Mintzbergs Model on Organisational Structures

This note summarises the key features of Henri Mintzbergs theory on the structuring of organisations, which he presented in his book The Structuring of Organisations and Structure in 5’s: Designing Effective Organizations in the early 1980s. According to Mintzberg organisations are formed of five main parts: Operating core Those who perform the basic work related directly to the production of products and services.

Charged with ensuring that the organisation serve its mission in an effective way, and also that it serve the needs of those people who control or otherwise have power over the organisation Middle-line managers Form a chain joining the strategic apex to the operating core by the use of delegated formal authority Technostructure The analysts who serve the organisation by affecting the work of others. They may design it, plan it, change it, or train the people who do it, but they do not do it themselves

Support Staff

Composed of specialised units that exist to provide support to the organisation outside the operating work flow Pressures Each of these five parts has a tendency to pull the organisation in a particular direction favourable to them

• Strategic Apexes – centralisation
• Support Staff – collaboration
• Technostructures – standardisation
• Operating Core – professionalisation

Middle Line – balkanisation Five Generic Structures There are five generic organisation structures which can be described in terms of the five-part theory:

• Simple structure, Machine bureaucracy,
• Professional bureaucracy,
• Divisionalised form,
• Adhocracy.

Especially, power over all important decisions tends to be centralized in the hands of the chief executive officer. Thus, the strategic apex emerges as the key part of the structure. Indeed, the structure often consists of little more than a one-person strategic apex and an organic operating core Most organizations pass through the simple structure in their formative years. The environments of the simple structures are usually simple and dynamic.

A simple environment can be comprehended by a single individual, and so enables decision making to be controlled by that individual. A dynamic environment means organic structure: Because its future state cannot be predicted, the organization cannot effect coordination by standardization Machine Bureaucracy The design of a machine bureaucracy tends to be as follows:

• highly specialised, routine operating tasks;
• very formalised procedures in the operating core; a proliferation of rules, regulations;
• formalised communication;
• large-sized units at the operating level;
• reliance on the functional basis for grouping tasks;
• relatively centralised power for decision making;
• an elaborate administrative structure with sharp distinctions between line and staff.

Because the machine bureaucracy depends primarily on the standardization of its operating work processes for coordination, the technostructure emerges as the key part of the structure Machine bureaucratic work is found, in environments that are simple and stable.

Machine bureaucracy is not common in complex and dynamic environments because the work of complex environments can not be rationalized into simple tasks and the processes of dynamic environments can not be predicted, made repetitive, and standardized The machine bureaucracies are typically found in the mature organizations, large enough to have the volume of operating work needed for repetition and standardization, and old enough to have been able to settle on the standards they wish to use The managers at the strategic apex of these organizations are mainly concerned with the fine-tuning of their bureaucratic machines.

Machine bureaucracy type structures are “performance organizations” not “problem solving” ones. Professional Bureaucracy The professional bureaucracy relies for coordination on:

• the standardization of skills and its associated parameters such as design, training and indoctrination.
• In professional bureaucracy type structures duly trained and indoctrinated specialists -professionals- are hired for the operating core, and then considerable control over their work is given to them.

Most of the necessary coordination between the operating professionals is handled by the standardization of skills and knowledge – especially by what they have learned to expect from their colleagues. Whereas the machine bureaucracy generates its own standards the standards of the professional bureaucracy originate largely outside its own structure (especially in the self-governing association its operators join with their colleagues from other professional bureaucracies). The professional bureaucracy emphasizes authority of a professional nature or in other words “the power of expertise”.

The strategies of the professional bureaucracy are mainly developed by the individual professionals within the organization as well as of the professional associations on the outside. Divisionalised Form Divisionalised form type organizations are composed of semi-autonomous units – the divisions. The divisionalised form is probably a structural derivative of a Machine Bureaucracy – an operational solution to co-ordinate and controls a large conglomerate delivering:

1. Horizontally diversified products or services
2. In a straight-forward, stable environment
3. Where large economies of scale need not apply.

If large economies of scale were possible the costs and benefits of divisionalisation would need careful examination. The modern, large holding company or conglomerate typically has this form Like the Professional Bureaucracy, the Divisional Form is not so much an integrated organization as a set of quasi-autonomous entities coupled together by a central administrative structure. But whereas those “loosely coupled” entities  in the Professional Bureaucracy are individuals—professionals in the operating core—in the Divisionalised Form they are units in the middle line.

These units are generally called divisions, and the central administration, the headquarters The Divisionalised Form differs from the other four structural configurations in one important respect. It is not a complete structure from the strategic apex to the operating core, but rather a structure superimposed on others. That is, each division has its own structure. Most important, the Divisionalised Form relies on the market basis for grouping units at the top of the middle line. Divisions are created according to markets served and they are then given control over the operating functions required to serve these markets.

