For routine tasks, such as making hamburgers and manufacturing automotive parts, a machine-like operation is both ef”cient and effective. A key challenge is how to motivate and satisfy workers in the operating core. People quickly tire of repetitive work and standardized procedures. Yet offering too much creativity and personal challenge in, say, a McDonald’s outlet could undermine consistency and uniformity—two keys to the com- pany’s success.
Like other machine bureaucracies, McDonald’s deals constantly with tension between local managers and headquarters. Local concerns and tastes weigh heavily on decisions of middle managers. Top executives, aided by analysts armed with reams of data, rely more on generic and abstract information. Their decisions are in!uenced by corporation-wide concerns. As a result, a solution from the top may not always match the needs of individual units. Faced with declining sales and market share, McDonald’s introduced a new food preparation system in 1998 under the marketing banner “Made for you.” CEO Jack Greenberg was convinced the new cook-to-order system would produce the fresher, tastier burgers needed to get the company back on the fast track. However, franchisees soon complained that the new system led to long lines and frustrated customers. Unfazed by the criticism, Greenberg invited a couple of skeptical “nancial analysts to !ip burgers at a McDonald’s outlet in New Jersey so they could see “rsthand that the concerns were unfounded. The experiment back”red. The analysts agreed with local managers that the system was too slow and decided to pass on the stock (Stires, 2002). The board replaced Greenberg at the end of 2002.
Professional Bureaucracy Harvard University affords a glimpse into the inner workings of a professional bureaucracy. As in other organizations that employ large numbers of highly educated professionals to perform core activities, Harvard’s operating core is large relative to other structural parts, although the technostructure has grown in recent years to accommodate mandated programs such as racial equity or gender sensitivity. At the operating sphere, each individual school, for example, has its own local approach to teaching evaluations; there is no university-wide pro”le developed by analysts. Few managerial levels exist between the strategic apex and the professors, creating a !at and decentralized pro”le.
Control relies heavily on professional training and indoctrination. Insulated from formal interference, professors have almost unlimited academic freedom to apply their expertise as they choose. Freeing highly trained experts to do what they do best produces many bene”ts
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but leads to challenges of coordination and quality control. Tenured professors, for example, are largely immune from formal sanctions. As a result, universities have to “nd other ways to deal with incompetence and irresponsibility. Faced with a professor whose teaching performance was moving from erratic to bizarre, a Harvard dean did the one thing he felt he could do—he relieved the professor of teaching responsibilities while continuing to pay his full salary. The dean was not very disappointed when the professor quit in anger (Rosovsky, 1990).
A professional bureaucracy responds slowly to external change. Waves of reform typically produce little impact because professionals often view any change in their surroundings as an annoying distraction. The result is a paradox: Individual professionals may strive to be at the forefront of their specialty, whereas the institution as a whole changes at a glacial pace. Professional bureaucracies regularly stumble when they try to exercise greater control over the operating core; requiring Harvard professors to follow standard teaching methods might do more harm than good.
Harvard president Larry Summers tripped over this challenge in a famous case when he suggested that superstar African American studies professor Cornel West redirect his scholarly efforts. Summers gave his advice to West in private, but West’s pique made the front page of the New York Times (Belluck and Steinberg, 2002). Summers’s profuse public apologies failed to deter the offended professor from decamping to Princeton, where he stayed for 14 years before returning to Harvard in 2016. In professional bureaucracies, professionals often win struggles between the strategic apex and the operating core. Hospital administrators learn this lesson quickly, and often painfully, in their dealings with physicians.
Divisionalized Form In a divisionalized organization (see Exhibit 4.2), the bulk of the work is done in quasiautonomous units, such as freestanding campuses in a multi-campus university, areas of expertise in a large multispecialty hospital, or independent business units in a Fortune 500 “rm (Mintzberg, 1979). Johnson and Johnson, for example, is among the largest companies in the world (#39 on the Fortune 500 in 2016). It has 250 operating companies lodged in virtually every country. Its medical device division is the world’s largest. Its pharmaceutical division is even bigger. Its consumer products division produces a wide assortment of well-known brands, such as Neutrogena, Tylenol, Band-Aids, and Rogaine. It also makes contact lenses and tuberculosis medicines.
Although J&J’s divisions often have little in common, the company’s executives argue that there is a level of shared synergy and stability that have paid off over time. Despite
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Exhibit 4.2. Divisionalized Form.
Source:Mintzberg (1979, p. 393). Copyright ! 1979. Reprinted by permission of Pearson Education, Inc., New York, New York.
setbacks in the Tylenol crisis of 1982 and a series of product recalls in 2010 and 2012, J&J had raised its dividend for 53 consecutive years and was one of only two U.S. companies with an AAA credit rating.
One of the oldest businesses in the United States, Berwind Corporation began in coal- mining in 1886. It now houses divisions in business sectors as diverse as manufacturing, “nancial services, real estate, and land management. Each division serves a distinct market and supports its own functional units. Division presidents are accountable to the corporate of”ce in Philadelphia for speci”c results: pro”ts, sales growth, and return on investment. As long as they deliver, divisions have relatively free rein. Philadelphia manages the strategic portfolio and allocates resources based on its assessment of market opportunities.
Divisionalized structure offers economies of scale, resources, and responsiveness while controlling economic risks, but it creates other tensions. One is a cat-and-mouse game between headquarters and divisions. Headquarters wants oversight, while divisional managers try to evade corporate control:
Our topmanagement likes tomake all the major decisions. They think they do, but I’ve seen one case where a division beat them. I received . . . a request from the division for a chimney. I couldn’t see what anyone would do with a chimney . . .
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[But] they’vebuilt andequippedawholeplantonplantexpenseorders.Thechimney is the only indivisible item that exceeded the $50,000 limit we put on plant expense orders. Apparently they learned that a new plant wouldn’t be formally received, so they built the damn thing (Bower, 1970, p. 189).
Another risk in the divisionalized form is that headquarters may lose touch with operations. As one manager put it, “Headquarters is where the rubber meets the air.” Divisionalized enterprises become unwieldy unless goals are measurable and reliable information systems are in place (Mintzberg, 1979).
Adhocracy Adhocracy is a loose, !exible, self-renewing organic form tied together primarily through lateral means. Usually found in a diverse, freewheeling environment, adhocracy functions as an “organizational tent,” exploiting bene”ts that structural designers traditionally regarded as liabilities: “Ambiguous authority structures, unclear objectives, and contradictory assignments of responsibility can legitimize controversies and challenge traditions. Incoherence and indecision can foster exploration, self-evaluation, and learning” (Hedberg, Nystrom, and Starbuck, 1976, p. 45). Inconsistencies and contradictions in an adhocracy become paradoxes whereby a balance between opposites protects an organization from falling into an either-or trap.
Ad hoc structures thrive in conditions of turbulence and rapid change. Examples are advertising agencies, think-tank consulting “rms, and the recording industry. A successful and durable example of an adhocracy is W. L. Gore, producer of Gore-Tex, vascular stents, dental !oss, and many other products based on its pioneering development of advanced polymer materials. When he founded the company in 1958, Bill Gore conceived it as an organization where “there would be no layers of management, information would !ow freely in all directions, and personal communications would be the norm. And individuals and self-managed teams would go directly to anyone in the organization to get what they needed to be successful” (Hamel, 2010).