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Chapter 2: Organizational structure, design, and bureaucracy
Introduction
In this interactive guide you can view additional explanation and analysis of the key theories in the book to deepen your knowledge and understanding of organizational behaviour.
Click on the links below to view the extension material for Chapter 2:
Further examples of organizations which have grown from small beginnings
Fayol’s (1949) 14 principles of management
Examples of organizational structures
Examples of other organizational charts
Examples of rules, policies, and procedures
Bureaucracies that maintain records about a population
Examples of environmental influence
Digitization and the transformation of bank branches
Boundaries between organizations
Further examples of organizations which have grown from small beginnings
See section 2.2 The emergence of large-scale organizations in the book.
In real-life case 2.1, we saw how a number of large-scale organizations grew from small beginnings. Here are some other examples:
Greggs the Bakers, which now has 1,700 stores in the UK, began as a single store bakery in north-east England in the 1950s: https://www.greggs.co.uk/about/
The UK-wide department store John Lewis, which currently has 90,000 employees started out as a single drapery shop on London’s Oxford Street in the 1860s:
https://www.johnlewispartnership.co.uk/about/who-we-are/our-history.html/;
https://www.theguardian.com/business/2014/apr/19/john-lewis-150th-anniversary-co-op
Brittany Ferries is one of the largest ferry companies operating between the UK, France and Spain. It was originally created in 1972 by a group of farmers to export French cauliflowers to the UK: https://www.brittany-ferries.co.uk/information/about/brittany-ferries
Fayol’s (1949) 14 principles of management
See section 2.2 The emergence of large-scale organizations in the book.
Henri Fayol suggested that management was a profession and a skill that people could be trained to perform. In his 1916 work, Administration industrielle et générale (English translation 1949), he suggested fourteen principles for effective and efficient management, outlined in the table below:
Principle |
Explanation |
Evidenced in |
Division of work |
All tasks are specialized |
Vertical and horizontal differentiation creating specific roles within the organizational structure |
Authority |
The right to give orders and sanction subordinates |
Levels of hierarchy with seniority; disciplinary procedures |
Discipline |
Obedience of subordinates |
Clear procedures and responsibilities; disciplinary procedures |
Unity of command |
Each subordinate answers to only one manager, not several |
Clear lines of responsibility across the hierarchy |
Unity of direction |
Each area of the hierarchy should have one objective |
Horizontal differentiation naming specific departments and functions |
Subordination of interests |
Individual interests are secondary to those of the organization as a whole |
Importance of the office rather than the person. Following rules and procedures |
Remuneration |
Fair pay for all employees |
Appropriate pay and remuneration policies |
Centralisation |
Degree of delegation down through the ranks |
Spans of control designed through the hierarchy |
Scalar chain |
Authority should go from one step down to the next, but communication allowed across levels where necessary |
Horizontal and vertical differentiation, accompanied by specific rules and responsibilities |
Order |
Resources and people to be in the right place at the right time |
Rules and regulations and ordering instruments such as timetables |
Equity |
Equal treatment for all employees |
Standardized rules and procedures |
Tenure |
Stable employment prospects |
Employment contracts |
Initiative |
Employees allowed to exercise own initiative |
Perhaps a contradiction in a purely rational bureaucratic form? |
Esprit de corps |
Team spirit, everybody working together in unity and harmony |
An interesting observation for such an impersonal form of organization—see Chapters 5 and 6 on the social side of the organization |
Fayol in fact suggested that anything which contributed to effective management could be considered a principle of management. Management became a profession in itself (Pryor and Taneja, 2010), with the training of managers becoming as important as training for production skills or other functions in the organization, such as finance.
Fayol’s principles are generally considered to be part of a rational, technical, ‘one-best-way’ approach to management. However, the final two principles would seem to contradict this, suggesting that employee initiative and social factors are also important for effective management.
References
Fayol, Henri. (1949). General and industrial management, London: Pitman.
Pryor, Mildred G., & Taneja, Sonia. (2010). Henri Fayol, practitioner and theoretician—revered and reviled, Journal of Management History, vol. 16, no. 4, pp. 489–503.
Examples of organizational structures
See section 2.3 Bureaucratic structure and hierarchy in the book.
