Note on Organizational Structure

9-491-083 REV: MAY 23, 2016

ETHAN BERNSTEIN

NITIN NOHRIA Note on Organizational Structure

Organizations exist to enable people to effectively integrate their efforts and get things done. The structure of an organization is the pattern of organizational roles, relationships, and procedures that enables such integrated, collective action by its members.

Organizational structure is human-created—it exists because it fulfills a set of coordination functions better than non-organizational structures (e.g., markets, crowdsourced communities, dyadic relationships, etc.). In particular, organizational structure serves four coordination functions to meet a specific set of organizational and individual needs:

Table 1 Functions of Organizational Structure

Function Organizational Need Individual Need

Coordinated It enables members of the organization to draw on a It enables members of the organization to Capabilities wide variety of skills according to a division of labor develop specific skills and capabilities and to that defines a shared map of who is able to do what. learn, grow, and advance individualized careers.

Coordinated It enables members of the organization to coordinate It enables members of the organization to bond Activities activities (individual actions) through integrating with a larger community, engage in mechanisms such as hierarchical supervision, formal interdependent work, and collectively produce rules, processes, and procedures. valuable output.

Coordinated It enables members of the organization to distribute It enables members of the organization to Goals decision-making authority for priorities and goals, integrate individual interests into shared goals shaping the organization’s raison d’étre—its broad that are personally motivating and rewarding. purpose and mission.

Coordinated It enables members to set and sustain organizational It enables members of the organization to Boundaries boundaries, defining what work they will do (and not identify with the organization’s business model do) and who they will hire (and not hire). and competitive positioning, and to decide if they wish to join (or not).

Source: Casewriter.

HBS Professor Nitin Nohria prepared the original version of this note, "Note on Organization Structure," HBS No. 491-083, which is being replaced by this version prepared by Professors Ethan Bernstein and Nitin Nohria with the assistance of Research Associate Kathy Qu. This note serves as the basis for class discussion.

Copyright © 1991, 1992, 1995, 2016 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to www.hbsp.harvard.edu. This publication may not be digitized, photocopied, or otherwise reproduced, posted, or transmitted, without the permission of Harvard Business School. 491-083 Note on Organizational Structure

Shaping an effective organizational structure is one of the central functions of the general manager. In traditional hierarchies, executives have the ability to change or redesign the overall structure of an organization, while other managers structure the activities in their sphere of responsibility. In less hierarchical organizations, structures emerge from participative, dynamic, ongoing processes. Either way, understanding how organizations are structured is vital to being an effective manager.

This note is written with a view to provide the reader with a basic understanding of organizational structure and how to use it as a managerial lever. The first section outlines some of the key tools that must be taken into account in designing organizational structures. In the second section, some archetypal forms of organizational structure and their strengths and weaknesses are described, summarized by Exhibit 1. Finally, some emerging trends in how organizations are structured are discussed in the last section of this note, supplemented by a brief summary, in timeline format, of the evolution of theory on organizational structure in Exhibit 2. A selected bibliography is provided at the end for the reader who may wish to pursue this subject in greater depth.

The Tools of Organizational Structure

The structure of an organization is far more complex than drawing an organizational chart of lines and boxes. In thinking about underlying functions of organizational structure in Table 1, the following four considerations must be addressed:

1. The Division of Labor to Coordinate Capabilities Organizations do not do work, people do. Since no one person can do or know everything, how should responsibility for various capabilities be divided among the members of an organization? This includes deciding upon the extent of horizontal and vertical specialization, i.e., the breadth and depth of a job. An orchestra, for example, does not just hire musicians, but rather hires violinists, trumpeters, tuba players, violists, harpists, flutists, pianists, etc.

Deciding upon the division of labor in an organization involves some key trade-offs. On the one hand, highly specialized jobs avoid duplication and focus attention, permitting the development of skills, capabilities, high standards, and clear accountabilities. On the other hand, extreme specialization increases coordination costs and leads to monotonous jobs.

2. Integration Mechanisms to Coordinate Activities A direct consequence of the division of labor is the need to integrate the independent activities and output of the members of the organization. Effective integration is as important as careful differentiation. There are various modes of vertical and horizontal integration within and among groups such as direct supervision, formal rules and procedures, plans and budgets, negotiation and adjustment, and other integrating devices such as liaison roles, meetings, committees, task forces, etc. Technology is also playing a key role in integration mechanisms, as a wave of new software solutions aim to use social technologies, electronic communication, and ubiquitous connectivity to enhance coordination of activities at work.

Managers can choose integration mechanisms based on the degree to which integration issues are routine versus exceptional. Routine integration, such as across stations in an assembly line or in the monthly processing of paychecks, can be accomplished by direct supervision or standard operating procedures. Similarly, integration issues involving the use of limited resources may require mechanisms such as plans and budgets and mutual negotiation. The resolution of infrequent or unusual matters, on the other hand, may require other mechanisms like committees, task forces, etc. Integration needs can also foster

2 Note on Organizational Structure 491-083

the development of dynamic work teams or open collaboration, which can result in innovative problem solving and/or employee engagement. Though it is important to ensure smooth integration in any organization, it is important to remember that integration is costly. Meetings, for example, can be helpful, but many organizations suffer from meeting fatigue1 from excessive, poorly structured meetings that waste time.

3. The Distribution of Decision-making Authority to Coordinate Goals A third issue that must be addressed in any organization is who should make what decisions to set the organization’s direction. This means allocating decision rights such as the rights to initiate, approve, implement, and control various types of strategic or tactical decisions. The main axis along which these rights vary is the vertical dimension (the dimension spanning the different levels of the organization) leading to the well-known problem of determining the appropriate degree of centralization or decentralization of decision-making authority. Decision rights also have to be distributed along the horizontal dimension (the dimension spanning different roles at the same level of the organization) so that it is clear, for example, whether the marketing or engineering department has the right to decide on the specifications of new products.

