‘Hands on’ Organizational Effectiveness:
A corporate life cycle perspective
Rijksuniversiteit Groningen
Faculty of Economics and Business
Master of Science in Business Administration
Organizational and Management Control
Supervisor RuG: Dr. S. Tillema Co-assessor RuG: Dr. P.E. Kamminga
Name: Margré van Dalfsen
Adress: Van Isselmudenstraat 26 8326 CT Sint Jansklooster E-mail: rm.vandalfsen@rug.nl Mobile phone: (0031) 06-11301348 Student number: S1525182
MANAGEMENT SUMMARY
In recent years, it is increasingly recognized that the organizational growth process does not always run smoothly. Sustained growth is vital to both value and job creation, which are critical outcomes of the
entrepreneurial process. However, if a firm is growing very rapidly in a relatively short period of time, problems are likely to arise.
Steering an organization through the growth process represents a difficult managerial challenge. New-venture founders often find themselves unprepared to manage growth-related transitions effectively.
The central question of this paper is how top management of an organization can overcome the problems that originate from a period of rapid growth, and how they can make a successful transition into the next stage of development.
The aim of this study was to explore which indicators of effectiveness are most important in overcoming the problems underlying the transition from the growth phase to the maturity phase. In addition this study investigated the development of these indicators to advance the organization towards the maturity phase.
The theoretical framework was build on the life cycle model of Miller and Friesen (1983, 1984) (with a focus on the growth and maturity phases) and the organizational effectiveness model developed by Waterman, Peters and Philips (1980). The key variables, or indicators of organizational effectiveness, which were incorporated in the theoretical framework, have been evidenced in literature as the cause of problems underlying the transition from growth to maturity. This study adopted a configurational approach to examine the development of the variables structure, style and systems from the growth phase to the maturity phase of the corporate life cycle model.
The analysis of an organization in the automotive industry provided some evidence to support the expectations derived from the theoretical framework. Findings from the case study offered support for the claim that the most relevant indicators of effectiveness at the end of the growth phase are structure, coinciding with systems. Additionally, professionalisation of management by means of management style, is the third relevant indicator. Structure however seemed to be the most important key indicator towards the maturity phase.
TABLE OF CONTENTS
CHAPTER 1 INTRODUCTION
1.1 General Introduction p. 1
1.2 Research Framework p. 2
- Theoretical model p. 2
- Depiction of research framework p. 4
CHAPTER 2 LITERATURE STUDY
2.1 The Corporate Life Cycle p. 5
- Different models p. 5
- Model of Miller and Friesen p. 5
- The Growth and Maturity phase p. 7
2.2 Organizational Effectiveness p. 8
- Different configurations of variables p. 8
- Structure, Style and Systems p. 9
2.3 Definitions of Structure, Management Style and Systems p. 11
- Definition of Structure p. 11
- Definition of Style p. 12
- Definition of Systems p. 13
2.4 Structure, Style and Systems in the Growth and Maturity phases p. 14
- Structure in Growth and Maturity p. 14
- Style in Growth and Maturity p. 17
- Systems in Growth and Maturity p. 19
- In summary: p. 22
CHAPTER 3 METHOD p. 23
- Selection of the case p. 23
- Data collection p. 23
- Data analysis p. 24
CHAPTER 4 CASE STUDY p. 25
4.1 Results from the case study p. 25
- Introduction to the case p. 25
4.2 Structure in the case company p. 27
- Introduction p. 27
- Structure in the Growth phase p. 27
- Structure during the transition from Growth to Maturity p. 28
- Development of structure in summary p. 30
4.3 Style in the case company p. 32
- Introduction p. 32
- Style in the Growth phase p. 32
- Structure during the transition from Growth to Maturity p. 33
- Development of style in summary p. 34
4.4 Systems in the case company p. 36
- Introduction p. 36
- Systems in the Growth phase p. 36
- Systems during the transition from Growth to Maturity p. 38
- Development of systems in summary p. 39
4.5 In summary p. 40
Development of structure, style and systems in theory and practice
1.1 GENERAL INTRODUCTION
In recent years, it is increasingly recognized that the organizational growth process does not always run smoothly. Sustained growth is vital to both value and job creation, which are critical outcomes of the
entrepreneurial process. However, if a firm is growing very rapidly in a relatively short period of time, problems are likely to arise.
Steering an organization through the growth process represents a difficult managerial challenge. New-venture founders often find themselves unprepared to manage growth-related transitions effectively (Galbraith, 1982; Meyer, Lenoir and Dean, 1988). Smith and Mitchell (1985) investigated these growth-related transitions, which are generally preceded by specific problems, in relation to the corporate life cycle.
The central question of this thesis is how top management of an organization can overcome the problems that originate from a period of rapid growth, and how they can make a successful transition into the next stage of development. High growth is most often identified within relatively young organizations.
For the purpose of finding an answer to the central question, this study addresses two theoretical concepts, namely the corporate life cycle and organization effectiveness. A few researchers have investigated the relationship between different corporate life cycle stages and the development of organizational effectiveness.
Quinn and Cameron (1983) linked a model of effectiveness with the corporate life cycle stages to develop a model of effectiveness values during the early stages of organization development. The outcomes of their research however are rather shallow. An interesting article by Flamholtz (1995) does add to our understanding of the central question. He described his framework as a lens which can be used to understand and plan what must be done to build a company successfully at different stages of organizational growth.
Flamholtz’ framework is an extension and synthesis of two different models of organizational functioning, namely an organizational effectiveness model and an organizational life cycle model. This thesis uses a similar approach but focuses on only two phases of the corporate life cycle, referring to the high growth period mentioned in the central question.
1.2 RESEARCH FRAMEWORK
- Theoretical model
This study applies the McKinsey model, developed by Waterman, Peters and Philips (1980), as the model for organizational effectiveness. The corporate life cycle model which is used in this study, was developed by Miller and Friesen (1983, 1984).
The corporate life cycle model is included in the theoretical framework because the literature on life cycle models adds to our understanding of the rather complex phenomenon of growth, describing how growth happens and the effect it has on organizations (Kazanjian 1988). Greiner (1972) explicitly viewed the growth of organizations as a series of evolutions and revolutions precipitated by crises related to leadership, control and coordination. These crises in general characterize a transition to the next life cycle stage. The corporate life cycle model is presented in the first section of chapter 2.
The second section of chapter 2 gives an explanation of the organizational effectiveness model. This model indicates what must be done to build successful companies or strategic business units. It identifies the seven key variables of organizational effectiveness and proposes how they can be developed to achieve overall
organizational effectiveness1.
