Organizations in a diverse and dynamic environment: Differentiation, Integration, and Performance

To find an answer to this question we computed and compared the average amount of differentiation between departments in each of the six organizations and the average quality of integration achieved in each organization.

The results were highly intriguing. The two organizations with the most successful performance records had, in fact, achieved the highest degree of integration of the six and were also among the most highly differentiated (Figure II-3). As we indicated above, the differentiation of the various units was more in line with the demands of the environment for these two organizations than for the others. Managers in both organizations also indicated in both questionnaires and interviews that the units in these organizations worked very well together, achieving the integration required by the environment. A typical view of these relationships is provided by the comments of a research manager in one of these two organizations, describing his unit’s relations with the production department:

We have had good relations with production lately. I have seen other situations where production people wouldn’t fol- low research changes in processes. In [this organization] when we have the recipes outlined, the production people go over them with us and understand them and follow our procedures. At first we had some difficulties, probably because I had to learn what their capabilities were, but now they just sit down with us and we go through the problems and work them out and they follow our recipes.

Other comments from managers in both organizations de- scribed the state of integration between units in similar positive terms. All of this evidence indicates that the states of dif- ferentiation and integration in the two high-performing or- ganizations were in line with the environmental requirements.

The two medium performers were not simultaneously achieving the required differentiation and integration. They seemed, in effect, to have traded off some differentiation for improved integration, or vice versa. Medium-performing or- ganization A had relatively close integration of units, but its state of differentiation was very low. Its departments were , able to work well together, but perhaps because they were not ; very much different. On the other hand, medium-performing organization B had achieved high differentiation, but appar- , ently at the expense of various departments’ being able to | work effectively in reaching joint decisions. The integration j scores from questionnaires and interview comments indicated I that there were many problems in this area. For example, two : research managers described their problems in obtaining interdepartmental collaboration:

! I think the biggest problem is communications with [the integrating unit] so we can know the needs. You need to know what sales and production needs are. They have customer !.. complaints. If we knew the customer complaints, we could help. In this organization there isn’t good communications linkage on these things.


Cooperation at times with production hasn’t been too good. At times we are looked on as outsiders, even though they are running experimental processes we developed. They do it without consulting us. They may get general ideas on a run before they start, but once it is started, there is no suggestion or discussion. I don’t know whether they don’t bother j or they don’t want our help.

Low-performing organization B had units that were very similar in orientation and structure, which also were unable to attain effective integration. This clearly fits our hypothesis that a lack of differentiation and integration would contrib- i ute to low performance and presents the clearest example of ! this condition.

The other low-performing organization, A, while it had ! units that were well-differentiated, was achieving the second lowest degree of integration. For example, sales and research managers in this organization discussed their problems in this fashion:

I don’t feel that sales is brought into product evaluation early enough. My feeling is that if we were brought in earlier, we could save a lot of time that research spends working on things. The way things are set up now, we are absolutely independent of what is going on with new products. Our only relations with anybody is through [the Integrative Unit], but if we were brought in earlier, I think it would help the researchers.

As a source of market information, the field sales force is so spread out and working on so many things they can’t give us good information. They should be a very good source about the primary need, but they aren’t. Salesmen come back and tell us about the need in such broad generalities that it sounds like they are talking about superproducts. They say they would like a clear plastic that can take any color and be completely heat resistant and easy to shape, etc. Any idiot knows we all want that, but what we need is more specific knowledge coming from qualified persons, such as the salesmen.

We lack coordination in getting the new product from the laboratory to the field. It sometimes takes two years to get the field people to push a new product. One thing we have been trying to do is to get the technical person out into the field so that he can push his product himself.

In summary, neither of these low-performing organizations met the demands of the environment for high differentiation and integration so well as either the medium- or the high- performing ones. The medium performers, while they managed to achieve either the required differentiation or the required integration, failed to achieve both. The high performers did most nearly meet both the requirement for highly differentiated units and the necessity for these units to work well together. There appears to have been a close relation-ship between the extent to which these organizations met the environmental requirements for differentiation and integration and their ability to deal effectively with that environment.

But this finding still leaves us with a curious contradiction. If, as we have found, differentiation and integration work at cross purposes within each organization, how can two organizations achieve high degrees of both? The best approach to explaining this apparent paradox becomes evident if we consider how organizations might go about achieving both of these states. If organizations have groups of highly differentiated managers who are able to work together effectively, these managers must have strong capacities to deal with interdepartmental conflicts. A high degree of differentiation implies that managers will view problems differently and that conflicts will inevitably arise about how best to proceed. Effective integration, however, means that these con- flicts must be resolved to the approximate satisfaction of all parties and to the general good of the enterprise. This provides an important clue to how two of these organizations met the environmental requirements for high differentiation and high integration. These two organizations differed from the others in the procedures and practices used to reach interdepartmental decisions and to resolve conflict. We now want to explore these differences.

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

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