Telefónica’s organizational structure
Telefónica is a multinational telecommunications group based in Spain. As with many multinationals, it has a group holding company that owns and manages various national subsidiaries and divisions. The group organizational structure shows that, beneath the CEO, the board level is organized both by function (e.g. finance, marketing, and human resources) and by geographical areas, such as Brazil, Spain, and Germany.
The structure gives a clear line of command and control that can go from the CEO at the top down to an assistant in a mobile phone store in Germany or any of the other countries in which the company operates. While the CEO may never meet most of the workers in the global organization, the structure still allows for command and control over the whole workforce.
See more about Telefónica’s organizational structure at the following links:
https://www.telefonica.com/en/web/about_telefonica/organisation/executive-team
https://www.telefonica.de/company/management.html
https://www.theofficialboard.com/org-chart/telefonica
Examples of other organizational charts
See section 2.3 Bureaucratic structure and hierarchy in the book.
Compare the structures shown below: can you describe the structures using such terminology as ‘span of control’, ‘hierarchy’, ‘horizontal differentiation’, etc?
British Army: https://www.army.mod.uk/who-we-are/
Harvard University: https://oir.harvard.edu/fact-book/org_chart_central
Skoda: https://www.skoda-js.cz/en/organizational-structure/
Sony: https://www.sony.net/SonyInfo/CorporateInfo/Data/organization.html
This website shows the hierarchy models of many large companies. There is a free membership whereby more detailed charts for 15 companies can be seen: https://www.theofficialboard.com/
Examples of rules, policies, and procedures
See section 2.4 Bureaucratic standardization: rules, policies, and procedures in the book.
Type of policy |
Description |
Example policy |
Grievance |
Policies which outline how workers themselves may pursue grievances—areas in which they are unhappy with how they are being managed. |
NHS Scotland, UK https://workforce.nhs.scot/policies/grievance-policy-overview/ [Last accessed 25th May 2022] |
Pay and remuneration |
Outlines not just the pay scale that workers can expect to receive, but also other aspects of reward such as leave entitlement. |
Danske Bank, Denmark https://danskebank.com/-/media/danske-bank-com/file-cloud/2016/3/remuneration-policy.pdf [Last accessed 7th April 2022] |
Appraisal and promotion |
Procedures for monitoring the standard of work that employees do, often done in a standardized appraisal procedure on an annual basis. Such a procedure can then feed into decisions on promotion or pay increases. |
Pembrokeshire Association of Voluntary Services, UK http://www.pavs.org.uk/publications/documents/PO2-StaffAppraisalPolicy.pdf [Last accessed 7th April 2022] |
Finance |
Procedures relating to expense claims, outlining what workers might legitimately claim (e.g. car mileage or transport costs) and a standard allowance for these. |
University of Strathclyde, UK https://www.strath.ac.uk/media/ps/finance/expenseclaims/Expenses_Policy.pdf [Last accessed 7th April 2022.] |
Recruitment and selection |
Policies may cover aspects such as where a job is advertised, criteria for selecting candidates, and types of evidence required to demonstrate that candidates meet different selection criteria (see Chapter 10 for more on specific recruitment and selection techniques to match personalities to job descriptions). |
West Yorkshire Police, UK https://www.westyorkshire.police.uk/sites/default/files/2018-03/recruitment_and_selection.pdf [Last accessed 7th April 2022.] |
Equal opportunities |
Policies that ensure equality of treatment on grounds such as gender, race, age, sexual orientation, and disability. |
Broxtowe Borough Council, UK https://www.broxtowe.gov.uk/media/4314/equality-and-diversity-policy.pdf [Last accessed 7th April 2022.] |
Disciplinary |
Policies which outline acceptable behaviour in the workplace, and the procedure by which transgressions of this are dealt with. This might include specific ways of reporting and dealing with issues of bullying and harassment, or dealing with issues of perpetual unauthorised absence or a poor quality of work. |
Crown Prosecution Service, UK http://www.legalservicesboard.org.uk/what_we_do/regulation/pdf/annex18_disciplinary_policy.pdf [Last accessed 7th April 2022.] |
Absence |
Procedures for dealing with the reporting of absence, sick pay, and how to deal with persistent or long-term absences. If you have been ill and unable to attend work, you will probably know a pre-determined procedure for informing the workplace of your absence, and then have to provide a sick-note and complete paperwork on your return. |
British Broadcasting Corporation http://downloads.bbc.co.uk/foi/classes/policies_procedures/health_sickness_absence_policy.pdf [Last accessed 7th April 2022.] |
Health and Safety |
Guidelines to ensure safe working and the prevention of accidents in the workplace. |
Cygnet Health Care, UK https://www.cygnethealth.co.uk/content/uploads/2017/03/Health-and-Safety-Policy.pdf [Last accessed 7th April 2022.] |
Bureaucracies that maintain records about a population
See section 2.6 The power of bureaucracy: large-scale control of the book.
