Mintzberg The three last configurations Pål Sørgaard Telenor

Mintzberg: The three last configurations Pål Sørgaard, Telenor R&D and If. I INF 5250 September 26, 2005

Curriculum covered l The more modern configurations – professional bureaucracy – divisionalised form – adhocracy l Chapters 10 -12 l Material that deserves a recapitulation – Read the book again when you have been working for a year 26 September, 2005 Pål Sørgaard, R&D 2

The professional bureaucracy (ch 10) l Characteristics – prime coordinating mechanism: standardisation of skills – key part: operating core – main design parameters: training, horizontal job specialisation, vertical and horizontal decentralisation – situational factors: complex, stable environment; nonregulating, nonsophisticated technical system; fashionable l Examples – universities, general hospitals, social-work agencies, craft production firms, law firms, courts, accounting firms l Core condition: complex enough to require professionals, stable enough to use standardised skills 26 September, 2005 Pål Sørgaard, R&D 3

A different kind of bureaucracy l Bureaucratic in the sense that coordination is achieved by standards, by design l The standards are set by the professions involved – e. g. medical faculties and Lægeforeningen – not by the technostructure l Classification, pigeonholing as a core process – clients and cases are put in neat, predetermined categories (diagnosis) – programs of action for each category are then applied – schools build and maintain categories l Pigeonholing creates equivalence between functional and market bases for grouping 26 September, 2005 Pål Sørgaard, R&D 4

Focus on operating core l Professional autonomy – little behaviour formalisation – little use of planning and control systems – responsible to whom? l Support staff developed – In order to serve the professionals l IT may be used heavily by the operating core (e. g. Xray) l Little or weak use of IT in order to run the business – not highly regulating, not sophisticated, not automated technical system 26 September, 2005 Pål Sørgaard, R&D 5

The administrative structure l The professionals try to control the administrative structure l Sometimes two hierarchies – one bottom-up for the professionals – one top-down for the support staff – just like the University of Oslo! l The administrators have limited power 26 September, 2005 Pål Sørgaard, R&D 6

Some issues l Relatively weak at coordination – standardisation of skills is a loose mechanism – need for more coordination may require other configurations l Pigeonholing is not perfect l Hard to deal with incompetent or unconscientious professionals – some ignore the needs of the clients l Inflexible structure – little innovation, hard to change – sometimes good at learning from its practice, but not always 26 September, 2005 Pål Sørgaard, R&D 7

Can professional bureaucracies be better managed? l Direct supervision by managers not in the profession is hard l Other kinds of standardisation do not apply well l Measuring performance may result in trouble l Complex work must be under the control of those who do it l More control has negative impact on innovation and dialogue with clients l Change comes mainly with new professionals, through their schools and associations 26 September, 2005 Pål Sørgaard, R&D 8

The divisionalised form (ch 11) l Characteristics – prime coordinating mechanism: standardisation of outputs – key part: middle line – main design parameters: market grouping, performance control system, limited vertical decentralisation – situational factors: diversified markets (particularly products or services); old, large; power needs of middle managers; fashionable l Examples – common among large industrial corporations: Hydro, Orkla – other kinds of examples are Helse Øst, Høgskolen i Oslo l Not a complete structure, an aggregate 26 September, 2005 Pål Sørgaard, R&D 9

Typically l The divisions are fairly autonomous l There is little interdependence between divisions l Divisions address separate markets l Divisional leaders are very strong l Headquarters focus on performance (economic result) l Divisions are driven towards machine bureaucracy l Comes as a result of diversification or acquisitions l Split in separate organisations is a realistic alternative 26 September, 2005 Pål Sørgaard, R&D 10

Powers of the headquarters l Decisions on what divisions there should be l Allocation of overall financial resources l Definition of the performance control system l Appointment of divisional managers l Monitoring of the divisions on a personal basis l Provision of certain common support services 26 September, 2005 Pål Sørgaard, R&D 11

Conditions l First of all: market (esp. product) diversity – and divisionalisation encourages further diversification l Divisionalisation based only on client or regional diversification often turns out to be incomplete – hybrid: carbon-copy bureaucracy l Technical system split in segments, one per division l Environment: preferably simple and stable – other environments often lead to hybrids l Large and old (except federations) l Power games and aggregation of power important factors 26 September, 2005 Pål Sørgaard, R&D 12

Stages of divisionalisation (fig 11 -3) Integrated form (pure functional) By-product form Related product form Conglomerate form (pure divisional) 26 September, 2005 Pål Sørgaard, R&D 13