Ideally, decision rights should be given to those who have the best information to make the decision. Typically, these are people lower down or on the front lines in the organization. For example, a manufacturing manager probably knows the most about the production capacity of the plant and a field sales manager the most about customers. But it is far from that simple. A lack of firm-wide information, or self-interest that is at odds with the interests of the firm as a whole, can easily undermine the quality of front-line decisions. For example, it may not always be optimal to allow the manufacturing manager to make plant loading decisions or the sales manager to make pricing decisions—the manufacturing manager may wish to increase production because she is compensated for capacity utilization and the sales manager may wish to offer deep discounts because she has a sales quota to meet. Decision rights must, therefore, be allocated while keeping in mind the extent of goal congruence and the incentives of the various members of the organization. And that alignment must be achieved without making the assignment of decision rights so complex that no one knows who is responsible for what decisions.

4. The Setting and Sustaining of Organizational Boundaries Since not all capabilities, activities, and goals are organized within the boundaries of the firm, structuring an organization also involves deciding what to do inside and outside the boundaries of the firm. This means making choices about the extent of horizontal and vertical integration, make-versus-buy choices for different goods and services, and choices about strategic alliances or supply chain relationships with other firms. Also, choices have to be made about the extent to which the different parts of the organization interact directly with the outside environment. Should customers be allowed to interact directly with workers in the manufacturing plant or should they only interact with the sales force? Should only managers be allowed to interact directly with clients or can non-managerial staff manage these relationships? How much inventory should the organization allow stores and warehouses to hold to buffer themselves from the environment? Overall, these choices define the boundaries of the organization and how it interacts with its environment. These decisions are becoming more complex as emerging forms of inter-organizational collaboration, such as complex outsourcing agreements and crowdsourcing strategies, blur boundary lines.

3 491-083 Note on Organizational Structure

Each of those four dimensions of structure can have formal (explicit) and informal (emergent) components: formal and informal divisions of labor, integration mechanisms, authority structures, and boundaries. While the formal components are deliberately determined and codified by the established structures, the informal components emerge from the pattern of social interactions within the organization. The presence of both formal and informal structures presents managers with a nested pair of challenges: first, gaining awareness of both formal and informal structures; and second, keeping them aligned so that one does not undermine the other. For example, so-called ‘flat’ organizations that espouse no hierarchy often find that informal power structures, hidden below the surface, can more than substitute for the constraint of formal hierarchy.

Criteria Embedded into Organizational Structure

The structure of an organization can vary in terms of the above four dimensions, but how does one evaluate a structure’s strengths and weaknesses? Some of the more common and important criteria are:

(i) Efficiency: the organization’s ability to perform its tasks reliably and produce results with the most economic use of capital, labor, and other resources;

(ii) Responsiveness: the organization’s ability to satisfy the demands of the various domains of the environment in which it operates to customer needs (quality of output or service provided);

(iii) Adaptability: the organization’s ability to innovate and to change dynamically over time to stay ahead of competition; and

(iv) Integrity: the organizational structure’s ability to provide the glue for consistency between the organization’s enduring, distinctive sense of who they are and what they do (organizational purpose), individual members’ motivation, and external demands.

While all organizations must strive for improvements along all these criteria, trade-offs are often necessary. For different organizations, one or more of these criteria may be especially important and their structures must be shaped accordingly.

Organizational Structure—Basic Forms Over Time

Humans have organized for centuries in order to survive: to hunt for food, to fend off predators and competitors, to establish communities and to form collective groups for pursuing a wide range of aims and aspirations. In theory, given the dimensions along which structures can vary, there can be a very large number of organizational structures. In practice, only a few designs are commonly observed. In this section, the note will cover several archetypal forms in more detail, as summarized in Exhibit 1.

Management-Centric: Traditional Organizational Structures

When an organization grows beyond the affairs that can be handled by a single group of people and one boss, an architect—often a founder, executive, advisor, or group of such individuals—can develop a structure designed to permit the organization to scale. Although the resulting organizational structures can vary widely, the “functional form” and the “divisional structure” often serve as templates upon which more complex structures are built.

Functional structure In a functional structure, capabilities are grouped together by common function (HR, Finance, Sales, Engineering, R&D, etc.) from the bottom to the top of the organization.

4 Note on Organizational Structure 491-083

All engineers, for example, are located in the engineering department, and the vice-president of engineering is responsible for all engineering activities. Their activities are coordinated vertically within the function by hierarchical supervision, rules, and plans. Employees are committed to achieving the goals of their respective functional departments. Planning and budgeting is by function and reflects the cost of resources used in each department. Careers are normally defined on the basis of experience within the function. Coordination across functions occurs through the office of the CEO and/or a senior executive committee.

Divisional structure The divisional structure groups capabilities delimited by product, geography, market-segment, client-type, etc. In the pure form of a divisional structure, all the necessary functions for the division, such as manufacturing, research and development, and marketing, are contained and coordinated vertically within each division. If the functional structure is organized according to the various inputs that enable an organization to produce goods and services, the divisional structure is organized according to the various outputs (e.g., trucks vs. passenger cars, residential vs. commercial real estate, consumer vs. enterprise sales, etc.) of the organization, reporting to a divisional head who is a specialist in the divisional focus rather than any particular function. Employees are committed to achieving the goals of their respective divisions. Planning and budgeting is by division, not by function. Careers are normally defined on the basis of experience within the division (e.g., a specialist in B2B or B2C). As with functional structures, coordination across divisions occurs through the office of the CEO and/or a senior executive committee.