In section 2.6, we examine how bureaucracy can be used to keep records and exert control over a whole population. An example of this is the university application procedure in the UK.
UCAS is the organization which handles applications for UK universities.
In dealing with the thousands of university applicants each year, UCAS has the problem of ordering a complex mass of individuals. They could ask people to turn up at their premises to discuss their university applications, but this would overwhelm their premises by the sheer weight of numbers, and there is no way that an individual staff member could remember each potential student with whom they had had discussions. They could ask people to write a letter of application stating any relevant details. This would prevent the premises from being swamped, but how would they collate thousands of letters? Say they wanted to find all applicants for Midwest University; or say they wanted to find all applicants for Geography degrees, or all applicants over 25 years old. It would mean sifting through and examining closely every single letter among thousands to find the relevant details. Nothing would ever get done.
So, to make this task manageable, UCAS uses a number of bureaucratic mechanisms—the UCAS application, in particular. Rather than inviting unstructured letters, UCAS structures each individual in the shape of the UCAS application form (originally completed on paper but now online). Each individual is represented by the different fields that they fill in: age, predicted grades, gender, preferred universities, preferred courses, etc. Now, the mass of individual applicants is represented and structured in a way that makes their ordering, and, ultimately, allocation to different universities, possible. What was previously unmanageable is now manageable—it is the bureaucracy that allows information to be managed efficiently and, ultimately, for control to be exerted over the mass of student applicants for that year.
The UCAS case shows how bureaucracy functions in both ordering and managing vast numbers of people, but also allows the record of any one individual within that mass to be pinpointed immediately
Examples of ‘red tape’
In section 2.8 of the book (Dysfunctions of bureaucracy), we encountered ‘red tape’, a term which describes a situation in which excessive paperwork and form-filling gets in the way of people doing their job. Here, we review a number of examples of red tape causing problems in different industries and areas of activity.
Post-Brexit red tape
Following Brexit in the UK, a number of industries suggested that they had increased costs due to new export and import paperwork which was required, and that this was also taking up valuable time. Some examples of this include:
Lorry drivers: https://www.bbc.co.uk/news/business-60161094
Farming and fisheries: https://www.bbc.co.uk/news/business-55887043
Small businesses: https://www.theguardian.com/business/2021/mar/29/small-business-exports-fall-eu-survey-brexit/
Charity and humanitarian aid: https://www.theguardian.com/politics/2022/mar/09/brexit-red-tape-stopping-small-charities-getting-supplies-to-ukraine/
Visas for Ukrainian refugees
Refugees from the war in Ukraine found particular difficulties when applying to move to the UK, these were blamed on excessive paperwork and red tape which formed part of the process:
https://www.theguardian.com/world/2022/mar/08/ukrainian-family-describe-trauma-of-uk-visa-processing
Health and social care
In various areas of health and social care provision, workers have complained of paperwork and excessive regulations leaving them unable to attend to the needs of vulnerable people who require care. The examples below include the Munro report (2011) into social care which identified a problem where the burden of paperwork takes social workers away from one of the important tasks that they are meant to perform, namely protecting vulnerable children. More recently, people volunteering to deliver Covid vaccines found that they had to go through various bureaucratic hoops before they were able to work in vaccination centres.
