges in the division of the elements

other writers would call "staff" into two species: the "support staff,"

such as the accountants and the housekeepers and all the other folks

who allow the operating core to work unimpeded, and the

"technostructure," the research minded, high tech, modern evolution

of staff. The technocrats decide how the operating core will work,

25For a brief period the bosses at one of my firms were quite excited about matrix management, deciding

that it proved their anarchy was really a system26Neuhauser, D. (1972) "The Hospital as a Matrix Organization," Hospital Administration, 17:Fall, p. 8 -

25.

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although they have no direct authority over them: the engineers

designing cars at GM, the time-and-motion guys designing assembly

lines, and all those strategic planning types who say that it's time for

the hospital to move into fitness centers. Also original is Mintzberg's

recognition that real organizations, unlike organization charts, do not

really end neatly at a single point. Rather, there are power coalitions

at the top (an idea not original to Mintzberg, although the depiction of

it is). The power of the president or CEO in an organization,

particularly a publicly held corporation, is limited. If the vice

presidents really do not like what the president is doing, they can

influence the Board and stage a coup. (I observed one such coup in

which the president who founded a corporation and was its largest

single, but not majority, stockholder, was ousted and replaced by aformer vice president.)

Based on observed variance in the relative size of each of the

five organizational components, Mintzberg defines 5 distinct types of

organization (see p. 232): the simple structure, the machine

bureaucracy, the professional bureaucracy, and divisionalized form,

and the adhocracy. Each of these designs has distinct requirements

associated with it (see pp. 236-237). For example, the divisionalized

form, in which subunits of the organization act like little independent

companies, is difficult to coordinate across divisions.

Organization Design

Why do you possibly need to know all this theory about

organization structure? Simply put, because it affects how people do

their jobs, which in health care means that it affects how patients are

cared for. I am not terribly fond of RLD's approach to organizationtheory. The practical advice they offer in Chapter 6, on the other

hand, is on the mark. Therefore, I would like to organize the

prescriptive part of this presentation around their chapter sections.

Division of Work: Job Design and Work Group Structure

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One sociologist27 suggests that the scientific management of

Taylor and the other classical theorists deprived the worker of skills.

The "negative side" (RLD p. 212) of extreme specialization represents

the effects of this theft on motivation. Present responses, as the text

points out, include job enlargement and job enrichment. To help you

implement these concepts within the unit you will supervise, we

present Hackman's Core Dimensions model.28

Hackman and associates identify five aspects of a job which they

believe lead to employee motivation and satisfaction:

Skill variety, (the range of skills and knowledge used in the job),

task identity(the job as a complete whole) and task significance (thejob is important for the company) are seen to lead to a job that is

experienced as meaningful. Obviously, all three of these elements are

likely to be missing in an assembly line job. Food service workers in a

hospital are unlikely to experience their work as meaningful, for

example: placing a lump of mashed potatoes on each tray on an

assembly line is not innately satisfying. However, there are things

management could do to make even that task more of a whole. For

example, workers could assemble whole trays following dietary

prescription cards that provide some patient and diagnostic

identification (Mrs. Jones, gall bladder surgery; Mr. Smith, diabetic).

Autonomy, or the ability of the worker to make significant

decisions regarding the job, is seen tolead to responsibility.

Continuing the food service example, workers could contribute to

weekly planning sessions at which menu alternatives are sketched

out. They could also decide how responsibilities such as preparing

food items, organizing trays, and so on are apportioned among thework team.

27Perrow, 1986, Chapter 2, "Managerial Ideologies and the Origins of the Human Relations Movement."28This discussion is taken from Randolph, W.A. (1985) Understanding and Managing Organizational

Behavior (Richard D. Irwin, Inc: Homewood, IL), pp. 178 - 182.

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Finally, feedbackis necessary to allow the worker to assess

performance and see the effect his work had on the whole. Returning

to the food service example one more time, if there is more than one

assembly line each could be assigned specific wards. Contact

personnel from the ward would then report back to the food service

line on how each day's menu was received by the patients.

When all of these five elements are present in a job, Hackman

and associates assert, the result will be high motivation, quality

performance, high satisfaction, and low absenteeism and turnover.

How does one create such jobs? Hackman provides useful clues for

this:

"Vertical loading"--letting the employee make important

decisions--is the largest single contributor to improving a job.

Hackman suggests that vertical loading leads to increased skill

variety, task identity, task significance and autonomy.

"Establishing relationships with clients" is the second highest

contributor, affecting skill variety, autonomy and feedback.

Relationships with clients are particularly important in a service

industry, where the client is present through most of the production

process.