Using the Miller and Friesen’s (1984) five-stage life cycle model, Birth, Growth, Maturity, Revival and Decline, this exploratory study addresses the following questions:
- Which indicators of organizational effectiveness need management’s attention for the purpose of overcoming the problems keeping the organization from making the transition from the growth phase to the maturity phase?
- How must these variables develop to stimulate the transition of the organization from the growth phase to the maturity phase?
The theoretical model implies a relationship between the development of indicators of organizational
effectiveness and the life cycle stages growth and maturity. Only few researchers have studied the question how the criteria for organizational success change over time and if there are any predictable patterns of such change (Adizes, 1979, 2004; Greiner, 1972; Lippitt and Schmidt, 1967).
1 The seven key variables describe the internal characteristics of an organization. The research framework does not explicitly
This study claims that every life cycle stage has it’s own specific composition, also called a configuration2, of the
seven key variables, with an emphasis on one or more particular variables. The development of these variables determines whether the organization is ready to make the transition to the next life cycle stage.
In the third section of chapter 2, the relevant variables of the McKinsey model, structure, style and systems are defined and characterized. In the fourth section, the expected developmental process of these particular variables from the growth phase to the maturity phase is described, based on former literature.
Chapter 3 gives a description of the empirical research that has been done. A case study was used to explore the value of the theoretical framework and expectations derived from the literature study. Chapter 4 presents the analysis of the results of the case study. Finally, chapter 5 answers the central question of this study and discusses the implications of the theoretical analysis.
- Depiction of research framework
The research framework underlying this thesis is depicted in figure 1.1 below.
2To be consistent with Miller and Friesen’s (1983, 1984) studies, organizational life cycle configurations are conceptualized as
Figure 1.1: Research framework
GROWTH PHASE MATURITY PHASE
Configuration of ORGANIZATIONAL EFFECTIVENESS - Structure - Management Style - Systems - Strategy - Skills - Staff - Shared Values Configuration of ORGANIZATIONAL EFFECTIVENESS - Structure - Management Style - Systems - Strategy - Skills - Staff - Shared Values TRANSITION INCONSISTENCY between relevant steering variables during transition CHARACTERISTICS of relevant steering variables Structure, Management Style
and Systems
CHARACTERISTICS of relevant steering variables Structure, Management Style
and Systems DEVELOPMENT
of Structure, Management Style
and Systems Corporate Life Cycle Model
(Miller and Friesen, 1984)
Organizational Effectiveness Model
2.1 THE CORPORATE LIFE CYCLE
- Different models
Much research has been done on how organizations develop over time, which has resulted in many theories about the corporate life cycle. Downs (1967) was among the first to develop a model for organizational
development, resulting in his theory of ‘motivation for growth’. At least eight studies have been done, following Down’s example, that resulted in different models of the corporate life cycle (Lippitt and Schmidt, 1967; Scott, 1971; Greiner, 1972; Lyden, 1975; Katz and Kahn, 1978; Adizes, 1979; and Kimberly, 1979). Quinn and Cameron (1983) integrated the nine different models of life cycle development into one model and linked this model to different criteria of effectiveness. They were the first to study the relationship between organizational effectiveness and the corporate life cycle.
- Model of Miller and Friesen
In this study the life cycle model of Miller and Friesen (1984) is adopted, based on the fact that the model covers a complete cycle of organizational development as a biological series from birth to death. The model was
developed on the basis of an integration of former life cycle models and tested and supported empirically (Miller and Friesen, 1980a, 1980b, 1983, 1984). Miller and Friesen (1980a, 1983, 1984) distinguished five life cycle stages for their longitudinal studies: (1) birth, (2) growth, (3) maturity, (4) revival, and (5) decline. Their model is depicted in figure 1.
The Birth Phase
This is the period in which a new firm is attempting to become a viable entity. It is characterized by much struggling and resembles Scott's (1971) ‘Stage one’, Greiner's (1972) ‘Creativity stage,’ Lippitt and Schmidt's (1967) ‘Birth phase’, and Quinn and Cameron's (1983) ‘Entrepreneurial stage.’ The prime characteristics of the firms in this phase are that they are young, dominated by their owners, and have simple and informal structures.
The Growth Phase
This period is expected to occur once the firm has established its distinctive competences and enjoyed some initial product-market success. It is similar to Downs' (1967) ‘Rapid growth stage’, Adizes' (1979) ‘Growth stage’3, and
Lyden's (1975) ‘Second stage’. The emphasis is upon achieving rapid sales growth and expanding resources in an attempt to realize advantages with regard to larger scale. Typically, a functionally-based structure is established, some authority is delegated to middle-managers, and procedures are formalized.
3Adizes’ (1979) growth phase is divided into two sub phases, namely the Go-Go phase and the Adolescence phase. Because the
The Maturity Phase
Maturity is expected to follow growth as sales levels stabilize, the level of innovation falls, and a more bureaucratic organization structure is established. The goal becomes smooth and efficient functioning. The Maturity phase is based on the ‘Formalization and control stage’ of Quinn and Cameron (1983), Scott's (1971) ‘Stage two’, Greiner's (1972) ‘Direction stage’, Katz and Kahn's (1978) ‘Stable organization stage’, and Adizes' (1979) ‘Prime stage’.
The Revival Phase
This is typically a phase of diversification and expansion of product-market scope. It shows firms adopting divisionalized structures in order to cope with the more complex and heterogeneous markets. For the same reason, there is also an emphasis upon more sophisticated control and planning systems. This phase resembles Quinn and Cameron's (1983) ‘Elaboration of structure stage’, Scott's (1971) ‘Stage three’, and Greiner's (1972) ‘Coordination stage’. It is also the termination stage of most larger divisionalized firms, mentioned by Chandler (1962) and Channon (1973).
The Decline Phase
A final stage that seems quite different from all of the above was also commonly reflected in the literature. It reveals stagnation as markets dry up and firms begin to decline with them. Profitability drops because of the external challenges and because of the lack of innovation. The ‘Deceleration stage’ of Downs (1967), the ‘Fourth stages’ of Lyden (1975) and Kimberly (1979), and the ‘Decline phase’4 of Adizes (1979) can be compared to the
Decline stage.