Further reading:
Munro, Eileen. (2011) The Munro Review of Child Protection. Department for Education, London. Available at: https://www.education.gov.uk/publications/standard/publicationDetail/Page1/CM%208062
https://www.bbc.co.uk/news/education-10788737
https://www.bbc.co.uk/news/uk-55516277
https://hbr.org/2017/10/bureaucracy-is-keeping-health-care-from-getting-better
Police and law enforcement
Another report (Berry, 2010) looked into policing and found similar conclusions about the impact of paperwork taking policed officers away from front-line policing. Similar problems have been found in other areas of law enforcement, such as the probation service:
Further reading:
Berry, Jan. (2010) Reducing Bureaucracy in Policing. Home Office, London. Available at: http://www.homeoffice.gov.uk/publications/police/reducing-bureaucracy/reduce-bureaucracy-police
http://www.bbc.co.uk/news/10471566
http://www.guardian.co.uk/politics/2011/jul/27/kenneth-clarke-probation-service
Education
In 2015, the then-UK Secretary of State for Education, Nicky Morgan, pledged to cut down on excessive bureaucracy and paperwork for school teachers, who found themselves overloaded with non-teaching activities such as marking, lesson planning, and pupil tracking. In addition to preventing teachers from doing their work, these requirements harm morale and recruitment within the profession, effects similar to Weber’s disenchantment, and also have negative impacts on mental well-being:
https://www.tes.com/magazine/news/general/9-10-teachers-say-job-has-adversely-impacted-mental-health
The Red Tape Challenge
In 2012, the UK government was engaged in a public consultation over unnecessary rules and regulations which get in the way of organizations achieving their aims (Department for Business, Innovation and Skills, 2012). The ‘red tape challenge’ invited businesses to suggest regulations that were unnecessary burdens and a hindrance. The following extract from their website shows the balance between bureaucracy and rules that are needed, and those that become red tape:
‘Good regulation is a good thing. It protects consumers, employees and the environment, it helps build a more fair society and can even save lives. But over the years, regulations—and the inspections and bureaucracy that go with them—have piled up and up. This has hurt business, doing real damage to our economy. And it’s done harm to our society too. When people are confronted by a raft of regulations whenever they try to volunteer or play a bigger part in their neighbourhood, they begin to think they shouldn’t bother.’
Source: Department for Business, Innovation and Skills (2012).
The details, and results, of the challenge can be found in this online archive:
http://webarchive.nationalarchives.gov.uk/20150522175321/http://www.redtapechallenge.cabinetoffice.gov.uk/home/index/ [Last accessed 7th April 2022.]
Examples of environmental influences
See section 2.9 From bureaucracy to post-bureaucracy in the book.
A number of news reports highlight areas where organizations are impacted by factors in their environment, for example:
Sector |
Example |
Political |
Legislation has been introduced in many countries to ban smoking in public places; this has caused pubs, restaurants and similar places to have to develop outdoor smoking areas, on the one hand, but has also changed the culture of pubs and the nature of the experience and products that they offer, with more of an emphasis on food. Meanwhile, while these outdoor smoking areas might become cold, environmental legislation in France has been introduced to ban outdoor gas heaters. |
Economic |
In the UK, austerity policies in the wake of the credit crisis have led to cuts in local government services, including police and road maintenance. Organizations such as libraries must now rely far more on volunteers than paid staff. https://www.nefconsulting.com/volunteers-alone-cannot-fill-the-gap/ |
Social |
After the BBC documentary Blue Planet II highlighted the devastating effects of plastic waste on marine life, social values changed towards pressuring companies to minimize the use of single-use plastics. One example of this is where companies such as McDonald’s either ban plastic straws or use straws made from other materials. Meanwhile, supermarkets are moving towards sourcing alternative forms of packaging which are less damaging to the environment. |
Technological |
Throughout the textbook, there are many examples of the impact of technological change on organizations—for example automation and its effect on jobs, in chapter 4. Drones are one very specific example of technology which has had an impact on may different organizations and professions. On the one hand, in December 2018, drones flying close to the runway closed down Gatwick airport and forced airports to reconsider security operations. On the other hand, drones have provided a new tool for photographers and filmmakers to get images previously unavailable to them. https://www.theguardian.com/world/2019/jan/04/gatwick-returns-to-normality-but-drone-threat-remains |
Structureless organizations
In section 2.9 (From bureaucracy to post-bureaucracy) some post-bureaucratic, ‘structureless’ organizations are discussed. Here is some more information about some of these organizations:
Oticon - the ‘spaghetti organization’
Oticon, a Danish technology firm specializing in hearing-aid equipment, is often held up as an example of what a purely post-bureaucratic organization might be like. In order to promote flexibility and innovation within the company, it restructured away from a traditional hierarchy and got rid of traditional bureaucratic features, for example:
• All paperwork is scanned when first received and stored on computers. The paper itself is shredded and, as a symbol of the intent to remove paperwork, the shredded paper is put into a clear plastic chute that passes from roof to floor in the middle of the canteen.
