Lee G. Bolman - Reframing Organizations

Until the mid‐twentieth century, most big companies were functionally organized. Responding to strategic complexity during the late 1950s and early 1960s, many companies shed their functional structures in favor of divisional forms pioneered by DuPont and General Motors in the 1920s. Beginning in the mid‐1960s, many organizations in complex environments began to develop matrix structures in which individuals and units have more than one reporting structure. Matrix structures are often cumbersome (Davis and Lawrence, 1978; Peters, 1979), but can solve many problems when organizations figure out how to make them work (Vantrappen and Wirtz, 2016). By the mid‐1990s, Asea Brown Boveri (ABB), the Swiss‐based electrical engineering giant, had grown to encompass some 1,300 separate companies and more than 200,000 employees worldwide. To hold this complex collection together, ABB developed a matrix structure crisscrossing approximately 100 countries with about 65 business sectors (Rappaport, 1992). Each subsidiary reported to both a country manager (Sweden, Germany, and so on) and a sector manager (power transformers, transportation, and the like).

The design carried the inevitable risk of confusion, tension, and conflict between sector and country managers. ABB aimed for structural cohesion at the top with a small executive coordinating committee (9 members from seven countries at the beginning of 2021), an elite cadre of some 500 global managers, and a policy of communicating in English, even though it was a second language for most employees. Variations on ABB's structure—a matrix with business or product lines on one axis and countries or regions on another—are common in global corporations. Familiar brands like Amazon, Google, and Starbucks use matrix structures to support their business (Bradt, 2018).

Networks have always been around, more so in some places than others. Cochran (2000) describes how Western and Japanese firms doing business in China in the nineteenth and twentieth centuries had to adapt their hierarchical structures to accommodate powerful social networks deeply embedded in Chinese culture. One British firm tried for years, with little success, to limit the ability of powerful informal leaders, who headed local networks based on kinship and village, to influence hiring and wages of the workforce. In the modern era, the proliferation of information technology beginning in the 1980s led to an explosive growth of digital networks—everything from small local grids to the global Internet. These powerful new lateral communication devices often supplanted vertical strategies and spurred the development of network structures within and between organizations (Gulati, Lavie, and Madhavan, 2011; Steward, 1994).

Many large global corporations have evolved into complex networks (Ghoshal and Bartlett, 1990; Gulati and Gargiulo, 1999). Horizontal linkages supplement and sometimes supplant vertical coordination. Such a firm is multicentric: initiatives and strategy emerge from many places, taking shape through a variety of partnerships and joint ventures. Powell, Koput, and Smith‐Doerr (1996) describe the mushrooming of “interorganizational networks” in fast‐moving fields like biotechnology, where knowledge is so complex and widely dispersed that no organization can go it alone. They give an example of research on Alzheimer's disease that was carried out by 34 scientists from three corporations, a university, a government laboratory, and a private research institute. Such cross‐organizational forms continue to grow in importance and variety.

We can observe the increased adoption of platforms, ecosystems, and crowds that is meant to help solve organizational design problems. Each of these approaches reflects a type of meta‐organization that encompasses many corporations, communities, or individuals linked not by contracts but rather by technology and/or a common goal. (Joseph and Gaba, 2020)

In designing a structure that works, managers have a palette of options both for dividing the work and coordinating multiple efforts. Structure needs to be designed with an eye toward strategy, the nature of the environment, the talents of the workforce, and the available resources (such as time, budget, and other contingencies). The options are summarized in Exhibit 3.2.

Vertical coordination is often efficient but not always effective, depending on employees' willingness to follow directives from above. More decentralized and interactive lateral forms of coordination are often needed to keep top‐down control from stifling initiative and creativity. Lateral coordination is often more effective but costlier than its vertical counterparts. A meeting, for example, provides an opportunity for face‐to‐face dialogue and decision making but may squander time and energy. Personal and political agendas may undermine the meeting's purpose.

Exhibit 3.2. Basic Structural Options.

Ad hoc groups such as task forces can foster creativity and integration around pressing problems but may divert attention from ongoing operating issues. The effectiveness of coordinators who span boundaries depends on their credibility and skills in handling others. Coordinators may also schedule meetings that take still more time from actual work (Hannaway and Sproull, 1979). Matrix structures provide lateral linkage and integration but are notorious for creating conflict and confusion. Multiple players and decision nodes make networks inherently difficult to manage.

Organizations have to use both vertical and horizontal procedures for coordination. The optimal blend of the two depends on the unique challenges in a given situation. Vertical coordination is generally superior if an environment is stable, tasks are well understood and predictable, and uniformity is essential. Lateral communications work best for complex or creative tasks performed in a turbulent environment. Every organization must find a design that works for its circumstances, and inherent structural tradeoffs rarely yield easy answers or perfect solutions.

Consider the contrasting structures of McDonald's and Harvard University (highly regarded organizations in two very different industries), and Amazon and Zappos (two successful Internet retailers with very different structures).

McDonald's, the company that made the Big Mac a household word, has been enormously successful. For 40 years after its founding in the 1950s, the company was an unstoppable growth engine that came to dominate the worldwide fast‐food business. In recent decades, growth has ebbed and flowed, but McDonald's is still the world's largest food service business. The company has a divisional structure with divisions organized around markets (Thompson, 2019), and a relatively small staff at its world headquarters near Chicago. The vast majority of its employees are salted across the world in more than 38,000 local outlets. But despite its size and geographic reach, McDonald's is a highly centralized, tightly controlled organization. Most big decisions are made at headquarters.