How do managers choose between these two templates? Because new organizations often start with only one product or service (i.e., one division), they typically begin with a functional structure. But before long, the organization may find that its portfolio of products or services has grown, or that it needs separate divisions to serve different markets, geographies, or customer segments (e.g., enterprise customers and individual consumers). Upon creating multiple divisions, a new problem arises: coordinating across divisions and avoiding duplicative effort and resources between them. At first, organizations may create crosscutting centralized shared services groups, in IT or HR for example, that can minimize duplication and serve the needs of multiple divisions. But when the demand for coordination across divisions becomes more salient, for example when customers demand that the organization present a single face to them across product division, organizations look to hybrid forms—like the matrix organization.

Matrix structure In order to leverage the strengths and avoid the limitations of both functional and divisional structures, many organizations operate as a hybrid form commonly referred to as a matrix organization. The unique characteristic of the matrix form is that both divisional and functional structures are implemented simultaneously. Both division managers and functional managers have authority within the organization, and employees report to both of them (though a distinction can sometimes be made between a direct line reporting relationship and a dotted line reporting relationship, the former being your primary boss and the latter your secondary boss). The organization can have both technological expertise within functions and horizontal coordination across functions. Most of the firm’s employees will have dual assignments. For instance, a defense contractor may need deep functional skills as well as the ability to coordinate across these functions for each contract or project. A multinational firm may need to coordinate across the demands of functions, products, and geographic locations.

While the matrix is conceptually appealing, it suffers from ambiguity in determining the responsibility and authority relationships between, for instance, functional and project managers, resulting in a lack of jurisdictional clarity on capabilities, activities, and goals.2 When conflicts arise, each person and their multiple bosses have to reach consensus to resolve them. As a result, people in a

5 491-083 Note on Organizational Structure

matrix spend a great deal of time in meetings. Some of the conflict built into the matrix is healthy since it forces discussion and coordination to address issues that pertain to both functions and projects. It also provides top management with the ability to influence which dimension gets more or less attention in different situations. However, dual reporting relationships and assignments can cause role ambiguity, hamper career development, and weaken ties with professional reference groups.

Much has been written about how to survive and thrive in a matrix organization. At the most basic level, if managers do not adapt to the information- and power-sharing required by the matrix, it will not work. They must collaborate with each other rather than rely on vertical authority in decision- making. Because such horizontal collaboration is required to succeed in matrix organizations, the increasing prevalence of matrix organizations has been accompanied by a commensurate increase in project-based and team-based work environments.

Many organizations have found that the matrix is difficult to install and maintain. When the matrix fails, it is usually because one or more of the coordination functions of organizational structure stops working, often because one side of the dual functional-divisional structure dominates or because employees have not learned to work across the dual structures in a collaborative fashion.

Employee-Centric: Emerging Organizational Structures

Is there a more effective way to organize than the matrix? If the matrix has a tendency to become over-coordinated and corrupted by power dynamics, is there a way to only have as much structure as an organization needs, when it needs it?

Drawing inspiration from less-architected yet highly productive forms of distributed network technology like the Internet, employee-centric (or user-centric) approaches to organizational structure let patterns of coordination emerge based on the organic networks formed by members of the organization as they do their work. Adherents to employee-centric structures tend to argue that technology has radically changed the way people work, yet the technology of organizational structure has not kept up.3 If sophisticated technology allows members of organizations today to engage in fluid project work, peer-to-peer collaborations, and distributed authority, why not entirely transcend architected structures like the matrix in favor of emergent structures in which the division of labor, coordination mechanisms, distribution of authority, and boundaries are continuously dynamic, defined by emergent interactions between members as they get work done? Why not build organizations from the “bottom-up,” starting from the individual needs rather than organizational needs in Table 1?

There is at least one reason to think that might work. Self-managed teams have become increasingly common in the 65 years since Eric Trist first observed their potential to substantially raise productivity in the South Yorkshire coal mines. Since then, frequently cited examples of their power include highly successful companies like W.L. Gore, Semco, Barry Wehmiller, Morning Star, GE, Volvo, Saab, C&S Wholesale, and others. If self-managed teams can work, what about self-managing organizations that consist of many self-managing teams, such that the organization is an emergent multi-team system?4

Although employee-centric organizational structures come in many forms (Exhibit 1 summarizes a few of the most common), Holacracy has increasingly become an icon for them because it is the most highly specified. Brian Robertson, who originally conceived of Holacracy, did so on the belief that human beings have an unmatched ability to sense “a system that’s not working, or a mistake that keeps getting repeated, or a process that seems inefficient and cumbersome.”5 Those represent opportunities (or, in the vocabulary of Holacracy, “tensions” between the existing organizational structure and a better way of working) to improve the organizational structure. If members of the organization could

6 Note on Organizational Structure 491-083

flexibly change its structure to capture such improvement opportunities in the course of getting their work done, then perhaps members of an organization could get only the coordination they need, without the excessive, limiting, frustrating structure of the matrix. That’s the promise of employee- centric organizational structure: constant adaptability to capture opportunities for learning.

Such logic has led a number of organizations to try employee-centric structures, especially given the increasingly complex world in which businesses operate. One must not confuse employee-centric structures with a lack of structure. While they may not invest in an architected structure, employee- centric organizations invest heavily in defining “structuring” processes.6 In the case of Holacracy, a “constitution” lays the groundwork for structuring and explicitly defines how processes of shifting authority, decision making, and assigning sources of accountability are carried out in a variety of different contexts. The constitution serves as the rules Figure 1 How Holacracy Works and processes for how to “work in” and “work on” (see Figure 1 for an overview) the structure that then allow employees to identify the roles that are needed to accomplish tasks and achieve group goals, and people are assigned to fill those necessary roles. In summary, roles derive first; people come after.