Figure 2.1: Life cycle model (Miller and Friesen, 1984)
4 Birth Decline Growth Maturity Revival Time Size
Additionally, Miller and Friesen (1984) found that every stage has a different pattern, also defined as a configuration, of internally consistent organizational characteristics caused by changes in the external
environment. Moores and Yuen (2001, pp. 354-355) state that Miller and Friesen’s (1983, 1984) approach to this pattern analysis of the corporate life cycle typology is compatible with systems approach to fit. According to the systems approach (Van de Ven and Drazin, 1985) an organization’s effectiveness results from both the
congruence of its strategic, structural and managerial characteristics with external contextual factors, and the internal consistency of such organizational characteristics. Miller and Friesen (1984) found evidence from their empirical research that, although the time-span for each life cycle stage is different from firm to firm, each of the stages is unique in showing integral interdependencies among strategy, structure and management style.
- The Growth and Maturity phase
This study focuses on young5 organizations which recently experienced high growth and expanded rapidly as a
result of this growth. The definition of high-growth enterprises (Ahmad, N., Statistics Directorate, OECD, Copenhagen, February 2007) is: All enterprises with average annualised growth greater than 20% per annum, over a three year period. Growth can be measured by the number of employees or by turnover. At some point in time, a high-growth organization has reached a size that brings about certain problems. It suddenly finds that it requires additional physical resources (space, equipment), financial resources and human resources.
Additionally, as organizations go through expanding their range of products or services in response to more mature and saturated markets, problems arise from increasingly heterogeneous and hostile environments (Adizes, 1979; Miller and Friesen, 1984; Quinn and Cameron, 1983). The organization must overcome these problems to make the transition to the next stage of the corporate life cycle.
Fitting this young organization, as described above, into the life cycle model of Miller and Friesen (1984) leads to the conclusion that the organization has reached the end of the growth phase and has to make adjustments in the organization to make the transition to the maturity phase. Consequently, the scope of this research is the
transition between the growth phase and the maturity phase and therefore the description below focuses on these two stages.
5The definition of young in this context is an organization which has passed the birth phase and is not struggling to survive
2.2 ORGANIZATIONAL EFFECTIVENESS
- Different configurations of variables
Criteria for organizational effectiveness have been the subject of all kinds of research and different models have been developed (Campbell, 1977). Despite the attention this construct received in organization theory, there has been little agreement as to the internal variables that influence organizational effectiveness (Cameron, 1978; Goodman and Pennings, 1980; Steers, 1975).
This study builds on the model developed by Waterman, Peters and Philips (1980), also known as the McKinsey Model or 7S Model. The premise behind this model is that for organizations to function effectively they have to rely on the interdependence of seven variables, which are structure, strategy, staff, style, systems, shared values and skills. This framework was chosen because of its grounding in practice and the major contribution of the model in drawing attention to the less tangible and visible aspects of organizational systems.
Waterman, Peters and Philips’ (1980) claim is that effective organizational change is really the relationship between structure, strategy, systems, style, skills, staff and something they call superordinate goals. Central idea is that organization effectiveness stems from the interaction of several factors – some not especially obvious and some underanalyzed.
The model was found to work as a diagnostic tool for assessing organizations’ competitive performance, and also helps managers to formulate action plans and improvement strategies (Zairi, 1994, pp. 29-30). The meaning of each of the seven S’s representing the McKinsey framework is given below.
- Strategy: The plan leading to the allocation of resources - Shared values: The goals shared by all employees
- Style: The management style of the organization - Structure: The organizational map/chart
- Skills: The strengths and capabilities of all employees
- Staff: The people employed
- Systems: Procedures, guidelines and control mechanisms
Linking the life cycle model developed by Miller and Friesen (1984) with the model for organizational
According to Waterman, Peters and Philips (1980) organizational effectiveness can only be achieved when all seven S’s are interrelated and in balance, taking the external context into account. Miller and Friesen (1984) state that every life cycle stage shows a different external context (environment, markets, technologies) in relation to the internal organizational characteristics (structure, culture, processes, strategy)6. Waterman, Peters and Philips
(1980, pp.18-19) also claim that all seven variables act as a driving force, although it is not obvious which of the seven factors will be the driving force in changing a particular organization at a particular point in time. In some cases, the critical variable might be strategy, in others, it could be systems or structure.
The external context and the internal variables cluster together into configurations. An organization is often interpreted as a configuration or archetype of different characteristics. Meyer, Tsui and Hinings (1993) state that organizational configurations refer to any multidimensional configuration of conceptually distinct characteristics that commonly occur together. Consequently, every life cycle stage presents a particular balance or configuration of structure, systems, strategy, shared values, style, skills and staff, given the external context. Additionally, in every life cycle stage one or more different variables will act as the driving force for change.
Five general ideas are the basis of the framework:
1. Organizational effectiveness can only be achieved if all seven variables are continuously adapting to the life cycle stage the organization is in.7
2. The variables leading to organizational effectiveness are interrelated, which means that if the emphasis is on the development of one or more variables at a particular life cycle stage, the other variables have to adjust to this change too.
3. Each variable requires development to a different extent at a different stage of organizational growth. The achievement of overall development of all variables is a developmental process that ends when an organization goes into the decline phase.
4. Problems arise when a certain variable is not adjusting properly to a certain stage, which keeps the organization from making the transition to the next life cycle stage.
5. Organizations which have been successful in managing the developmental problems at one stage of growth will be able to make the transition to the next stage of growth.
- Structure, Style and Systems
The problems which arise after a period of rapid growth can give an indication which of the seven S’s acts as the driving force during the change from the growth phase to the maturity phase. Consequently these particular internal variables must have management’s top priority.
6This study focuses on internal characteristics, the external context is outside the scope of the research framework but is
considered given. The external context is incorporated in the corporate life cycle model of Miller and Friesen (1983, 1984).
7Empirical research has confirmed the notion that the criteria for organizational effectiveness, as well as the means for
Referring to the scope of this research, only the problems which come into being in the growth phase, that keep an organization from making the transition to the maturity phase, are attended to.
Several researchers have paid attention to the problems underlying the transitions from one life cycle stage to another. Kazanjian’s (1988) stage of growth outlined problems referring to internal organizational mechanisms (Structure and Systems in the McKinsey model) and people (Style in the McKinsey model) as the dominant problems in this stage. According to Kazanjian (1988), managerial depth (Style) is another typical concern when firms are growing rapidly.
Smith and Mitchell (1985) investigated the relationship between the different stages of the organizational life cycle and the different priorities among top-level managers. Referring to the stage of (rapid) growth they viewed organizational coordination (Structure) as a means of managing complexity brought on by growth. The technical efficiency (Systems) priority is also relevant in the (rapid) growth phase according to the results of Smith and Mitchell’s study. This priority however, is equally important in almost all stages of the corporate life cycle.
