The Evolution of Organization Design

Organization designOpens in new window is not a collection of facts; it is a way of thinking about organizations and how people and resources are organized to collectively accomplish a specific purpose.

Organization design is a way to see and analyze organizations more accurately and deeply than one otherwise could.

The way to see and think about organizations is based on patterns and regularities in organizational design and behavior.

Organization scholars search for these regularities, define them, measure them, and make them available to the rest of us.

The facts from the research are not as important as the general patterns and insights into organizational functioning gained from a comparative study of organizations.

Insights from organization design research can help managers improve organizational efficiency and effectiveness, as well as strengthen the quality of organizational life. One area of insight is how organization design and management practices have varied over time in response to changes in the larger society.

Historical Perspectives

You may recall from an earlier management course that the modern era of management theory began with the classical management perspective in the late nineteenth and early twentieth century. The emergence of the factory system during the Industrial RevolutionOpens in new window posed problems that earlier organizations had not encountered.

As work was performed on a much larger scale by a larger number of workers, people began thinking about how to design and manage work in order to increase productivity and help organizations attain maximum efficiency.

The classical perspective, which sought to make organizations run like efficient, well-oiled machines, is associated with the development of hierarchy and bureaucratic organizations and remains the basis of much of modern management theory and practice.

In this volume we examine the classical perspective, with its emphasis on efficiency and organization, as well as other perspective that emerged to address new concerns, such as employee needs and the role of the environment. Elements of each perspective are still used in organization design, although they have been adapted and revised to meet changing needs. These different perspectives can also be associated with different ways in which managers think about and view the organization, called manager frame of reference.

  1. Efficiency Is Everything

Pioneered by Frederick Winslow TaylorOpens in new window, scientific management emphasizes scientifically determined jobs and management practices as the way to improve efficiency and labor productivity.

Taylor proposed that workers “could be retooled like machines, their physical and mental gears recalibrated for better productivity.”

He insisted that management itself would have to change and emphasized that decisions based on rules of thumb and tradition should be replaced with precise procedures developed after careful study of individual situations.

To use this approach, managers develop precise, standard procedures for doing each job, select workers with appropriate abilities, train workers in the standard procedures, carefully plan work, and provide wage incentives to increase output.

Taylor’s approach is illustrated by the unloading of iron from railcars and reloading finished steel for the Bethlehem Steel plantOpens in new window in 1898.

Taylor calculated that with correct movements, tools, and sequencing, each man was capable of loading 47.5 tons per day instead of the typical 12.5 tons. He also worked out an incentive system that paid each man $1.85 per day for meeting the new standard, an increase from the previous rate of $1.15.

Productivity at Bethlehem Steel shot up overnight. These insights helped to establish organizational assumptions that the role of management is to maintain stability and efficiency, with top managers doing the thinking and workers doing what they are told.

The ideas of creating a system for maximum efficiency and organizing work for maximum productivity are deeply embedded in our organizations. A Harvard Business Review article discussing innovations that shaped modern management put scientific management at the top of its list of 12 influential innovations.

  1. How to Get Organized

Another subfield of the classical perspective took a broader look at the organization.

Whereas scientific management focused primarily on the technical core—on work performed on the shop floor—administrative principles looked at the design and functioning of the organization as a whole.

For example, Henri Fayol proposed 14 principles of managementOpens in new window, such as “each subordinate receives orders from only one superior” (unity of command) and “similar activities in an organization should be grouped together under one manager” (unity of direction). These principles formed the foundation for modern management practice and organization design.

The scientific management and administrative principles approaches were powerful and gave organizations fundamental new ideas for establishing high productivity and increasing prosperity. Administrative principles in particular contributed to the development of bureaucratic organizations.

Although the term bureaucracy has taken on negative connotations in today’s organizations, bureaucratic characteristics worked extremely well for the needs of the Industrial Age. One problem with the classical perspective, however, is that it failed to consider the social context and human needs.

  1. What About People?

Early work on industrial psychology and human relations received little attention because of the prominence of scientific management. However, a major breakthrough occurred with a series of experiments at a Chicago electric company, which came to be known as the Hawthorne Studies.

Interpretations of these studies at the time concluded that positive treatment of employees improved their motivation and productivity. The publication of these findings led to a revolution in worker treatment and laid the groundwork for subsequent work examining treatment of workers, leadership, motivation, and human resource management.

These human relations and behavioral approaches added new and important contributions to the study of management and organizations. However, the hierarchical system and bureaucratic approaches that developed during the Industrial Revolution remained the primary approach to organization design and functioning well into the 1980s.

In general, this approach, worked well for most organizations until the past few decades. During the 1980s, though, it began to cause problems. Increased competition, especially on a global scale, changed the playing field. North American companies had to find a better way.

  1. Can Bureaucracies Be Flexible?

The 1980s produced new corporate cultures that valued lean staff, flexibility and learning, rapid response to the customer, engaged employees, and quality products.

Organizations began experimenting with teams, flattened hierarchies, and participative management approaches. For example, in 1983, a DuPont plantOpens in new window in Martinsville, Virginia, cut management layers from eight to four and began using teams of production employees to solve problems and take over routine management tasks. The new design led to improved quality, decreased costs, and enhanced innovation, helping the plant be more competitive in a changed environment. Rather than relying on strict rules and hierarchy, managers began looking at the entire organizational system, including the external environment.

Since the 1980s, organizations have undergone even more profound and far-reaching changes. Flexible approaches to organization design have become prevalent.

Recent influences on the shifting of organization design include the Internet and other advances in information technologyOpens in new window and big data analyticsOpens in new window; globalization and the increasing interconnection of organizations; the rising educational level of employees and their growing quality-of-life expectations; and the growth of knowledge- and information-based work as primary organizational activities.

    Research data for this work have been adapted from the manual:
  1. Managerial Accounting: Tools for Business Decision Making By Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso