Knowledgebank: Additional Perspectives on Strategy and Organization Design
Recently, Henry Mintzberg has provided additional insight into the relationship
between strategy and organization design.2 In addition to the basic relationships identified
by Chandler, Mintzberg goes on to suggest that an organization’s growth rate and
distribution of power, other factors determined by strategy, also affect the design the
organization adopts. Mintzberg argues that organizations can be differentiated along three
basic dimensions: (1) their primary coordinating mechanism (the major approach used to
coordinate organizational activities), (2) the key part of the organization (the part that
plays the major role in determining the organization’s success or failure), and (3) the type
of decentralization employed. Each of these dimensions has several different aspects.
Mintzberg identifies five basic coordinating mechanisms that flow from different
strategies. The first is direct supervision. In this approach, one individual is responsible
for the work of others. The second is standardization of work processes. Here the content
of the work is specified or programmed. Next is standardization of skills. This approach
explicitly specifies the kind of training necessary to do the work. Fourth is the
standardization of output. This method specifies the results, or output, of the work.
Finally, mutual adjustment coordinates activities through informal communications.
There are also five key parts of an organization. One is the strategic apex, consisting of
top management and its support staff. Another is the operative core, composed of
workers who actually carry out the organization’s tasks. The middle line is made up of
middle and lower-level management. Analysts such as industrial engineers, accountants,
planners, and human resource managers make up the technostructure. Finally, the support
staff consists of units that provide support to the organization outside of the operating
workflow (for example, legal counsel, executive dining room staff, and consultants.)
Mintzberg suggests that there are three types of decentralization. Under vertical
decentralization, there is a well-defined distribution of power down the chain of
command, or shared authority between superiors and their subordinates. Horizontal
decentralization is the extent to which non-managers (including staff) make decisions, or
1
Alfred D. Chandler, Jr., Strategy and Structure (Cambridge, Mass.: MIT Press 1962); Alfred D. Chandler,
Jr., The Visible Hand: The Managerial Revolution in America. (Cambridge, Mass.: Belknap Press, 1977).
See also Andrea Gabor, The Capitalist Philosophers. (New York: Times Business, 2000).
2
Henry Mintzberg, The Structuring of Organizations: A Synthesis of the Research. (Englewood Cliffs,
N.J.: Prentice-Hall, 1979).
share authority between line and staff. Selective decentralization is the extent to which
power over different kinds of decisions rests with different units within the organization.
Using the relevant forms of coordinating mechanism, key parts, and types of
decentralization, Mintzberg proposes that the strategy that an organization adopts and
how far the organization has to move to fulfill that strategy results in five different forms
of organization design. These forms are summarized in Table 1.
Structural
Configuration
Prime
Coordinating
Mechanism
Key Part of
Organization
Type of
Decentralization
Simple structure
Direct
supervision
Strategic apex
Vertical and
horizontal
centralization
Technostructure
Limited
horizontal
decentralization
Machine
bureaucracy
Professional
bureaucracy
Standardization
of work processes
Operating core
Vertical and
horizontal
decentralization
Standardization
of skills
Middle line
Divisional form
Limited vertical
decentralization
Standardization
of outputs
Support staff
Adhocracy
Mutual
adjustment
Selective
decentralization
Source: Henry Mintzberg, The Structuring of Organizations: A Synthesis of the Research, ©
1979, p. 301. Reprinted by permission of Prentice-Hall, Inc., Englewood Cliffs, NJ.
Table 1
Mintzberg’s Five Designs
THE SIMPLE STRUCTURE
The simple structure uses direct supervision as its primary coordinating mechanism, has
as its most important part its strategic apex, and employs vertical and horizontal
centralization. Relatively small corporations controlled by aggressive entrepreneurs, new
government departments, and medium-sized retail stores are all likely to exhibit a simple
structure. These organizations tend to be relatively young. The CEO (often the owner)
retains much of the decision-making power. The organization is relatively flat and does
not emphasize specialization. Many smaller U-form organizations are structured in this
fashion. Trilogy Software would be an example of a firm using this approach.
THE MACHINE BUREAUCRACY
The machine bureaucracy uses standardization of work processes as its prime
coordinating mechanism; the technostructure is its most important part; and limited
horizontal decentralization is established. The machine bureaucracy is quite similar to
Burns and Stalker’s mechanistic design discussed in Chapter 6 of Griffin’s Fundamentals
of Management, Fourth Edition. Examples include McDonald’s and most large branches
of the US government. This kind of organization is generally mature in age, and its
environment is usually stable and predictable. A high level of task specialization and a
rigid pattern of authority are also typical. Spans of management are likely to be narrow,
and the organization is usually tall. Large U-form organizations are also likely to fall into
this category.
THE PROFESSIONAL BUREAUCRACY
The third form of organization design suggested by Mintzberg is the professional
bureaucracy. Examples of this form of organization include universities, general
hospitals, and public accounting firms. The professional bureaucracy uses standardization
of skills as its prime coordinating mechanism, has the operating core as its most
important part, and practices both vertical and horizontal decentralization. It has
relatively few middle managers. Further, like some staff managers, its members tend to
identify more with their professions than with the organization. Coordination problems
are common.
THE DIVISIONALIZED FORM
The divisionalized form, Mintzberg’s fourth design, exhibits standardization of output as
its prime coordinating mechanism, the middle line as its most important part, and limited
vertical decentralization. This design is the same as both the H-form and the M-form
described earlier. The Limited Inc. and Disney are illustrative of this approach. Power is
generally decentralized down to middle management—but no further. Hence each
division itself is relatively centralized and tends to structure itself as a machine
bureaucracy. As might be expected, the primary reason for an organization to adopt this
kind of design is market diversity.
THE ADHOCRACY
The adhocracy uses mutual adjustment as a means of coordination, has at its most
important part the support staff, and maintains selective patterns of decentralization. Most
organizations that use a fully-developed matrix design are adhocracies. An adhocracy
avoids specialization, formality, and unit of command. Even the term itself, derived from
“ad hoc,” suggests a lack of formality. Sun Microsystems is an excellent example of an
adhocracy.
Clearly, our understanding of the relationship between an organization’s strategy and its
design is still in its infancy. However, the work begun by Chandler and continued by
Mintzberg has laid a reasonable foundation for arguing that such a relationship exists. In
the future, managers and researchers will no doubt develop better and stronger insights
into how organization strategy and design are interrelated.
Source: Griffin, Management, Fourth Edition (Boston: Houghton Mifflin Company, 1990).