Several authors have theorized that the organizational coordination priority becomes important as organizations experience problems due to high levels of growth that result in increased structural complexity (Katz and Kahn, 1978). As organizations evolve toward the stage of high growth, their structures grow.
According to Adizes (1979, 2004), up to and partially in the growth phase, the organization has been entrepreneurial. It has operated with a great deal of informality, lacking well-defined goals, responsibilities, plans, and controls, and still prospered. However, once a critical size is reached, informal processes must be formalized. The size of the organization now requires more formal plans, regularly scheduled meetings, defined organizational roles and responsibilities, a performance appraisal system, and management control systems (Structure and Systems). Adizes (2004) also claims that a change is required in the skills and capabilities of the people who manage the firm (Style). To this point, it was possible for managers to be ‘doers’, but what is increasingly required are people who are adept at management: planning, organization, motivation, leadership and control. Thus the individual manager is also faced with a personal transition.
Analysing the results from the studies as described above, the problems that are likely to arise during the transition from growth to maturity concern internal organizational systems, organizational coordination, the managerial process, formalization and administrative systems. Consequently, the variables as defined by Waterman, Peters and Philips (1980) which are most probably the cause of these problems are structure, systems and management style. These three variables need management’s attention to create a new balance or
2.3 DEFINITIONS OF STRUCTURE, MANAGEMENT STYLE AND SYSTEMS
- Definition of Structure
This study focuses on one of the most recent studies about structure by Nieuwenhuis (2006), trying to give, and subsequently apply, an integral definition of structure. Nieuwenhuis bases his definition of structure on past literature (models, theories and concepts) on this subject. He claims that structure defines the type of organization and the way it operates. These are just the hard, formal rules. Additionally, research done by Chandler, Hanks and Watson (1993, pp. 7-8) gives a summary of different theories about the dimensions of structure, and is therefore also taken into account in defining structure in this study.
The following common dimensions of structure8 are derived from the literature mentioned above and define
structure for the purpose of this research: - Basis of organization
Which type of organic structure is the basis of the organization? - Formalization
The degree of formalization is the extent that roles are independent of personal attributes of individuals occupying the roles. Formalization tries to standardize and regulate behaviour. - Specialization
The division of labour is the specialisation of cooperative labour in specific, circumscribed tasks and roles, intended to increase efficiency of output.
- Centralization
Who is the last person whose permission must be obtained before legitimate actions may be taken on strategic, tactical or operational level?
According to Nieuwenhuis (2006) two different kinds of perspective about structure arise: some researchers think that structure is equal to the organizational structure, and others consider processes as the means to describe structure. This study considers both types of structure necessary and complementary, therefore they have to be designed as a whole. Structure thus consists of (1) an organizational structure and (2) a process structure9.
Thinking only in terms of organizational structures leads to vertical orientation. The hierarchy is dominant in structuring organizational activities. The focus upwards creates rigid structures in which people are focused on their own task instead of the overall result. They operate ‘between the walls’ of the department and the organization becomes more and more bureaucratic. Thinking in terms of results for the customer, or in process structures, leads to a horizontal orientation. People are focused on the customer’s requirements and consequently on the total result, instead of being focused only on their own tasks and the results of their own department.
8
A description of these dimensions, which are used in this study as measures of structure, can be found in appendix 1. 9
Integrating these two structures creates a matrix structure, a flexible and dynamic structure that can adjust itself to changing situations. In this matrix-process structure, as defined by Nieuwenhuis (2006), structure is looked at from a broad perspective, incorporating all four dimensions of the variable structure as defined above.
- Definition of Management Style
Management style in this research is defined on the basis of a theory developed by Goleman, Boyatzis and McKee (2002) about emotional intelligence. The relevant leadership styles based on the theory of emotional intelligence are the measures of management style10 for the purpose of this study.
- Authoritative / Visionary style
Builds resonance11 by moving people towards shared dreams.
- Coaching style
Builds resonance by connecting what a person wants with the organization’s goals. - Affiliative style
Builds resonance by connecting people to each other. - Democratic style
Builds resonance by valuing people’s input and commitment through participation. - Pacesetting style
Builds resonance by meeting challenging and exciting goals. - Coercive / Commanding style
Builds resonance by giving clear direction in an emergency.
Emotional intelligence with respect to leadership deals with how leaders handle themselves and their
relationships – it assumes that, in some situations, leaders need to apply intellect which is sensitive to emotions. Goleman et al. (2002) argue that leaders – being executives, managers, politicians, or others – should excel not only through the use of skills, experience and intelligence, but also by using emotional intelligence in their connections with others, such as empathy and self-awareness.
One of their most important findings was that leaders with the best results did not practise just one style, but used many different styles depending on the business situation. This characterizes the basic principle of this study’s research framework, that is which styles need to be practised in the growth phase and the maturity phase of the corporate life cycle.
10A brief description of these dimensions, which are used in this study as measures of style, can be found in appendix 1. 11Resonance in this context is the ability of a leader to stimulate positive feelings with an employee. Of the six leadership styles,
- Definition of Systems
Defining systems in this study’s research framework was difficult because of the variety of definitions of this specific indicator in the literature. For example, Waterman, Peters and Philips (1980) define the variable systems as all procedures, formal and informal, that make the organization go, day by day and year by year: capital budgeting systems, training systems, cost accounting procedures, budgeting systems.
Flamholtz (1995, pp. 43) claims that the variable systems is divided into operational systems and management systems. Operational systems are the systems required to run an organization on a day-to-day basis. Management systems in his study, include systems for planning, organization, management development, and control. The control system refers to the set of processes (budgeting, goal setting) and mechanisms (performance appraisal) used to influence the behaviour of people so that they are motivated to achieve organizational objectives. The variable systems in this study’s research framework considers only the control system as defined by Flamholtz (1995). The focus is on this aspect of systems, because an extensive explanation of the steering variable systems, including for example operational systems (Flamholtz, 1995), is not possible within the time and scope of this study.
Taking these limitations into account, systems in this study are defined according to a research done by Moores and Yuen (2001). The variable systems is conceptualized as formality of routines and procedures with greater use of computers, technical staff, and financial modelling (Merchant, 1981, 1977; Simons, 1992, 1999), also referred to as Management Accounting Systems (MAS). Such formal systems produce information which is expected to fulfil certain qualitative characteristics in order to be selected and presented for decision-making purposes.
