MSc in EFM – Management Week 2

1. MSc in EFM – Management Week 2 The Structure of Organisations – Mintzberg’s Contingency Theory

2. Mintzberg’s Approach • Described as an ‘extended contingency approach’ • Wide-ranging use of theory • Synthesis of many other theories and writers • Need to read ‘Structure in Fives’, or ‘The Structuring of Organisations’

3. Mintzberg’s Model • 5 co-ordination methods • 5 basic parts to an organisation • Design Parameters • Contingency Factors • 5 Pulls or forces • 5 structural configurations • The Concluding Pentagon

4. 5 Basic Co-ordination Mechanisms • Mutual adjustment – person-to-person • Direct supervision – an individual directly responsible for the work of others • Standardisation of work processes – how the job is actually to be done • Standardisation of Outputs – the outputs of the process (goods or services) • Standardisation of Skills – Input levels are controlled rather than outputs

5. 5 Basic Parts to an Organisation • Operating core – staff who carry out the main operations of the organisation • Strategic Apex – group that decides overall strategy, chooses other managers and manages interface with environment • Middle-line – link between operating core and strategic apex • Technostructure – staff who determine the way in which work is carried out, but do not directly manage the processes • Support Staff – all other staff who support the work of the other four parts

6. 5 Parts of the Organisation

7. Design Parameters • Choices made by senior management as they design the structure of the organisation • 9 parameters in 4 sets • Design of Positions • Design of Superstructure • Design of lateral linkages • Design of decision-making system

8. A - Design of Positions • See Handout of Terminology 1. Job specialisation Horizontal and Vertical, and Job enlargement • Behaviour formalisation • Formalisation by job • Formalisation by work-flow • Formalisation by rules 3. Training and Indoctrination

9. B - Design of SuperstructureThe formal structure of the organisation • Unit grouping on many different bases: Knowledge or skill, function, output, time, place Two major bases are by: Function or Market • Unit Size – large literature – see Textbook “How many individuals can rep0rt to one manager?” – ‘span of control “Tall v Flat” structures

10. 2 Hypotheses re Unit size • The greater the use of standardisation for coordination, the larger the size of the work unit • The greater the reliance on mutual adjustment (due to interdependencies in complex tasks), the smaller the work unit

11. C – Design of Lateral Linkages Many structures are mainly vertical, but this will not suffice. There needs to be lateral communication links. i Planning and Control Systems. “Performance control aims ‘to regulate the overall results of a given unit’” Budgetary control Setting financial/operational targets

12. ii Liaison Devices – to improve lateral communication and decision making • Liaison positions • Task forces • Standing committees • Integrating managers • Matrix structures

13. D – Design of Decision Making System • Degree of Decentralisation • Reasons for decentralisation: • Information processing • Timeliness • Closeness to decision situation • Training for managers • Vertical and Horizontal decentralisation

14. CONTINGENCY FACTORS Is there a relationship between Structure and effective performance of the organisation? If so, What determines this relationship? This leads to the quest for ‘contingency factors that help to explain how structure and effective performance are related ‘Contingency Factors’ are organisational states or conditions that are associated with the use of certain design parameters, and thus with organisational structure’

15. Two hypotheses re |Contingency Factors • Congruence Hypothesis – effective structuring requires a close fit between contingency factors and design parameters, I.e.to be effective, design must match the situation • Configuration Hypothesis – Effective structuring requires an internal consistency among the design parameters, u.e.design must be on a logical basis

16. Contingency Factors • 4 Sets of Contingency factors • Expressed as 16 Hypotheses • Hypotheses are based on substantial empirical evidence – this is one of the key strengths of Mintzberg’s approach • See handout for full version of the hypotheses

17. A – Age and Size • Older  More formalised • Structure reflects age of founding of industry • Larger unit  more elaborate structure; more differentiated, and more administrative • Larger the unit  larger size of average unit • Larger the organisation  more formalised behaviour

18. B – Technical System • More regulating technical system  more formalised operations  more bureaucratic structure in operating core • More sophisticated technical system  more elaborate administrative structure • Automation of operating core  organic structure (not bureaucratic)

19. C - Environment • More dynamic environment  organic structure • More complex environment  decentralised structure • More diversified markets  market-based units (divisionalised) • Extreme hostility  centralisation, temporarily • Disparities in environment  decentralisation, probably as divisions

20. D – Power and Other • Greater external control  more centralised and formalised • Power needs of managers  excessive centralisation • Fashion favours the structure of the day, even when inappropriate

21. Conclusion • Design parameters represent choices, but not free choice. • Congruence hypothesis says that the choices must be appropriate to contingency factors • Congruence hypothesis says choices must be internally consistent.