The early scientific management theorists operated by breaking

jobs into constituent tasks, which were then assigned to individual

workers. Hackman suggests reversing this process by "combining

tasks" and "establishing natural work units." This process contributes

to skill variety, task identity and task significance.

Hackman's last suggestion, opening feedback channels, refers to

feedback that the individual receives directly, without management

advice. In essence this means ensuring that the worker can see if s/he

is performing correctly on his own. This feedback is fairly easy to

establish in a manufacturing environment, where defects in product

are easy to detect. Error rates for keyboarding or rejection rates for

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sewed garments can easily be tracked. It is a task that requires

somewhat more imagination in health care.

Authority and Responsibility

In this area, RLD note that managers have numerous sources of

power, using the French and Raven paradigm of 5 types of power.

They also note that decisions should be delegated as far down in the

hierarchy as possible. Since we have covered both power and

empowerment previously, we'll just acknowledge the point and move

on.

Departmentalization

RLD place most departmentalization under their "bad" guy, "the

classical view," but go on to point out that it is necessary. Work

groups have advantages: grouping allows for supervision (as opposed

to running all over to supervise), sharing of resources and

communication, and common performance measures. The six criteria

Mintzberg suggests for grouping are offered:

o Knowledge and skills

o Work process and function

o Time (shifts)

o Output

o Client (also, product line: Ca, MI, etc.)

o Place

The tricky part, of course, comes in encouraging communication

and sharing across, rather than within, work groups. The matrix

organization observed in hospitals, and cross-cutting operations such

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as project organization in other firms, serve to provide communication

and coordination across homogenous work groups.

Span of Control

We played with span of control in our "design a hierarchy"

exercise. Most of us, accustomed to working in professional settings,

created relatively small spans of control for each manager: about 6

persons. In a real work setting, determining how many people to

place under a single supervisor is a function of the people, the tasks

they perform, and the abilities of the supervisor.

The text presents five criteria that influence span of control.

Characteristics of subordinates: The more highly trained the

subordinates, the less supervision needed

Uncertainty in the work: Complex work, for which outcomes cannot be

predicted in advance, requires a narrow span of control in order

to exercise close supervision.

Standardization of work: The more standard the processes and

products, the more supervision can take the form of monitoring

of output. In this circumstance, one individual can supervise

many.

Degree of required interaction. If the manager is part of the team,

interacting regularly to create the product, the number of

people who can be supervised is relatively small.

Degree of required integration. Parallels "interaction". The higher the

degree to which outputs must be meshed, other things being

equal, the fewer people one supervisor can handle.

The clever reader will have noticed that these criteria are highly

interactive. An assembly line requires a high degree of integration,

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but also uses highly standardized work and low levels of education in

the worker. In that case, the final two criteria, standardization and low

education, override the need for integration and permit a wide span of

control. [Thought: maybe the real determinant of span of control is

the relative power of supervisor and staff. The more power

subordinates possess, the fewer of them one supervisor can control.]

Determining the balance across these elements is an art, not a

science.

Planning Organizational Structure for Excellence: Peters

We will conclude this lecture by briefly highlighting the points

made in a Tom Peters article entitled "Restoring AmericanCompetitiveness: Looking for New Models of Organizations." I

disagree with Peters' quote from the Toyota chairman that

"competitiveness is a microeconomic issue." Toyota has vested

interests in portraying American failure in the Japanese market as a

function of quality rather than trade policy. Nonetheless, it is hard to

disagree with the assertion that most organizations could use with a

little shaking up if they are to improve.

Peters presents a spiffy organization chart (p. 104) illustrating

his central thesis: that too many organizations have a structure

composed mainly of walls and barricades. The corporate center is

small and walled off from the bulk of the organization by a "Praetorian

guard" of staff assistants. Narrow minded middle managers act

defensively, blocking ideas that might flow up or down the

organization hierarchy. And finally, the organization itself is

surrounded by a wall that separates it from those it intends to serve

except at specific gates, likely to be labelled "market research."

In contrast, Peters' ideal organization (p. 106) has few walls and

chaotic communications. Harkening back to the organic metaphor,

this one looks like an amoeba. Management is still central to the

organization, but instead of establishing rigid hierarchies it provides

vision and values. Top management is no longer isolated from the

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work place, but "wanders" among all working divisions and out among

the customers. Horizontal communications are encouraged; given a

vision, middle management can solve its own technical problems

without the need for coordination from above. The permeability of

Peters' amoeba to the environment is of extreme importance. People

who don't listen to their customers and suppliers may go the way of

the dinosaurs.

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