Examples of MAS that have received much attention recently are activity-based costing (Kaplan and Cooper, 1998), the balanced scorecard (Kaplan and Norton, 1996), and shareholder value (Rappaport, 1998). The focal point is not Management Accounting Systems themselves, but the accounting information produced by these systems. This information consists of a number of elements which are provided to managers and employees for a specific purpose, either an operating decision, or the planning and control of an operating task (Tillema, 2005, pp. 103-104).
Moores and Yuen (2001) claim that the information should possess certain qualitative characteristics. The first characteristic, or dimension, is selection of information, which is similar to the ‘content’ dimension or ‘tools used’ of MAS. Under this dimension, information systems should process or provide information that satisfies the concepts of relevance and reliability and which passes the materiality test. The second dimension, presentation of information, is similar to the ‘form’ dimension of MAS. Systems should present information in a manner which satisfies the concepts of comparability and understandability, by means of breadth of scope (Moores and Yuen, 2001 pp. 355-356). Selection and presentation of information are considered the measures of the variable systems12 in this study’s research framework.
12
2.4 STRUCTURE, STYLE AND SYSTEMS IN THE GROWTH PHASE AND MATURITY PHASE
- Introduction
The definitions of the variables structure, management style and systems in relationship to the research framework suggest a certain degree of interdependency. The variables are strongly interrelated within the configuration of the seven S’s as described by Waterman, Peters and Philips (1980).
Structure for example, is mostly interrelated with style and systems through the characteristic formalization. Formalization tries to make the structure of internal relationships more visible and explicit by designing
processes and work flows, writing procedures and work instructions, etc. High formalization means more formal and concrete information, which makes the control process less difficult. Analysing information and additionally measuring financial as well as non-financial indicators efficiently is dependent on the degree of formalization. Management style also relates to structure strongly through the decision-making structures and the degree of centralization. High growth leads to rapidly increasing span of control and therefore to an increasing degree of decentralization of decision-making. Increasing decentralization must go with a more participative approach of management and a more democratic approach towards decision-making. Stimulating positive mutual
relationships between employees and team-building is also incorporated in the variable management style. It can give a positive input to the formalization process by connecting people to each other.
In summary, a change in one variable causes the other variables to change simultaneously to a certain degree. The effects of such a change on organizational effectiveness are therefore reinforced through interrelatedness among the three relevant variables (Waterman, Peters and Philips, 1980). This supports the use of the configurational approach as developed by Miller and Friesen (1983, 1984). This theory of mutual relations will be applied in describing the development of the variable systems. It will also be applied to explain the development of certain characteristics of the variables structure and style during the transition from growth to maturity.
- Structure in Growth and Maturity
As already mentioned in previous sections, the variable structure in relation to the corporate life cycle has been addressed by several researchers in literature (Adizes, 1979, 2004; Smith, Mitchell & Summer, 1985; Miller and Friesen, 1983, 1984; Chandler, Hanks, Jansen & Watson, 1994; Moores and Yuen, 2001). In spite of a broad variance in specific content, a comparison of the characteristics of structure, as defined in section 3 of this chapter, and their development across life cycle stages can be made. This comparison reveals a fairly consistent pattern of development of the structural characteristics in the growth phase and the maturity phase of the corporate life cycle13.
Table 1 shows the results of this comparison, describing the degree of development of the characteristics in the growth phase and the maturity phase.
Table 1: Development of structure from growth to maturity
STRUCTURE Growth phase Transition Maturity phase
1. Basis of organization
Principally functional in early growth, developing towards more divisional or a matrix-format at the end of growth
Matrix structure on a functional basis
2. Formalization
a. Differentiation Moderate degree of differentiation High degree of differentiation b. Delegation of
operating authority
Increasing degree of delegation during growth, with limited, or some, delegation at the start of the growth phase
Moderate delegation
c. Decision-making structure
Developing from directive by top management at the start of the growth phase, to more participative at the end of growth
Management team and
participative /democratic approach
d. Coordination or institutionalized governance
Informal and dependent on top management at the start of growth, developing into a moderately formal information infrastructure at the end of the growth phase
Formal integrative information system (high level of coordination through rules, procedures, work instructions, etc.)
3. Specialization Low at the start of growth and increasing towards the end of the growth phase
Moderate or high number of staff specialists
4. Centralization From centralized towards less centralized at the end of growth
Decentralized
As the process of differentiation continues, there must be a development towards a matrix-format to prevent the organizational structure from becoming very bureaucratic and rigid during maturity. The more departments and levels within an organization, the more complex and bureaucratic an organization becomes. Miller and Friesen (1983, 1984) state that the more complex the structure of an organization becomes, the less centralized it will be. By adding a horizontal orientation by means of a process structure to the organizational (vertical) structure, decentralization and delegation can be realized by means of a participative, or teambuilding approach.
During the growth phase, the process of formalization is developing rapidly and rigidly. Continuous
restructuring from early growth on, has resulted in a solid structure on a functional basis in late growth. At the end of the growth phase there is a need for integration. The process of teambuilding, especially towards management, has to be integrated into the organizational structure. Integration and institutionalization of increasing formalization by means of a matrix structure, is most important. The focus is on creating efficiency.
During the growth phase, decision-making becomes more analytical, more multiplex, and better integrated. In late growth, decisions are not based anymore on the opinion of one leader but democratic decision-making among several managers prevails. Debates, attempts to be rational, and the focus on a broader array of relevant information in making decisions become more common (Miller and Friesen, 1984, pp. 1171). In maturity this democratic style of management in combination with delegation of operating authority and decentralization of decision-making must be institutionalized on strategical, tactical and operational levels.
Coordination can be accomplished by means of an information infrastructure14 developing synchronous with the
formalization process and the complexity of the organization structure (Adizes, 2004). The process (horizontal) structure provides the organization with procedures, rules, regulations, work instructions, etc., which can be used to complement formal information systems. Additionally all formal information systems have to continuously adapt to the requirements of the organizational structure. The formalization process will be complete when all systems have been renewed or adjusted to the organization structure in maturity.
The degree of specialization is also dependent on the complexity and the degree of differentiation within the organizational structure. In order to provide expertise on products, markets and controls, more staff technocrats such as accountants and engineers are recruited. The more heterogeneous markets combined with the forces of departmentalization during the growth phase, all lead to a more complex and differentiated structure and the presence of well-educated technocrats.