Adhocracy Adhocracy includes a highly organic structure, with:

• little formalization of behaviour;
• job specialization based on formal training;
• a tendency to group the specialists in functional units for housekeeping purposes but to deploy them in small, market-based project teams to do their work;
• a reliance on liaison devices to encourage mutual adjustment, the key coordinating mechanism, within and between these teams The innovative organization cannot rely on any form of standardization for coordination.

Consequently, the adhocracy might be considered as the most suitable structure for innovative organizations which hire and give power to experts – professionals whose knowledge and skills have been highly developed in training programs. Managers (such as functional managers, integrating managers, project managers etc. ) abound in the adhocracy type structures. Project managers are particularly numerous, since the project teams must be small to encourage mutual adjustment among their members, and each team needs a designated leader, a “manager. Managers are also functioning members of project teams, with special responsibility to effect coordination between them. To the extent that direct supervision and formal authority diminish in importance, the distinction between line and staff disappears. Structure/strategy fit Pan American airlines A mismatch between strategy and structure can lead to serious organisational difficulties. This was the case with Pan Am Airlines. An error in strategy In the late 1970s, the international airline Pan Am, decided to adopt a new strategy in order to capture some of the American domestic market.

The company felt that if its foreign-bound American travellers could do business with Pan Am for the entirety of their trip, the airline could become and industry giant. In 1978, therefore, Pan Am purchased National Airlines, which had one of America’s best domestic route systems. The acquisition proved to be a poor strategic move. Just as the purchase was made, the entire domestic airline industry in the US was deregulated. With deregulation, Pan Am could have constructed its own domestic route system with the resources it had.

Instead, it acquired a very expensive domestic route system and domestic carrier that quickly became unprofitable under Pan Am management because of a serious structural error. Structural error Pan Am decided to roll National and Pan Am into one airline, still trading as Pan Am. This is most closely associated with developing a functional organisational design. National’s regular customers were thereby disenfranchised and customer loyalty to the National ‘brand’ was lost. A name such as Pan Am National Airlines would have been more useful to the organisation.

Philip Morris, for example, used a much more appropriate and savvy approach when it bought Kraft and General Foods: it kept both names, Kraft General Foods. It did not drop the names and call itself Philip Morris Foods, which had no pre-existing market association. Combining the two airlines, rather than keeping them separate under a divisional structure, resulted in the loss of the lower-cost workers of National. Under the new, uniform structure, the former National employees were paid higher wages. While this may have appealed to the employees, it was an error on the part of Pan Am management.

This error was especially evident after deregulation, which brought about low-cost airlines that could profitably offer travellers cheap fares. With its higher cost, Pan Am was being beaten by its old and new competitors. A sounder management structure would have been to match Pan Am to its new strategy by the divisional structure, leaving the two airlines as separate divisions of the same organisation. The effects of strategy and structure errors because of the strategic and structural errors Pan Am was losing money. In order to survive, the airline began selling its assets. In 1980, it sold its Pan Am building in New York.

In 1981, it sold its company hotel chain. During the same decade, it sold many of its DC-10 aircraft to American Airlines. When airline transport boomed again, Pan Am was left with no capacity to take advantage of the increase in air traffic. The struggling airline even sold its prized Pacific routes, a move that many experts say was one of Pan Am’s management’s greatest mistakes. The airline’s survival became doubtful. Pan Am began looking for a partner in hopes of prospering again. Management and labour problems In the midst of strategic and structural problems, management and labour came into conflict. In 1981,

Edward Acker, who had built tiny Air Florida into a nationally known carrier, became chairman of Pan Am. He got off to a good start with the union, with some employees even wearing buttons proclaiming themselves as ‘Acker Backers’. But the relationship did not last long. In 1985, the Transport Workers Union struck Pan Am, costing it any possible profits that year. By the late 1980s, Pan Am’s unions were calling for Acker’s replacement. In 1988, Acker and four other corporate officers lost their jobs. William Genoese, director of the Teamsters’ airline division, explained that the company’s problem was that management didn’t realise that he airline was 20 years behind the times. Management was not in the marketplace merchandising or being more competitive. The problem continued under the next Chairman. Eventually, time ran out for the carrier. The airline filed for chapter 11 bankruptcy on January 8, 1990 and went out of business on December 4, 1991.

Required

Summarise the key strategic issues and the link to structure. 3. By way of conclusion, identify and explain the changing approaches to organisational design and structure. Your answer must include an analysis of the reasons for these changes. Use examples either real or hypothetical to clarify your answer.