The combination of these attributes may drive advantages in adaptability and learning for employee- centric structures.7 But whether or not those advantages come at an unsustainable cost to efficiency has been debated among scholars since the early 20th century, with at least some convincingly arguing that the long Source: Robertson, B. Holacracy: The New provenance of waxing and waning popularity Management System for a Rapidly Growing surrounding these structures makes them more World. New York: Henry Hold and Company, 2015, p. 27. ‘utopian’ than realistic. Nonetheless, there are reasons for hope. In the 1920s, Mary Parker Follett became one of the first management scholars to formally argue that authority should be built upon knowledge, experience, and the skills to apply the knowledge and experience. That, she argued, can come from anyone in the organization without losing efficiency simply by shifting the managerial mindsets away from the notion that authority and knowledge should only reside at the top.8 If that were the case back then, it should be even truer today, when technology levels the playing field by allowing information and communication to traverse time and space without traditional bureaucratic constraints that typically vested information in the hands of a few at the top.9

Crowd-Centric: Self-Organizing

If the Internet is the inspiration for employee-centric structures, the explosion of social media and crowd-based collaboration begs the question of whether organizational structure—management- centric or employee-centric—might become entirely obsolete. If employee-centric organizations use structuring processes to define roles and authorities in a self-managed way, crowd-centric organizations build platforms upon which the collective can iteratively self-organize. Examples of these self-organizing structures include open source communities (e.g., Wikipedia), hackathons, flash mobs, flash teams, etc. In each case, what looks like chaos can become spontaneous order when the need arises. Form follows need. Division of labor is fluid as roles are picked up, discarded, and exchanged, with members often filling more than one role. Integration mechanisms are community- based and often technology-enabled,10 meetings are held when they are needed, and temporary task forces are created spontaneously and quickly disbanded again. Authority is distributed, decisions are

7 491-083 Note on Organizational Structure

made at the point of origin, and innovations can spring up from all quarters. The boundaries of a self- organizing structure are sufficiently dynamic that those who are used to traditional organizations would question whether this is an organization at all.

What ties individuals together as a basis for self-organization? Central is purpose, which involves getting valuable work done for a customer or some other client.11 In management-centric structures, priority setting is done at the executive and managerial levels, and individuals relate to these organizational- or division-wide goals as it trickles down to their work. In contrast, in crowd-centric structures, individual goals relating to how the job fulfills personal needs bubble up to a collective purpose, and individuals self-select into the work of the organization accordingly. Research shows that crowds have intrinsic motivations to achieve goals, like the motivation to learn or the motivation to develop one’s reputation among a peer crowd that traditional organizational compensation structures don’t offer.12 The collective purpose continues to change and evolve as individuals find more effective ways to get the work done.

In addition to purpose, self-organization, just like the more traditional models of organizational structure, works with an interlocking set of components of an organization—culture, compensation, performance management, talent development, etc.—which informs how teams are set up, how decisions get made, how roles are defined and distributed, how salaries are set, how people are recruited or dismissed, and so on. Even though crowd-driven structures may seem risky or unmanageable, loosening organizational boundary constraints and moving beyond employee-driven structures to leverage the crowd can add substantial value to organizations.

Myths and Legends

While this note aims only to build a basic understanding of organizational structure, there are several myths that are worth dispelling about the categories of organizational structure above.

1. Is one form of organization better, more advanced, or more successful than others? No. The form of organizational structure that is best for an organization is contingent upon its context. An organization that does not deeply consider its unique circumstances in designing an organizational structure is setting itself up for failure, regardless of which structure it chooses. Also, organizations evolve over time and their structures must evolve as well. Although organizations have to be careful of changing structures too quickly to provide members with some sense of stability and continuity, they cannot be overly rigid either.

2. Does the appearance of employee-centric and crowd-centric structures mean the end of managers? No. The tasks of management―setting direction and objectives, planning, directing, controlling, and evaluating―haven’t disappeared. They are simply no longer concentrated in dedicated, pre-defined management roles (i.e., job descriptions). Because they are spread widely, not narrowly, it can be argued that there is more management and leadership happening at any time in self-managing or self-organizing organizations despite, or rather precisely because of, the absence of a fulltime managerial class. Indeed, as organizations become more self-managed or self-organized, they need better managers. The difference is that a “manager” is not a job description, but instead becomes a role that individuals move in and out of depending on organizational need and individual capacity.

3. Are newer forms of organizational structure more equal, empowered, democratic, fluid? No, not necessarily. The organizational structure may be more capable of these aspirations, but whether it is or not depends on what the members of the organization do with it. A self- managing or self-organizing organization can be far more static or hierarchical depending

8 Note on Organizational Structure 491-083

on how the structuring processes are used. Commonly referenced self-managing or self- organizing organizations include everything from leading edge Silicon Valley startups to organized crime and terrorist groups.

4. How do I determine if my organization is management-centric, employee-centric, or crowd-centric? Although there are differences between the management-centric, employee-centric, and crowd-centric structures, it is rare that an organization belongs in just one category or another. In other words, while a useful typology, organizations rarely exist in the pure form of any of these categories. Certain aspects and characteristics of each are adapted to fit the needs of the organization13, as well as the needs of the individuals within it. Indeed, one might find all three structures strategically used in various parts of a single organization.