In the maturity phase integration changes into institutionalization and decentralization. Participative
management and team-building are key words in this integration and institutionalization process. The basis of the organization is functional but the integration of the organizational (vertical) structure with the process (horizontal) structure leads to a solid matrix-format. Formalization is institutionalized by means of a high degree of differentiation and delegation of operating authority. Additionally, a decentralizing decision-making structure and higher level of coordination and supportive information systems also stimulate the institutionalization of the formalization process.
In the maturity phase the development of all structural characteristics, which have taken place during the
transition from growth to maturity, must be institutionalized. The emphasis in maturity is on getting organized in a continuously changing and more heterogeneous environment. The administrative and organizational process must have management’s priority in maturity. Consequently, the variable structure in maturity contributes to a new configuration of the seven indicators of organizational effectiveness as defined by Waterman, Peters and Philips (1980).
- Style in Growth and Maturity
Adizes (1979, 2004) has explored the variable style in relation to the corporate life cycle to a great extent. Other authors (Miller and Friesen, 1983, 1984; Moores and Yuen, 2001) also addressed this variable in their life cycle studies but to a lesser extent and often as an element of a configuration of internal variables. Adizes’ (1979, 2004) contribution to the theoretical framework of this study is therefore substantial.
Regarding the variable style, a similar approach as with structure is applied, by means of a comparison15 of
characteristics of style and their development across life cycle stages. This comparison also reveals a fairly consistent pattern (of development) of the characteristics of style in the growth phase and the maturity phase of the corporate life cycle. Table 2 shows the results of this comparison, describing the degree of development of the characteristics of style, as defined in section 3 of this chapter, in the growth phase and the maturity phase.
Table 2: Development of style from growth to maturity
STYLE Growth phase Transition Maturity phase
1. Authorative High at the start of growth, but decreasing during growth
Equal to growth or slowly decreasing
2. Coaching Low at the start of growth, but increasing during growth
Increasing
3. Affiliative Low at the start of growth, but increasing during growth
Increasing
4. Democratic Very low at the start of growth, but increasing during growth
Rapidly increasing
5. Pace setting High at the start of growth, but decreasing during growth
Slowly decreasing
6. Coercive Applied only during crises Applied only during crises
Because of rapid expansion and high growth during the growth phase, the founder of an organization will not be able to control all operational activities as he did in the birth phase. During the birth phase and at the start of the growth phase of the organization, the influence of the founder was relevant because of his commitment to the organization. While this commitment is indispensable for the survival of the young organization, it becomes dysfunctional during the growth phase.
During the growth phase the founder must depersonalize policies and institutionalize his leadership, that is, to establish effective systems, procedures and policies that do not require his personal judgement. The
depersonalization process is associated with the restructuring process to a high degree. Decentralization and delegation are key thoughts during the restructuring process. If these thoughts are not integrated in the
organization properly, it is difficult for management to depersonalize policies and leadership. The development of structure therefore has an influence on the development of management style.
Style during the birth phase and in early growth was typically entrepreneurial, that is, principally authoritative, pace setting and coercive. The founder follows his own strategy and makes decisions accordingly, often without involving his employees. However, decentralization of power and delegating authority means getting people involved in important decisions on strategical, tactical and operational levels, and creating commitment by giving them authority. Thus, during the growth phase, the founder has to develop a democratic style and practise this style in combination with the authoritative style. Shared goals are set on the basis of a strategy, that is developed by the founder, taken into account the opinions of managers on strategical and tactical levels.
In the maturity phase, management must be able to practise all management styles according to Goleman, Boyatzis and McKee (2002). They claim that leaders with the best results do not practise just one style, but use many different styles depending on the business situation. The emphasis will be however on the affiliative and the coaching style, referring to the value of team-building and decentralization in decision-making and in general. The coercive style only needs to be practised during organizational crises and emergency situations.
The combination of all styles results in an effective management style which also stimulates the development of the variable structure. Consequently, the variable style in maturity contributes to a new configuration of the seven indicators of organizational effectiveness as defined by Waterman, Peters and Philips (1980).
- Systems in Growth and Maturity
As already mentioned in the previous section, research on the variable systems in relation to the corporate life cycle in literature is very scarce. Because of this limitation, it is not possible to derive reasonable expectations about this variable, following the method applied to structure and management style. This study therefore applies the approach of Moores and Yuen (2001). In their research Moores and Yuen also apply the life cycle model of Miller and Friesen (1983, 1984) and incorporate the additional theory on configurations. This
configurational approach of strategy, structure and decision-making style fits this study’s research framework to a high degree.
Evidence suggests that firms’ strategic missions, structural characteristics, leadership and decision-making styles do affect what information will be deemed relevant and reliable for managers (Hopwood, 1974; Khandwalla, 1972; Merchant, 1997). Looking at the variables structure and management style as defined in section 3 of this chapter, assumptions can therefore be made about the relationship with management information. Prior research also suggests that as firms progress from birth to later stages, management’s requirements for information and control accelerate due to increased structural and environmental complexity (Gupta and Chin, 1990; Miller and Friesen, 1983; Simons, 1995, 1999).
Selection of information
Because of expanding operational activities and products in the growth phase, together with increasing decentralization of decision-making, there is an increasing need for formal rules and procedures, or formalization. A high degree of formalization is necessary for action accountability purposes, to ensure organizational and administrative efficiency (Katz and Kahn, 1978; Merchant, 1997). In addition, formal measurable goals and monitoring participants’ and competitor’s activities have at this stage become important (Simons, 1995). Consequently, managers of an organization at the growth stage emphasize the collection and analysis of information in a more competitive environment. Decision-making tends to focus on a broader range of factors, demanding a larger amount of information than during birth stages (Miller and Friesen, 1984). The organization cannot rely on the intuition of the founder to make the right decisions anymore.
More formal tools and techniques like environmental scanning and quality controls have to be incorporated in MAS during the growth phase, because of the more dynamic environment (Miller and Friesen, 1984).
Participative budgeting and responsibility accounting are essential for the increasing delegation of operating authority and decentralization within the new structure. Cash-flow statements and capital budgeting are important for monitoring financial resources for all expanding activities during the growth phase.
In the maturity phase, management must consciously decide to invest the time necessary for formalization— getting organized. A major part of the time that was spent on growing and expanding during the growth phase, is now spent on organizing and the administrative process. The maturity phase emphasizes stability and
institutionalization of the new structure and management style. The formalization process in combination with increasing decentralization and an increasing need for information, have to be institutionalized into the organization.