• There are neither job titles nor fixed roles. Departments and similar examples of bureaucratic structure are removed, and in their place are ‘projects’ to which any interested people from any part of the organization might contribute.
• Formal offices and dividing walls have also been removed; even fixed desks no longer remain. Instead, workers have their own trolley which contains their computer and other essential items.
In Oticon we can see a move away from formal structures and towards movement and fluidity—rather than rigidly structured, the organization is interlinked like spaghetti. Rather than working in pre-existing departments and within a pre-existing structure, people push their trollies around and cluster together to work on particular projects. Rather than being directed top-down, workers are left to self-organize.
In the video linked below, Oticon CEO Lars Kolind explains his management philosophy in comparison with more traditional hierarchical structures:
https://www.youtube.com/watch?v=PnAcDsEPLyw
This article gives a view of the positive and negative sides of Oticon’s structure:
http://pubsonline.informs.org/doi/abs/10.1287/orsc.14.3.331.15166
References:
Burnes (2000: 319–27); Jaffee (2001: 161–2); Larsen (2002).
The Googleplex
Google is a massive multinational organization which also relies on technological innovation. Its headquarters in California, the Googleplex, and similar buildings worldwide, resemble playgrounds in many respects. There are slides linking floors, table football and similar games on offer, and free food in the various canteens around the building. Rules about such things as set office hours are relaxed (imagine how Frederick Taylor, in Chapter 3, with his time and motion study would react to this!). Fixed work-spaces, such as offices, are rare. Workers have laptops and are encouraged to roam the building, having impromptu, chance meetings and conversations with co-workers.
The post-bureaucratic river-like form of organization at Google is designed to allow more space and more opportunity for knowledge and new ideas to emerge from chance meetings rather than being planned from above (see chapter 10 for more on this).
Features on the Googleplex can be found at:
https://hbr.org/2014/10/workspaces-that-move-people
https://www.youtube.com/watch?v=L8rKUyofGEs
http://www.youtube.com/watch?v=eFeLKXbnxxg
http://content.time.com/time/photogallery/0,29307,1947844,00.html
The post-bureaucratic worker—would you take unlimited holidays at Virgin?
Working for a post-bureaucratic organization such as Oticon or Google might seem like an ideal job—very few rules, the ability to work on projects that you like, and, in the case of Google, the ability to turn up to work at whatever time you want in the morning - it’s very different from working the regular 9 to 5.
Such work, however, has its own pressures. There is often pressure to perform—to demonstrate the ability to innovate by coming up with the goods. And with such a lack of formal control and rules, a lot of self-discipline is required in order to keep focused on tasks relevant to work.
Such pressures are evident in a recent policy announced by Richard Branson which, in a bid to increase productivity and creativity, has allowed workers at Virgin Group’s headquarters to take unlimited holidays, as long as they get their work done. As Branson puts it in his blog, ‘it is left to the employee alone to decide if and when he or she feels like taking a few hours a day, a week or a month off’ Branson, 2014).
Would you as an employee rush to take advantage of this loosening of management control? Barker (1993) argues that getting rid of management direct control can lead to more subtle and intensive form of control because other members of the team and the individuals themselves self-discipline. This is what Sewell calls responsible autonomy (Sewell, 1998), where workers are given freedom so long as they hit their targets. Given that many workers feel a sense of job insecurity, as Anne Perkins (2014), writing in The Guardian, states, Branson’s offer ‘should be enough to keep most workers chained to their desks forever. If the first condition for taking time off is deciding you wouldn’t be missed, it sounds scarily like an invitation to the boss to make it permanent’ (Perkins, 2014). Indeed, this more flexible form of working means that you have to self-discipline and therefore control yourself more. If by taking a holiday you are leaving other people in your department in difficulties, or a project not finished, imagine the pressure not to take a holiday when you know that you will be responsible for a potential project failure.