The History and Continuing Evolution of Organizational Structures

While the functions of organizational structure—coordinating capabilities, activities, goals, and boundaries to meet individual and organizational needs—have remained relatively stable over time, the structures themselves have evolved with the evolution of human society. While this note has provided some detail on the evolution of archetypal structures over time, Exhibit 2 provides a brief yet much longer view of key trends in the historical evolution of both theory (top) and forms (bottom) of organizational structure, from Adam Smith’s rationalist (versus familial) approach to corporate forms to modern day conceptualizations of collective activity.

Yet even as this note goes deep on organizational structure, a final reminder is warranted: an organization’s structure is not an end in itself, nor is changing it. Organizational structure merely sets the context for action. The most wonderfully designed structure provides no guarantee that the desired actions will follow. Structure and structuring are useful tools that participants from within can employ to achieve individual and organizational objectives. Ultimately, it requires individual and collective actions to realize the greatest economy of resources and the best prospects of effective performance.

9 491-083 -10-

Exhibit 1 Forms of Organizational Structures

Core Tool for Organizational Organizational Structure Centered Design Around and Driven By Basis for Authority Examples of Organizational Forms Structure Management  Formalized Power Functional, (Organizational Divisional, Form) Matrix Employee / User  Knowledge / Expertise Network (Nohria & Eccles, 1992), Team-Based (McChrystal, 2015; Mohrman et al, 1995), Project-Based (Turner, 2009), Holacracy (Robertson, 2015), Adhocracy (Mintzberg, 1983), Heterarchy (Hedlund, 1986), Shamrock (Handy, 1989), Boundaryless Organization (Devanna and Tichy, 1990), Hypertext Organization (Nonaka & Takeuchi, 1995), Edge-of-Chaos Organization (Brown and Eisenhardt, 1998) Teal Organization (Laloux, 2014) Crowd / Community  Task or Project Responsibility Self-Organizing (Ticoll, 2004),  Reputation in Community The Open Organization (Whitehurst & Hamel, 2015), Structuring  Values Agile Squads (Sutherland & Sutherland, 2014), (Form of Hackathons, Organizing) Flash Mobs / Flash Teams (Retelny et al, 2014) Source: Casewriter.

References for Examples of Organizational Forms Cited Above (in order of citation): Nohria, N. and R. G. Eccles, eds. Networks and Organizations: Structure, Form, and Action. Boston, MA: Harvard Business School Press, 1992. McChrystal, Stanley, Tantum Collins, David Silverman and Chris Fussell. Team of Teams: New Rules of Engagement for a Complex World. New York: Penguin Random House, 2015; Mohrman, S. A., Cohen, S. G., and Mohrman, A. M. Designing Team-Based Organizations: New Forms for Knowledge Work. San Francisco: Jossey- Bass, 1995; Turner, J. R. The Handbook of Project-Based Management. New York: McGraw-Hill, 2014; Robertson, Brian J. Holacracy: The New Management System for a Rapidly Changing World. New York: Henry Holt and Co, 2015; Mintzberg, H. Structure in Fives: Designing Effective Organizations. Englewood Cliffs, NJ: Prentice Hall, 1983; Hedlund, G. “The Hypermodern MNC—A Heterarchy?” Human Resource Management 25(1) (1986): 9-35; Handy, C. The Age of Unreason. Boston, MA: Harvard Business School Press, 1989; Devanna, D. and C. H. Takacs. “Team Play: Heedful Interrelating as the Boundary for Innovation.” Long Range Planning 37 (2004) 569-590; Nonaka, I. and H. Takeuchi. The Knowledge Creating Company. Oxford, UK: Oxford University Press, 1995; Brown, S. K. and K. Eisenhardt. Competing on the Edge. Boston, MA: Harvard Business School Press, 1998; Laloux, Frederic. Reinventing Organizations. Brussels, Belgium: Nelson Parker, 2014; Ticoll, D. “Get Self-Organized.” Harvard Business Review 82(9): 18-19; Whitehurst, J. and G. Hamel. The Open Organization: Igniting Passion and Performance. Boston, MA: Harvard Business Review Press, 2015; Sutherland, J. and J. J. Sutherland. Scrum: The Art of Doing Twice the Work in Half the Time. New York: Crown, 2014; Retelny, Daniela, et al. "Expert Crowdsourcing with Flash Teams." Proceedings of the 27th Annual ACM Symposium on User Interface Software and Technology. ACM, 2014. 491-083 -11-

Exhibit 2 Timeline on the Evolution of Organizations and the Theory of Organiztional Structure (Source: Casewriter) 491-083 -12- 491-083 -13- 491-083 -14- Note on Organizational Structure 491-083

Endnotes

1 Ashkenas, Ron, “Why We Secretly Love Meetings,” Harvard Business Review, October 5, 2010, https://hbr.org/2010/10/why- we-secretly-love-meetings.html, accessed October 2015. 2 Peters, Tom, “Beyond the Matrix Organization,” McKinsey Quarterly, September 1979, http://www.mckinsey.com/business- functions/organization/our-insights/beyond-the-matrix-organization, accessed October 2015. 3 Zammuto, Raymond F., Terri L. Griffith, Ann Majchrzak, Deborah J. Dougherty, and Samer Faraj. 2007. “Information Technology and the Changing Fabric of Organization.” Organization Science 18(5) 749–762. Turco, Catherine. The Conversational Firm: Rethinking Bureaucracy in the Age of Social Media, (New York: Columbia University Press, 2016).