The management accounting system (MAS), also considered an information infrastructure, is closely connected with structure through the formalization process. Additionally, it is also connected with management style through the decision-making structure. Because of the relationship between these three variables, it is important that they are well integrated and implemented in the organization during the transition from growth to maturity. In the maturity phase, stabilization and institutionalization are the main priority. Managers at the maturity phase must therefore devote a great part of their time on achieving operational efficiency by means of formal controls, quality controls and environmental scanning (Miller and Friesen, 1983, 1984).
Moores and Yuen (2001, pp. 381-382) also found that firms narrow their range of formal management accounting tools as they consolidate their activities in the maturity phase. Also it would appear that firms tend to rely increasingly on informal tools for managing the transition from growth to maturity.
Presentation of information
In the growth phase, firms will present information with a broader scope than at the birth phase, because of increasingly heterogeneous products and/or markets, correlated with size. Additionally, decentralized structures and more delegation of power and authority require more systematic and frequent reporting. Where
management could make decisions, often intuitively, on financial information during the birth phase, there is an increasing need for additional non-financial information during growth. The scope of information has to be broadened in order to deal with the diversity of decisions associated with decentralized and divisionalized structures. Additionally, it is expected that increased levels of environmental uncertainty at the growth stage will require more timely reporting of information.
During maturity the dominant administrative orientation in combination with stagnating growth makes a high level of presentation of information less important. Managers adopt a somewhat intuitive decision-making style because of a lack of time for applying formal, analytical models. Within the context of the changes, information presented is expected to be of a narrower scope than that for growth stage firms.
Table 3 gives a summary of the developmental process of the variable systems, from the growth phase to the maturity phase, according to this study’s theoretical framework.
Table 3: Development of systems from growth to maturity
SYSTEMS Growth phase Transition Maturity phase
1. Selection of information
Narrow range of management accounting tools in early growth, increasing towards a broad range at the end of the growth phase
Broad range of management accounting tools, but slightly narrower than at the end of the growth phase
2. Presentation of information
An increasingly broader scope during growth, towards a broad scope at the end of the growth phase
- In summary: Relevant indicators of organizational effectiveness in Growth and Maturity
This study’s research framework proposes a relationship between organizational effectiveness and the corporate life cycle. The foregoing literature review showed that the relevant indicators of organizational effectiveness during the growth phase and the maturity phase are structure, style and systems. This study derives expectations from former literature about the development of these variables.
- Structure is characterized by increasing divisionalization and formalization during the growth phase. A flexible and dynamic structure is necessary with an increasing degree of delegation of operating authority and decentralization. In maturity a matrix-format makes it possible to institutionalize the formalization process.
- Style is characterized by an increasing need for participative management, by means of democratic leadership and teambuilding from the growth phase to the maturity phase.
3. METHOD
3.1 Selection of the case
To explore the validity of the theoretical analysis, of which the results have been described in chapter two, a case study was conducted. The case organization is an organization active in the automotive industry. The
organization is one of many parts suppliers of the few big car manufacturing groups.
This particular case organization was selected for the field study because it had experienced high growth during the last six years. The growth rate was more than 50% from 2000 until 2005. During the second part of 2005 the growth rate suddenly decreased. In 2006 and the first part of 2007 growth was stagnating because of internal organizational problems. The organization had reached a considerable size at that point, and according to the corporate life cycle model the company had reached the end of the growth phase and was ready to make the transition towards maturity. Additionally, the company was in the middle of a large reorganization.
3.2 Data collection
The most important data source were interviews. There were three interviews with the corporate managing director (CEO). The CEO was chosen for the interviews as he is familiar with the overall operation of the business and is involved in strategic decision-making and the execution of corporate policies. Because the CEO is also the founder of the organization, he was able to describe the whole developmental process of structure, systems and management style during the corporate life cycle. The interviews with the corporate managing director lasted on average one hour. The first interview was aimed at general information about the case in relation to this study’s research framework. Internal characteristics and external context were used to determine in which life cycle stage the case is acting. The second and third interview were aimed at the variables structure and management style and the way they coexist with the variable systems in the organization.
The CFO and the management assistant were interviewed because of their knowledge with regard to the relevant problems that the management team had to face during the period of rapid growth and the problems it is facing today because of this growth. An external consultant plays an important role in the organizational restructuring that is occurring at this moment and he was interviewed in that respect. The interviews with the Chief Financial Officer, the management assistant and the external consultant lasted on average 2.30 hours and were primarily aimed at identifying the role of all three steering variables in the organization and their (future) development.
Because some statements in the report needed additional explanation, a small number of questions was added to the interview reports. Almost all interviewees made some additional remarks and answered the questions when clarification was asked for. The reports served as the main input for the case analysis.
Complementary, documentary evidence was collected. Documentary evidence collected during the field study included: organizational charts, the quality system manual, business plans, procedures, instructions, etc.
The goal of the interviews was to analyse the problems which occurred at the end of the (rapid) growth phase, and to determine if the cause of these problems were changes (or a lack of change) in the variables structure, management style and systems, as claimed in the theoretical framework.
3.3 Data analysis
The presumption that the case is an organization at the end of the growth phase of the corporate life cycle model was verified with the different interviewees. Based on information about the external context, the market conditions, and factors such as age, number of employees and turnover, it can be concluded that the company is at the end of the growth phase. The analysis of the results of the case study will have to provide evidence about the consistency between the research framework (literature study) and practice, referring to our case study. The aim of this empirical study is to investigate similarities and differences between theory and practice. These similarities and differences relate to the configurations of structure, style and systems in the growth and in the maturity phase.
4.1 RESULTS FROM THE CASESTUDY
- Introduction to the case
The organization is a young and dynamic organization which focuses on continuous improvement and expansion of its market share as a supplier of automotive floor mats and textile products for the automotive industry. It is a company with an international focus and an emphasis on customers’ requirements. With sales offices in countries around the world, and production facilities in the Netherlands, Poland, Australia and – as of recently – also in India, a wide range of products and activities is offered to customers worldwide. A staff of more than 600 employees around the world was present at the moment the case study was conducted. The company is managed from its establishment in 1988 by the present CEO.
At the moment the interviews with the different interviewees started, the company had experienced rapid growth for a period of almost 6 years, when suddenly growth was stagnating. This stagnation was at first attributed to a down-swing caused by periodic fluctuations. However, when economic recovery had already commenced for some time, growth was still not increasing. The most relevant problem when growth stagnated, were delays in the delivery of customers’ orders. For some time, only short-term solutions were used to keep the customers satisfied. However, after muddling through for about a year, management decided that long-term solutions had to be found, in order to stimulate growth again.