Advantages compared to machine bureaucracy, but … l Allocation of capital – better done by the capital market? – corporations priced lower than the sum of their parts l Helps training managers – better than a small, independent company? l Spreads risk across markets – conceals failures and bankruptcies too long, may cause others to fall? l Strategically responsive – focus on short term performance and the impact on structure in the division may be negative? 26 September, 2005 Pål Sørgaard, R&D 14

Centralisation and synergies l Tendency to centralise decision at headquarters based on MIS-data (management information system) l “A cornerstone […] is letting heads of business units determine where and when to collaborate. If corporate managers take the lead, they often do not understand the nuances of the business. They naively see synergies that aren’t there. They tend to overestimate the benefits of collaboration and underestimate its costs. ” Eisenhardt and Galunic (2000) 26 September, 2005 Pål Sørgaard, R&D 15

Problems with divisionalisation l Centralisation of power l Bureaucratisation l Reliance on MIS l Outside private sector: artificial performance standards l Pure divisionalisation may be a weaker alternative than full split – remember: no environment of its own l Controlled diversity more profitable than conglomerate – by-product or related-product forms the more interesting 26 September, 2005 Pål Sørgaard, R&D 16

No environment of its own stable dynamic Complex Decentralised al ion cy s Bureaucratic ra es uc f ro ea P r (standardisation of skills) Decentralised y ac Organic cr ho (mutuald adjustment) A Simple Centralised Organic ple re m u (direct supervision) Si ruct bu 26 September, 2005 Centralised Bureaucratic ine acy h cr ac auof work (standardisation M re processes) bu Pål Sørgaard, R&D 17 st

The adhocracy (ch 12) l Characteristics – prime coordinating mechanism: mutual adjustment – key part: support staff (together with the operating core in the operating adhocracy) – main design parameters: liaison devices, organic structure, selective decentralisation, horizontal job specialisation, training, functional and market grouping concurrently – situational factors: complex, dynamic (sometimes disparate) environment; young (especially operating adhocracy); sophisticated and often automated technical system (in the administrative adhocracy); fashionable 26 September, 2005 Pål Sørgaard, R&D 18

Design l Focus on innovation, cannot rely on standardisation l Goes away from the principle of unity of command l Gives power to experts, but cannot rely on their standardised skills to achieve coordination l Mutual adjustment in and between project teams – project coordinators, meetings, etc l Matrix structure common – experts formally in functional units – project teams based on (market) needs 26 September, 2005 Pål Sørgaard, R&D 19

The operating adhocracy l Solves problems on behalf of its clients – – – think-tanks applied R&D institutes creative advertising companies manufacturer of prototypes experimenting theatre company l May easily turn into a professional bureaucracy if more focused and with standardised methods – e. g. from NR to Accenture 26 September, 2005 Pål Sørgaard, R&D 20

The administrative adhocracy l Solves problems, runs projects, on behalf of itself l Typically a company where the operating core is truncated – done in a separate organisation – contracted out (outsourcing) – by full automation (c. f. discussion of machine bureaucracy) l Tricky issue of combining efficient production with high degree of innovation – machine bureaucracy with a venture team is not an adhocracy 26 September, 2005 Pål Sørgaard, R&D 21

Administration and support l. A lot of coordination needed l Managers participate in project teams l Ensuring proper management and anchoring of projects often demanding l Need to monitor and redirect projects l Distinction between line and staff becomes unclear 26 September, 2005 Pål Sørgaard, R&D 22

Strategy in adhocracies l Hard to split strategy formulation and strategy implementation l Strategy tends to evolve – formed implicitly by decisions made – strategy formation, emergent strategy, strategising 26 September, 2005 Pål Sørgaard, R&D 23

Conditions l Dynamic and complex environment l Interdependencies that need to be handled l Frequent product changes l Often young (esp. operating adhocracies) l Sophisticated and sometimes automated technical system l An element of fashion – all the right words: dynamic, expertise, projects, etc. 26 September, 2005 Pål Sørgaard, R&D 24

Some issues l Ambiguities – Unclear, multiple and changing lines of authority l The most politicised configuration l Not very efficient l Danger of inappropriate transition 26 September, 2005 Pål Sørgaard, R&D 25

Summary l Five main configurations (ch 7 -12) l Five parts of organisation (ch 1) l Five kinds of coordinating mechanisms (ch 1) l Five types of decentralisation (ch 5) l Nine design parameters (ch 2 -5) l Four groups of situational or contingency factors (ch 6) – environment especially important l Above all. An extended configuration hypothesis: Effective structuring requires a consistency among the design parameters and contingency factors 26 September, 2005 Pål Sørgaard, R&D 26