Barker, James R. (1983) ‘Tightening the iron cage: Concertive control in self-managing teams’. Administrative Science Quarterly 38(3): 408-37
Branson, Richard (2014) ‘Why we’re letting Virgin staff take as much holiday as they want’ [blog post]. Available at: https://www.virgin.com/richard-branson/why-were-letting-virgin-staff-take-much-holiday-they-want (last accessed 1 May 2019)
Burnes, Bernard. (2000). Managing change: A strategic approach to organisational dynamics, Bernard Burnes, 3rd edn, London: Financial Times/Prentice Hall
Jaffee, David. (2001). Organizational Theory: Tension and Change, McGraw-Hill
Larsen, Henrik H. (2002). ‘Oticon: Unorthodox Project-Based Management and Careers in a "Spaghetti Organization"’., Human Resource Planning
Perkins, Anne (2014). ‘Richard Branson’s ‘unlimited holiday’ sounds great—until you think about it’. The Guardian 25 September. Available at https://www.theguardian.com/commentisfree/2014/sep/25/richard-branson-unlimited-holiday-job-insecurity
Sewell, Graham (1998) ‘The discipline of teams: The control of team-based industrial work through electronic and peer surveillance’. Administrative Science Quarterly 43(2): 397-428
Digitization and the transformation of bank branches
In section 2.10 Bureaucratic control and coordination in digitized organizations we saw how more and more customers access banks through the internet and mobile technology. This means that physical bank branches are being used less, and as such banks have had to rethink the purpose of these branches, or are closing branches down (Quatch, 2022).
While digitization follows trends in customer behaviour, it also has cost savings for the bank. Arnold (2014) reports that the average costs of a transaction in a branch is $4, compared to just 4 cents online. The digitization process doesn’t mean the end of branches, however. Banks realize that many customers, including older, wealthier, and small-business customers, prefer to do their banking in person (Arnold, 2014). Contact with staff in a branch also gives staff the opportunity to sell further financial products to customers (Ahmed, 2014). Lloyds and other branches are therefore refocusing the purpose of their branches, away from routine transactions that can be done online and towards selling more complex products and services (Arnold, 2014).
References:
Ahmed, Kamal. 2014. High street branches are still important for Lloyds. BBC News Online, 28 October. Available at https://www.bbc.co.uk/news/business-29798810
Arnold, Martin. 2014. Banks must cut costs but remember what their customers want. Financial Times, 20 October. Available at: https://www.ft.com/content/a3fbfd2e-5873-11e4-942f-00144feab7de
Quatch, Georgina. 2022 NatWest to close 32 branches as more customers move online The Guardian 14 February Available at https://www.theguardian.com/business/2022/feb/14/natwest-to-close-32-branches-as-more-customers-move-online
Boundaries between organizations
In section 2.10 Bureaucratic control and coordination in digitized organizations we saw how computer networks can change the relationship between and organization and its customers (for example with mobile working) or between organizations and their workers (through homeworking). The relationship between different organizations can also be changed—not only does an organization hold data about its own operations, this data is shared with other organizations through networks. When you book a hotel, it is often done online through booking sites which link with the computer networks of hotel chains in response to a customer enquiry, and make bookings on behalf of the customer. When you pay for goods at a supermarket, you may ask for ‘cashback’—the networks of the supermarket and your bank link together to process the payment. When the cashier hands you the cash, it is difficult to say whether they are acting as a supermarket cashier or a bank teller—the boundaries between the supermarket and the bank have become blurred (based on Lawley, 2006: 105–6).
References:
Lawley, Scott. (2006). Accelerating Organisations through Representational Infrastructures: The Possibilities for Power and Resistance, in PETER Case, SIMON Lilley & Tom Owens (eds), The speed of organization, Malmö: Liber; DBK Logistics; Norway Universitetsforlaget, pp. 91–118