4 Zaccaro, Stephen J., Michelle A. Marks and Leslie DeChurch, Multiteam Systems: An Organization Form for Dynamic and Complex Environments, (New York: Routledge, 2011) 5 Robertson, Brian J., Holacracy: The New Management System for a Rapidly Changing World, (New York: Henry Holt and Co, 2015), p. 27. 6 Nohria, Nitin and James D. Berkley, “From Structure to Structuring: A Pragmatic Perspective on Organizational Design,” Harvard Business School Working Paper, No. 96-053, April 1996. 7 Bernstein, Ethan, John Bunch, Niko Canner, and Michael Lee, “Beyond the Holacracy Hype: The Overwrought Claims—and Actual Promise—of the Next Generation of Self-Managed Teams.” Harvard Business Review 94(7-8).

8 Nohria, Nitin, “Commentary: Mary Parker Follet’s View on Power, the Giving of Orders and Authority: An Alternative to Hierarchy or a Utopian Ideology?” in Prophet of Management: A Celebration of Writings from the 1920s, ed. Pauline Graham, (Cambridge, MA: Harvard Business School Press). 9 Nohria, Nitin and James D. Berkley, “The Virtual Organization: Bureaucracy, Technology, and the Implosion of Control.” In The Post-Bucreaucratic Organization: New Perspectives on Organizational Change, ed. Anne Donnellon and Charles C Heckscher, (Thousand Oaks, CA: Sage Publications, 1994). 10Altman, Elizabeth J., Frank Nagle and Michael L Tushman, "Innovating without Information Constraints: Organization, Communities, and Innovation when Information Costs Approach Zero," In The Oxford Handbook of Creativity, Innovation, and Entrepreneurship, eds. C. E. Shalley, M. A. Hitt, and J. Zhou, (New York: Oxford University Press, 2015). 11Vora, Tanmay, “From Quality to Excellence: Essential Strategies for Building a Quality-Oriented Culture.” In The ASTD Management Development Handbook, ed. Lisa Haneberg, (Alexandria, VA: American Society for Training & Development, 2012). 12 Boudreau, Kevin, Nicola Lacetera and Karim R. Lakhani. “Incentives and Problem Uncertainty in Innovation Contests: An Empirical Analysis,” Management Science 57(2011): 843-863. 13 Ticoll, David, “Get Self-Organized.” Harvard Business Review, 82(2004): 18-19.

Selected Bibliography

Alchian, Armen A. and Harold Demsetz, “Production, Information Costs, and Economic Organization.” American Economic Review 62 (1972): 777-795.

Alderfer, Clayton P, “Effect of individual, group, and intergroup relations on attitudes toward a management development program.” Journal of Applied Psychology 55 (1971): 302-311.

Aldrich, Howard E. and Martin Ruef. Organizations Evolving. 2nd ed. London: SAGE Publications, 2006.

Altman, Elizabeth J., Frank Nagle and Michael L Tushman. "Innovating without Information Constraints: Organization, Communities, and Innovation when Information Costs Approach Zero." In The Oxford Handbook of Creativity, Innovation, and Entrepreneurship, eds. C. E. Shalley, M. A. Hitt, and J. Zhou. New York: Oxford University Press, 2015.

Amatori, Franco and Andrea Colli. Business History: Complexities and Comparisons. New York: Routledge, 2011.

Applegate, Lynda M., James I. Cash, Jr., and D. Quinn Mills. “Information Technology and Tomorrow’s Manager,” Harvard Business Review 66 (November-December 1988): 128-136.

15 491-083 Note on Organizational Structure

Argote, Linda and Ella Miron-Spektor. “Organizational Learning: From Experience to Knowledge,” Organization Science 22(2011): 1123–1137.

Aronowitz, Steven, Aaron De Smet and Deirdre McGinty. “Getting the Organizational Design Right.” McKinsey Quarterly, June 2015. http://www.mckinsey.com/business-functions/organization/our-insights/getting-organizational-redesign- right, accessed Oct 2015.

Arrow, Kenneth J. The Limits of Organization. New York: W.W. Norton & Company, 1974.

Ashkenas, Ron, Dave Ulrich, Todd Jick and Steve Kerr. The Boundaryless Organization: Breaking the Chains of Organizational Structure, Revised and Updated. 2nd ed. San Francisco: Jossey-Bass, 2002.

Barnard, Chester I. Functions of the Executive. Cambridge: Harvard University Press, 1938.

Bell, Daniel. The Coming of Post-Industrial Society. New York: Basic Books, 1974.

Bernstein, Ethan, John Bunch, Niko Canner and Michael Lee. “Beyond the Holacracy Hype: The Overwrought Claims—and Actual Promise—of the Next Generation of Self-Managed Teams.” Harvard Business Review 94(7-8).

Blau, Peter M. The Dynamics of Bureaucracy: a study of interpersonal relations in two government agencies. 2nd ed. Chicago: University of Chicago Press, 1963.

Blau, Peter M., and W. Richard Scott. Formal Organizations. San Francisco: Stanford Business Books, 1962.

Boudreau, Kevin J. and Karim R. Lakhani. “Using the Crowd as an Innovation Partner.” Harvard Business Review 140 (April 2013): 60-69.

Burns, Tom, and G. M. Stalker. The Management of Innovation. London: Tavistock, 1961.

Brown, M.H. and D.M. Hosking. “Distributed Leadership and Skilled Performance as Successful Organization in Social Movements.” Human Relations 39(1986): 65-79.

Caldwell, David F., and Charles A. O’Reilly. “Boundary spanning and individual performance: The impact of self- monitoring.” Journal of Applied Psychology 67 (1982): 124.

Chandler, Alfred D., Jr. Strategy and Structure: Chapters in the History of the American Industrial Enterprise. Cambridge, MA: M.I.T.Press, 1962

Child, John. “Organizational Structure, Environment and Performance: The Role of Strategic Choice.” Sociology 6 (1972): 2-22.