An external consultant, specialized in the automotive industry, was asked to do a thorough, integral screening and analysis of the organization. This screening and analysis resulted in a short list of problem areas, which was the basis for setting up improvement projects. Six continuous improvement projects were started, following a thorough, integral screening and analysis of the organization. These projects related to different problem areas, including production planning, sales information, stock management, sourcing of materials, the management system and on-time-delivery. A project team was composed for every individual project. The selection of project team members was based on their knowledge and skills. In every team, one project leader was appointed. The project teams worked on these improvement projects for a period of seven months. Because of the lack of knowledge in certain areas, the external consultant advised the project teams.
The steering group started up three projects, originating from the structural problems that came out of the improvement projects. The three projects are interrelated, but originate from different problem areas. The first project, Project Management, referred to sales information and sourcing of materials.
The second project, Business Process Redesign, referred to the management system and the third project, On-time Delivery, referred to production planning and on-time delivery. These different projects gave directions about which of the seven steering variables of Waterman, Peters and Philips (1980) were regarded as the key to the solution of the underlying problems.
4.2 STRUCTURE IN THE CASE COMPANY
- Introduction
From the establishment of the company in 1988 until recently the formal structure was inferior to the informal structure. The company was build around people, considering the employees as the most valuable asset. The informal structure made the organization flexible and was effective and efficient during the birth phase and the early growth phase of the company. The company was very centralized regarding the decision-making process, but entrepreneurship was stimulated to a high degree considering other aspects. Lines were short, which made a quick response to developments in the market possible. However, high growth resulted in rapid expansion of the organization and an increasing span of control. A need for a more formal structure was acknowledged by a few people in the organization.
- Structure in the Growth phase
Before the improvement projects were started up, the organizational structure could be defined as a functional structure. There were several departments, such as sales, finance, administration and purchase, classified according to their knowledge and skills. The organization was organized around people. The employees were willing to work hard and make long days. In spite of the high growth the organization was experiencing, the employees were not given full responsibility and authority for the diverse activities they were executing on strategical, tactical and operational levels. Centralization was very high and the formalization process was only developed on a small scale, regarding the degree of differentiation. The differentiation process resulted in several departments and the structuring of tasks and responsibilities accordingly. These characteristics of structure are similar to the characteristics of Adizes’ (2004) Go-Go stage, which was considered to be the start of the growth phase in this study.
Another very important consequence of insufficient internal communication and missing structure was that employees became indifferent and dispassionate, they lost their customer focus because they felt they could not influence the way the organization was operating anymore. They did their jobs but did not take responsibility for their actions, with the result that problems could not be solved properly because the cause of the problem was never clear. People were only focused on the results of their own department, not on the final product and therefore not on the customer’s requirements.
The conclusion can be drawn, that the variable structure was not properly developed up to the point of the transition from growth to maturity. According to the theoretical framework of this study, the formalization process must be more developed for organizations at the end of the growth stage. Delegation of operating authority and decentralizing power for making decisions on strategic, tactical and operational levels is required. Coordination must be accomplished by means of an information infrastructure resulting from the corporate mission or strategy (Adizes, 2004)16. More decentralization and specialization is necessary to manage all activities
properly in a continuously expanding organization.
- Structure during the transition from Growth to Maturity
The project Business Process Redesign was completely focussed on the variable structure as a steering variable. Business Process Redesign (BPR) is defined as radically redesigning the existing organization process and
implementing this new process structure. BPR concerns the basis of the organization, as well as the formalization, specialization and centralization of the organization.
The basis of the organization up to this point was principally functional, and additionally only vertically oriented. The organizational structure was defined according to the F-format, with various functional departments like sales, purchase, ICT, finance, etc. The functional structure worked well for a small company in a relatively stable market for some time, but was not sufficient for the present organization anymore. The notion ‘process structure’ or ‘horizontal orientation’ was of no importance until the external consultant introduced it into the organization.
A process structure was implemented, preceded by an extensive training on the subject from the external consultant, adding a horizontal orientation and thus customer focus to the company. The general idea was that people would stop thinking in ‘boxes’ or, in other words, thinking within the boundaries of their own
department. All employees must have the same goal, namely customer satisfaction. When all department heads are only thinking about their own results, often focussed on costs, the total corporate result will not benefit.
16Because the variable strategy is outside the scope of this study, it’s relevance for organizational effectiveness is not discussed
The implementation resulted in the integration of the existing functional structure with a process (horizontal) structure. Because of this integration, the former departments were now considered to be processes; tasks and responsibilities originating from the functional structure partly remained, but most of their time, employees were working in project teams in the new structure. The process structure also improved internal communication by means of project teams, in which employees from all different processes were working together on the same project. The changes in the variable structure were aimed at effective and efficient cooperation between employees, leading to a project’s success. It was expected that if people learned to see certain problems from different perspectives they would learn to understand and respect their team members.
As already mentioned in section 3 of chapter 2, the idea of integrating the organizational (vertical) and the process (horizontal) structure originated from the matrix-structure. However, the difference with a normal matrix-structure is that in the case organization, the interaction at the interfaces was well regulated. Every controlling or supportive interaction was described in the process structure. The new type of structure in the case company was therefore similar to the matrix-process structure of Nieuwenhuis (2006).
According to this study’s research framework, this type of structure has a broader perspective than the other formats (F-, G-, M-format) when it comes to integration of formalization, specialization and centralization. Tasks, responsibilities and authority are clear from both a vertical (organization) and a horizontal (customer)
perspective. Because of this, better control of all activities is possible would be possible, which could give a positive impulse to the functioning of the management accounting system (MAS). Specialized knowledge and skills would be better integrated into the organization’s processes and the various projects. Because of this the structure was expected to become more flexible and more dynamic.
The analysis from the interview reports showed a great difference in the value of structure according to the various interviewees. Structure, according to the external consultant and management assistant, was of great importance and had a key role in solving the problems the organization was facing. The CEO and the CFO did see the necessity of a distinct structure, but their perspective of structure was much narrower. They saw structure as tasks, responsibilities and authority. They emphasized the importance of people taking their responsibilities. According to the definition of structure as described in section 3 of chapter 2, structure has a much broader perspective than the responsibilities of people working in the organization. An organization chart is a solid basis for the process of formalization; people need to know what they have to do and need the skills, knowledge and authority to be able to their jobs accordingly.
