Have you ever wondered how organizations evolve their structure? When is the optimal time to change the structure of an organization? What should the structure be and why? How should this structure be represented?
Organizational structures are typically represented as inverted trees with the root of the organization at the top and its adjacent branches denoting the major divisions or functions. More branches follow all the way to the atomic level of the organization where the smallest units of work take place. Every organization requires this kind of inverted tree manifested in an “org chart” to legitimize its structure; however, “org chart” abstractions do not tell the entire story of the structure of an organization. What is missing is the identification of the part of the organization that controls its destiny; the specification of the major method the organization uses to coordinate its activities; and the type of decentralization for decision-making that is employed.
Henry Mintzberg, renowned management author and professor at McGill University in Montreal, Canada, developed a practical framework for understanding the structure of organizations and provide insight on the three missing dimensions of “org charts.” They are: the key parts of an organization; the organization’s coordinating mechanism; and the type of decentralization employed. Mintzberg’s research led him to conclude that seven types of organizations emerge from the interaction of these three dimensions.
In his work with organizational structures, Mintzberg also addressed the questions of what drives structures and when they should change. The key driver for organizational structure, Mintzberg noted, is the strategy of the organization. As strategies evolve so do organizational structures. Strategies determine the environment for the organization, and its corresponding technologies and tasks. They also affect the growth of the organization and its power distribution. Correct strategies could result in the optimal organizational structures to support them. On the other hand, weak strategies most often lead to poor structures, which contribute to the downfall of organizations.
Key Parts of an Organization
The key parts of an organization are the operational components that drive success or failure. Even though Mintzberg defined five key parts, only one is generally dominant. The five key parts are:
- Strategic apex, which consists of top management and its support staff.
- Operating Core, which consists of workers who carry out the organization’s tasks.
- Line managers, which consists of management teams, particularly middle management.
- Technostructure, which consists of specialized professionals such as engineers, accountants, planners, researchers, and personnel managers.
- Support staff, which consists of people who provide indirect services.
Within an organization, coordinating mechanisms specify the way the organization organizes and manages its work. While there are six possible coordinating mechanisms, only one tends to be employed by an organization. The six coordinating mechanisms are:
- Mutual adjustment, where coordination takes place through simple, informal communications.
- Direct supervision, where coordination takes place by person issuing orders or instructions to others.
- Standardization of work processes, where coordination takes place by specifying the work processes that people follow to carry out interrelated activities.
- Standardization of outputs, where coordination takes place by specifying the results of different work.
- Standardization of skills, where coordination takes place through the specialization and training of the various people in the organization.
- Standardization of norms, where coordination takes place by engaging the same set of beliefs and expected behaviors, such as the case in a religious organization.
Types of Decentralization
This dimension relates to the distribution of decision-making power. In its basic form, decision-making power can be centralized or distributed. Mintzberg differentiates six types of decentralization:
- Centralized, where all of the powers resides in the strategic apex.
- Selective, where the apex shares some of the power with the technostructure who standardizes the work for everybody.
- Parallel, where leaders of market-driven parts of the organization are given the power to make decisions for their units.
- Decentralized, where most of the power rests in the operating core.
- Selective decentralization, where decision-making is shared by the operating core, support staff, line managers, and staff experts who work in teams at various levels of the organization.
- Distributed, where power is shared more or less equally by all members of the organization.
Mintzberg considered that the contexts of age, size, technical system, environment, and power influence the structure of organizations. Older and larger organizations typically have more formalized and elaborate structures. The same is true for older industries. In reference to their technical system context, regulated organizations tend to have more control on its operating core. Complex technical systems require more professional and staff support. Automation can transform the structure of an organization from heavy reliance on the operating core to reliance on technostructure. With regards to its environment, complexity drives decentralization. Also, dynamic environments tend to generate more fluid structures. Diversified environments result in business unit and specialization arrangements. Power also impacts organizational structure. The more power an organization exerts on its environment, the more centralized it tends to be. Divided internal power leads to politicized structures.
As stated, Mintzberg defined seven organization types that result from the interplay of the three dimensions of structure and their supporting contexts such as age, size and technical system. The seven organization types are:
- Entrepreneurial, which are typically new, small, and act under centralized power;
- Machine, which rely on standardization of work processes;
- Professional, which depend on their standardization of skills;
- Diversified, which typically follow a market-based arrangement with each division running more or less autonomously;
- Innovative, which tend to be fluid and more organic, typically working in team structures;
- Missionary, which are heavily guided by the needs of their environment and tend to have decentralized power; and
- Political, which are extremely bureaucratic and result in the least stable.
Next time you look at an “org chart,” ask what the strategy behind the structure is. Also, think about its context: age, size, technical system, environment and power. Try to define the context for the organizational structure. Next, analyze the three dimensions of structure: its key part, coordinating mechanism and type of decentralization. If you do this, I believe you will have a much richer understanding of the “org chart.”