Crozier, Michel. The Bureaucratic Phenomenon. Chicago: University of Chicago Press, 1964.

Cyert, Richard M., and James G. March. A Behavioral Theory of the Firm. Englewood Cliffs, NJ: Prentice-Hall, 1963.

Davenport, Thomas and James Short. “The New Industrial Engineering: Information Technology and Business Process Redesign,” Sloan Management Review 31 (Summer 1990): 11-27.

Davis, Stanley M. and Paul R. Lawrence. Matrix. Boston: Addison-Wesley, 1977.

Deiser, Roland. Transformers: Executive conversations about creating agile organizations. Los Angeles: ECLF Press, 2014.

DiMaggio, Paul J., and Walter W. Powell. “The Iron Cage Revisited: Institutional Isomorphism and Collective Rationality in Organizational Fields,” American Sociological Review 48(1983): 147-160.

Donaldson, Lex. The Contingency Theory of Organizations. Thousand Oaks: Sage Publications, 2001.

Drucker, Peter. “The Coming of the New Organization,” Harvard Business Review (January – February 1988): 35-53

Durham, Norman L. The command and control of the Grand Armee: Napoleon as organizational designer. Pickle Partners Publishing, 2015.

Eccles, Robert G., and Dwight Crane. Doing Deals: Investment Banks at Work. Boston: Harvard Business School Press, 1988.

16 Note on Organizational Structure 491-083

Faraj, Samer, and Aimin Yan. “Boundary work in knowledge teams.” Journal of Applied Psychology 94 (2009): 604.

Fayol, Henri. (Constance Storrs, Trans.) General and Industrial Management. London: Pitman and Sons, 1949.

Galbraith, Jay R. Designing Complex Organizations. Reading, MA: Addison-Wesley, 1973.

Galbraith, Jay, Diane Downey, and Amy Kates. Designing dynamic organizations: A hands-on guide for leaders at all levels. New York: AMACOM, 2001.

Gray, Dave. The Connected Company. Sebastopol, CA: O’Reilly Media Inc, 2012.

Gulati, Ranjay. Reorganize for resilience: Putting customers at the center of your business. Boston: Harvard Business Press, 2013.

Gulati, Ranjay, Phanish Puranam and Michael Tushman. “Meta-organization design: Rethinking design in interorganizational and community contexts.” Strategic Management Journal 33 (2012): 571-586.

Hackman, J. Richard, and Greg R. Oldham. Work Redesign. Reading, MA: Addison-Wesley, 1980.

Hall, Richard H. “Professionalization and Bureaucratization,” American Sociological Review 33 (February 1968): 92-104.

Hammel, Gary. The Future of Management. Boston: Harvard Business School Press, 2007.

Hammel, Gary. “First, Let’s Fire All the Managers.” Harvard Business Review 89 (December 2011): 48.

Hammer, Michael. “Reengineering Work: Don’t Automate, Obliterate,” Harvard Business Review 68 (July-August 1990): 104-112.

Hannan, Michael T., and John H. Freeman. 1977. “The Population Ecology of Organizations.” American Journal of Sociology, 82:929-964.

Heckscher, Charles and Paul S. Adler, eds. The Firm as a Collaborative Community: Reconstructing Trust in the Knowledge Economy. New York: Oxford University Press, 2006.

Holbeche, Linda. The Agile Organization: How to build innovative, sustainable and resilient business. New York: Kogan Page, 2015.

Jensen, Michael C., and William H. Meckling. “Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure,” Journal of Financial Economics 3(1976), 305- 360.

Katz, Daniel, and Robert L. Kahn. The Social Psychology of Organizations, 2nd ed. New York: John Wiley, 1978.

Khandwalla, Pradip N. The Design of Organizations. New York: Harcourt Brace Jovanovich, 1974.

Koys, Daniel J. “The effects of employee satisfaction, organizational citizenship behavior, and turnover on organizational effectiveness: A unit‐level, longitudinal study.” Personnel Psychology 54 (2001): 101-11

Lakhani, Karim R., Hila Lifshitz-Assaf, and Michael Tushman. “Open Innovation and Organizational Boundaries: Task Decomposition, Knowledge Distribution and the Locus of Innovation.” In Handbook of Economic Organization: Integrating Economic and Organization Theory, eds. A. Grandori. Northampton, MA: Edward Elgar Publishing, 2013.

Laloux, Frederic. Reinventing Organizations. Brussels, Belgium: Nelson Parker, 2014.

Lawrence, Paul R., and Jay W. Lorsch. Organization and Environment: Managing Differentiation and Integration. Boston: Harvard Business School, 1967.

Levy, Pierre. L’intelligence collective: pour une anthropologie du cyberspace. Paris: La Decouverte, 1994.

Malone, Thomas W. and Michael S. Bernstein, ed. Handbook of Collective Intelligence. Cambridge, MA: MIT University Press, 2015.

March, James G. and Herbert A. Simon. Organizations. New York: John Wiley, 1958.

Marx, Karl (Moore, Samuel and Edward Aveling, Trans.). Capital. Moscow: Progress Publishers, 1867.

Mayo, Elton. The Human Problems of an Industrial Civilization. New York: Macmillan, 1933.

17 491-083 Note on Organizational Structure

McChrystal, Stanley, Tantum Collins, David Silverman and Chris Fussell. Team of Teams: New Rules of Engagement for a Complex World. New York: Penguin Random House, 2015.

McGregor, Douglas. The Human Side of Enterprise. New York: McGraw Hill, 1960.

Meyer, John W. and Brian Rowan. “Institutionalized Organizations: Formal Structure as Myth and Ceremony.” American Journal of Sociology 83 (1977): 340-363.

Miles, Raymond E. and Charles C. Snow. Organizational Strategy, Structure, and Process. New York: McGraw-Hill, 1978.

Miles, Raymond E. and Charles C. Snow. “Network Organization: New Concepts for New Forms,” California Management Review 28 (Spring 1986): 62-73.

Mintzberg, Henry. The Structure of Organizations. Englewood Cliffs, NJ: Prentice-Hall, 1971.

Nelson, Richard and Sidney Winter. An Evolutionary Theory of Organizations. Cambridge, MA: Harvard University Press, 1982.

O’Mahony, Siobhan and Karim R. Lakhani. “Organizations in the Shadow of Communities.” Research in the Sociology of Organizations 3 (2011): 3-36.

Ostroff, Frank. The Horizontal Organization: What the organization of the future actually looks like and how it delivers value to customers. New York: Oxford University Press, 1998.

Ouchi, William G. “Markets, Bureaucracies, and Clans.” Administrative Science Quarterly 25 (1980): 129-141.

Parsons, Talcott. The Social System. Glencoe, IL: Free Press, 1951.

Pfeffer, Jeffrey. Power in Organizations. Marshfield, MA: Pitman, 1981.

Pfeffer, Jeffrey, and Gerald R. Salancik. The External Control of Organizations: A Resource Dependence Perspective. New York: Harper & Row, 1978.

Pugh, D.S., D. J. Hickson, C. R. Hinings, and C. Turner. “Dimensions of Organization Structure”. Administrative Science Quarterly 13 (1968): 65-105.

Puranam, Phanish, Oliver Alexy and Markus Reitzig. “What’s “new” about new forms of organizing?” Academy of Management Review, 39.2 (2014): 162–180.

Ramarajan, Lakshmi. “Past, present and future research on multiple identities: Toward an intrapersonal network approach.” The Academy of Management Annals 8.1 (2014): 589-659.

Rigby, Darrell K., Jeff Sutherland, and Hirotaka Takeuchi. "Embracing Agile." Harvard Business Review 94.5 (May 2016): 40-50.

Robertson, Brian J. Holacracy: The New Management System for a Rapidly Changing World. New York: Henry Holt and Co, 2015.

Roethlisberger, F.J., and William J. Dickson. Management and the Worker. Cambridge, MA: Harvard University Press, 1939.

Scott, W. Richard. Organizations: Rational, Natural, and Open Systems. Englewood Cliffs, NJ: Prentice-Hall, 1981.

Selznick, Philip. Leadership in Administration. New York: Harper & Row Publishers, 1957.

Setili, Amanda. The Agility Advantage: How to Identify and Act on Opportunities in a Fast-Changing World. San Francisco: Jossey- Bass, 2014.

Simon, Herbert A. Administrative Behavior. New York: Macmillan, 1945.

Smith, Adam. The Wealth of Nations. London: Methuen & Co, 1776.

Stinchcombe, Arthur L. “Social Structure and Organizations.” In Handbook of Organizations, ed. James G. March. Chicago: Rand McNally, 1965.

Sull, Donald and Kathleen M. Eisenhardt. Simple Rules: How to Thrive in a Complex World. New York: Houghton Mifflin Harcourt, 2015. 18 Note on Organizational Structure 491-083

Sutherland, Jeff and J.J. Sutherland. Scrum: the art of doing twice the work in half the time. New York: Crown Business, 2014.

Taylor, Frederick W. The Principles of Scientific Management. New York: Harper, 1911.

Thompson, James D. Organizations in Action. New Brunswick, NJ: Transaction Publishers, 1967.

Turco, Catherine. The Conversational Firm: Rethinking Bureaucracy in the Age of Social Media. New York: Columbia University Press, 2016.

Trist, Eric L., and K.W. Bamforth. “Social and Psychological Consequences of the Longwall Method of Coal-Getting,” Human Relations 4(February 1951), 3-28.

Van Maanen, John. “Breaking In: Socialization to Work.” In Handbook of Work, Organization, and Society, ed. Robert Dubin. Chicago: Rand McNally, 1976.

Weber, Max (A.M. Henderson and Talcott Parsons Trans). The Theory of Social and Economic Organization. New York: Oxford University Press, 1947.

Weick, Karl E. The Social Psychology of Organizing. Reading, MA: Addison-Wesley, 1969.

Williamson, Oliver, E. The Economic Institutions of Capitalism. New York: Free Press, 1985.

Woolley, Anita Williams, Christopher F. Chabris, Alex Pentland, Nada Hashmi and Thomas W. Malone. “Evidence for a Collective Intelligence Factor in the Performance of Human Groups.” Science 330 (2010): 686-688.

Woodward, Joan. Management and Technology. London: H.M.S.O., 1958.

Worley, Christopher G., Thomas D. Williams, and Edward E. Lawler III. The Agility Factor: Building Adaptable Organizations for Superior Performance. New York: Jossey-Bass, 2014.

Zammuto, Raymond F., Terri L. Griffith, Ann Majchrzak, Deborah J. Dougherty, and Samer Faraj. 2007. “Information Technology and the Changing Fabric of Organization.” Organization Science 18(5) 749–762.

Zou, Xi and Paul Ingram. “Bonds and boundaries: network structure, organizational boundaries, and job performance.” Organizational Behavior and Human Decision Processes 120.1 (2013): 98-109.

Zucker, Lynne G. “Institutional Theories of Organization.” American Review of Sociology 13 (1987): 443-464.