Page 47 - Managing Change in Organizations

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Chapter 2 ■ Organization structures: choice and leadership
each period of revolutionary change creates a new form of organization, then new
management styles, control systems, reward systems and structures are introduced.
Classic shifts in organizational structure include the emergence of the multi-
divisional structure. Large corporations diversified into a variety of markets, often
geographically widely dispersed. Problems of control and coordination, the need
to achieve focus of management effort, allocation of R&D expenditure, etc. led
firms to create divisions which then operated relatively autonomously (although
in reality the true extent of the autonomy was often questionable and in many
firms seemed to vary with the economic cycle – the centre tightening control in
the downswing of the cycle).
Of course, there are many other factors to take into account. For example, divi-
sionalized organizations may find it difficult to capitalize on efficiencies which
may be derived from sharing certain resources (e.g. manufacturing capacity, R&D,
sales and distribution outlets/resources, etc.). In addition many organizations face
rapidly changing markets and customers wishing to buy changing configurations
of products or services. Sometimes it is difficult to sell effectively where a client
needs products from various divisions. Which division should ‘own’ the client is
a key issue. In some cases (e.g. classic cases include computer companies such as
Bull in France) some products compete. In any event the purchaser may wish to
complete a single deal through a single point of contact. Divisionalized organiza-
tions can find this difficult to achieve. One solution to these problems was the
strategic business unit concept (Barnett and Wilstead, 1988). Here the focus was
on the product market, with a strategic business unit making sense where one
could define a clear set of customers and a distinct set of competitors for which it
was possible to create a separate functioning business with an identifiable strategy
and in which financial performance could be measured.
In recent times, however, a rapidly changing market, technological and other
pressures have led firms to create more adaptability and also to seek to focus on
core competencies in which they are likely to achieve excellence. This has led to
dramatic changes. Firms are ‘delayering’. For example, at a recent conference I
attended, a senior executive from the North American computer industry claimed
that large organizations had removed between 1 and 1.5 layers of management on

average in the last five years. In consequence there are, in those organizations,
many fewer managers but they are carrying more responsibility and doing more
demanding jobs than they used to. Information technology, through making
access to data easier, is supporting team-based approaches to management. The
need to respond quickly to market pressures is leading many organizations to
push responsibility down the organization, whether under slogans such as
‘empowerment’ or through customer service or total quality programmes. For
these and other reasons connected with shareholder value, many large businesses
have ‘demerged’. In many countries the public service is being reformed along
similar lines. Public sector organizations which were once very hierarchical have
been either privatized or taken out of the public service as independent agencies.
We can see developments like this in North America, the UK, New Zealand and
elsewhere. Healthcare reform in Thailand is proceeding apace on the basis of
pushing responsibility down to providers (local hospitals and clinics) rather than
managing them directly from the centre (in the capital city).

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