One of these dimensions,
differentiation
, is the extent to which the organization is
broken down into subunits. A firm with many subunits is highly differentiated; one
with few subunits has a low level of differentiation. The second dimension,
integration
,
is the degree to which the various subunits must work together in a coordinated fashion.
For example, if each unit competes in a different market and has its own production
facilities, they may need little integration. Lawrence and Lorsch reasoned that the degree
of differentiation and integration needed by an organization depends on the stability of
the environments that its subunits face.
Organizational Size and Life Cycle
The size and life cycle of an organization may also affect its design.
35
Although several
definitions of size exist, we define
organizational size
as the total number of full-time or
full-time–equivalent employees. A team of researchers at the University of Aston in
Birmingham, England, believed that Woodward had failed to find a size–structure
relationship (which was her original expectation) because almost all the organizations
she studied were relatively small (three-fourths had fewer than 500 employees).
36
Thus,
they decided to undertake a study of a wider array of organizations to determine how
size and technology both individually and jointly affect an organization’s design.
Their primary finding was that technology did in fact influence structural variables in
small firms, probably because all their activities tend to be centered on their core tech-
nologies. In large firms, however, the strong technology–design link broke down, most
likely because technology is not as central to ongoing activities in large organizations.
The Aston studies yielded a number of basic generalizations: When compared to small
organizations, large organizations tend to be characterized by higher levels of job special-
ization, more standard operating procedures, more rules, more regulations, and a greater
degree of decentralization. Walmart is a good case in point. The firm expects to continue
its dramatic growth for the foreseeable future, adding several thousand new jobs in the
next few years. But, as it grows, the firm acknowledges that it will have to become more
decentralized for its first-line managers to stay in tune with their customers.
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Of course,
size is not constant. As we noted in Chapter 5, for example, some small businesses are
formed but soon disappear. Others remain as small, independently operated enterprises
as long as their owner-manager lives. A few, such as Dell Computer, JetBlue, and
Starbucks, skyrocket to become organizational giants. And occasionally, large organiza-
tions reduce their size through layoffs or divestitures. Marathon Oil, for instance,
recently announced that it would be spinning off its downstream business, creating two
independent businesses and significantly reducing the size of its business.
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Consequently,
Marathon is becoming a much smaller organization.
Although no clear pattern explains changes in size, many organizations progress
through a four-stage
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