Contingency Theory: Implications for the Process of Organizational Growth and Change

Another major question that was not directly addressed in this study is the issue of organizational growth and change. Healthy organizations are always under pressure to grow. This pressure may come from outside the system, in the form of requests to undertake new or expanded tasks, or it may come from inside, from members who seek a wider scope for their own activities and who see new opportunities to be developed. These pressures create the need to make strategic choices about the direction and rate of growth. Many factors enter into these choices.8 The concepts of differentiation and integration can be one tool to aid in making these decisions rationally. They can help executives to understand the nature of their existing organization in terms of its current pattern of differentiation. This can be mentally tested for accuracy of fit with the proposed growth, with its implications for creating newly differentiated parts. Does the proposal set up a need for a new technology? If so, will it require structures and orientations that are similar to or different from existing patterns? For example, Woodward s study suggests that managers should be particularly alert to the organizational implications of moving from a base in one technology (e.g., process) into an additional one (e.g., mass production). Will the domain of the organization, as defined by its market, be changed in important ways? Managers are accustomed to watching for important changes in the physical size of their market domain, but they are not so often alert to the organ- izational implications of market changes. Will the new domain involve any major shift in the degree of certainty? If so, it will probably also require an organizational change that must be faced up to in advance.

Many growing companies become involved to some extent in mergers and acquisitions. The assimilation of new acquisitions is at present very uneven, marked by notable failures as well as successes. While there is little hard evidence on this matter, it would appear from anecdotal accounts that many failures result from too little attention to the organizational issues connected with acquisitions. The concepts and measurement tools of this study can contribute to the better understanding of these issues. They would be useful in determining the environmental requisites for the new acquisition. Similarly, they could provide an understanding of the actual differences in structure and orientation between the acquired company and the parent, and whether these differences should be maintained or diminished. Finally, these concepts and measurements could shed light on appropriate methods of conflict resolution. The organizational information thus pro-vided could save a parent company from inadvertently drifting into “converting” a new acquisition into its own image, rather than allowing it to maintain its own necessary organizational practices and orientations. Too often the conversion process results in dissipating the most important asset acquired—a strong, viable organization.

Every organization, whether growing or not, is periodically faced with the necessity of bringing about some fundamental changes in the behavior of its members if it is to stay effectively related to its changing environment. Various research studies on effecting desired behavior changes in organizations have emphasized the importance of using both structural modification and education.9 The educational approach gives people a chance to become familiar with the proposed change, to comprehend the reasons behind it, possibly to contribute to its design, and to test out behaving in new and different ways. The structural approach sets up mechanisms that serve to reward the desired behavior and punish conduct that is no longer approved. Both approaches are based on well- established learning theories, and each can serve to strengthen the other. The findings of the present research, however, can provide some guides to the sequence and emphasis that might be given these two approaches.

If management has concluded, on the basis of the type of analysis we have been suggesting, that a given organizational unit needs to be more highly structured, it would be directionally consistent to initiate such a change with a structural and procedural change carried out by the appropriate authorities. This first step could then be followed up by an educational effort to make the change more understandable and livable for the people involved. This sequence would emphasize the objective of achieving more formal structure. If the desired change is in the opposite direction, toward less formality, the initial use of an educational program would be more appropriate, followed by the official shifts in structure and procedure. The sequential strategy in this case would con- tribute to less reliance on formal structure and again would clearly foster a consistency between the direction of the desired change and the sequence of methods.

On a more detailed level the same kind of thinking could help guide the choice between alternative forms of educational programs. For example, let us assume that a company wishes to improve its managers’ ability to resolve conflict by helping them to develop their interpersonal competence. If these managers are expected to work day in and day out in a unit with relatively low formalization of structure and procedure, it would seem appropriate to employ sensitivitytraining procedures, in which the entire learning process hinges on exposing the individual to a very unstructured and ambiguous situation. It also follows that in the opposite organizational circumstances, the use of more structured educational methods would be indicated. These hypothetical situations are submitted only as examples of how the direction of desired change can itself help to guide the selection of the methods employed to implement it. The findings of this and the similar studies described in the last chapter can be used to determine the desired direction of change.

A clearer understanding of the direction of desired change can also help management to choose among alternative technologies. Throughout the discussion in this chapter we have been implicitly assuming that the technology an organization employs to perform any chosen task is automatically determined by the methods available and by hard economic facts. This is not aways true. Companies can and do, by a variety of means, convert these technical constraints into choices. A given technical capability can be used in quite different ways. For example, some supermarket chains use computers to help pull decisions on manning, commodity ordering, merchandising, and so on from the stores into centralized headquarters. Other chains have used the same computer hardware as an extension o£ the store manager, who is regularly provided with data about his store’s operations so that he can make many key business decisions himself.

Similarly, there are often two or more technically feasible ways to perform a given task. Assembly work can often be done either serially, with the product passing from one work station to the next, where the parts are stored, or concentrically, with the parts moving into a single work station, where the product remains stationary as it is gradually built up. These alternative technologies would require different structures and procedures. As a final example, organizations have many choices available about whether to make or buy components. If a company decides to emphasize a capability for performing relatively uncertain tasks, it can often choose to subcontract for a supply of components that can best be produced in a highly routine fashion. Within limits, then, even the choice of “sub-technologies” can be influenced by an overriding strategic choice about the desired direction of change —toward an organizational capability for coping with greater or less environmental certainty.

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

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