Jawn Lam

Functional structure

Organizational StructuresClassical hierarchies13 min read

People are grouped by the kind of work they do (engineering, production, sales, finance), and the functions meet only at the top.

What it is

A functional structure groups people by the kind of work they do, so engineering, production, sales, and finance each become a unit whose head reports to the chief executive. The functions meet only at the top.

The functional structure puts like work with like, one unit per function

Select a unit or a letter to read it; the key above the drawing names the line and the letters used.

Reports toDDirect supervisionWStandardization of work processes

Strategic apexFunctionsChiefexecutiveEngineeringProductionSalesFinanceBy functionDW
Strategic apexFunctionsChiefEngineersProd.SalesFinanceBy functionDW
Select a unit or a letter to read it. D, direct supervision: One person takes responsibility for the work of others, giving instructions and monitoring their actions. W, standardization of work processes: The content of the work is specified or programmed in advance, usually by analysts.Chief executive. Layer: Strategic apex. Reports to no one. Keeps the strategic decisions and many operating ones, and is the one place where the functions meet.Engineering. Layer: Functions. Reports to Chief executive. By function. A unit of people who do one kind of work, whose head reports to the chief executive.Production. Layer: Functions. Reports to Chief executive. By function. Runs on its own standard ways of working.Sales. Layer: Functions. Reports to Chief executive. By function. Meets the other functions only through the chief executive, with no designed lateral links.Finance. Layer: Functions. Reports to Chief executive. By function. Answers to a single line of authority.D, direct supervision. One person takes responsibility for the work of others, giving instructions and monitoring their actions.W, standardization of work processes. The content of the work is specified or programmed in advance, usually by analysts.
The structure in words
  1. Strategic apex
    • Chief executive, reports to no one, coordinated by direct supervision. Keeps the strategic decisions and many operating ones, and is the one place where the functions meet.
  2. Functions
    • Engineering, reports to Chief executive, grouped by function. A unit of people who do one kind of work, whose head reports to the chief executive.
    • Production, reports to Chief executive, grouped by function. Runs on its own standard ways of working.
    • Sales, reports to Chief executive, grouped by function. Meets the other functions only through the chief executive, with no designed lateral links.
    • Finance, reports to Chief executive, grouped by function. Answers to a single line of authority.
  • By function: coordinated by standardization of work processes.

Engineering, production, sales, and finance each become a unit whose head reports to the chief executive, and the functions meet only at the top. Standard ways of working coordinate inside each function, and direct supervision through the chief executive coordinates across them.

Source: Fayol 1949; Taylor 1911; Williamson 1975.

Authority runs in a single line, and the chief executive's office keeps the strategic decisions and many operating ones. Inside a function, coordination comes from standard ways of working; across functions, from direct supervision through the chief executive.

Its profile on this explorer's dimensions: grouping by function or process; specialization medium to high, and standardization and formalization medium (all judgment, since the form leaves them open); centralization high, with decision rights at vertical and horizontal centralization (the horizontal half judgment); layers and span moderate (judgment); coordination spanning direct supervision and standardization of work processes; lateral mechanisms stopping at hierarchy, rules, and goals; bureaucratic exchange and closed boundaries (judgment). Differentiation against integration is contested. Mintzberg (1980) reads the most differentiated plastics firms in Lawrence and Lorsch (1967) as the adhocracy; on that reading it spans low to moderate, and counting all ten of their firms as functional, moderate to high.

Where the functional structure sits on the eleven dimensions

The filled segments are the form's levels; select a row for its reason and sources.

Select a dimension to read why the form sits there, and on what basis.Basis of grouping: Function or process. Basis: Theory. People are grouped by the kind of work they do; this is Williamson's unitary form, the functionally departmentalized firm. Sources: Williamson 1975; Mintzberg 1980; Fayol 1949.Specialization: Medium to high. Basis: Judgment. The main functions have their own specialists by definition; how narrow individual roles become is left open, since a small, informal functional firm is still functional. Sources: Williamson 1975; Taylor 1911.Standardization and formalization: Medium. Basis: Judgment. Core routines inside each function are standardized, while heavy standardization by a staff of analysts is the move that makes the machine bureaucracy; the band is judgment. Sources: Taylor 1911; Mintzberg 1980.Centralization: Centralized. Basis: Theory. In the unitary form the central office handles both strategic and operating decisions, which is why it overloads as the firm grows and diversifies. Sources: Williamson 1975.Layers and span of control: Moderate. Basis: Judgment. A layer of function heads sits between the chief executive and the front line; how tall it grows depends on size, so the band is judgment. Sources: Fayol 1949; Child 1973.Decision rights and the locus of authority: Vertical and horizontal centralization. Basis: Theory. The central office keeps operating as well as strategic decisions, and nothing in the form moves power out of the line; the horizontal half of Type A is judgment. Sources: Williamson 1975; Mintzberg 1980.Prime coordinating mechanism: Direct supervision and standardization of work processes. Basis: Theory. Standardization of work inside each function, and direct supervision across functions through the chief executive under Fayol's unity of command and scalar chain. Sources: Fayol 1949; Taylor 1911.Lateral mechanisms: Hierarchy, rules, and goals only. Basis: Theory. The functions meet only at the top: coordination runs up the scalar chain, with no designed lateral links. Sources: Fayol 1949; Williamson 1975.Differentiation against integration: Low differentiation, light integration to moderate differentiation, some integrating roles. Basis: Evidence. In Lawrence and Lorsch's functionally organized firms, the hierarchy integrated the container firms and individual integrators the food firms; Mintzberg reads the most differentiated plastics firms as the adhocracy, not as the functional form. Sources: Lawrence and Lorsch 1967a; Mintzberg 1980. View 2: Moderate differentiation, some integrating roles to high differentiation, heavy integration. The same study counts all ten firms as functionally organized, and its most differentiated plastics firms were integrated by an integrating department and cross-functional teams, so the functional form reaches level 3. Sources: Lawrence and Lorsch 1967a.Mode of exchange and control: Bureaucracy. Basis: Judgment. Exchange runs through the employment relation and the rules of each function, Williamson's hierarchy and Ouchi's bureaucracy; no work places the form on Ouchi's scale, so this is judgment. Sources: Williamson 1975; Ouchi 1980.Boundary permeability: Closed. Basis: Judgment. The horizontal boundaries between functions are exactly the walls the boundaryless writers set out to open; no source rates the form, so the band is judgment. Sources: Ashkenas and colleagues 1995.

Five of the eleven levels rest on theory, one on evidence, and five on judgment. One row is contested: Differentiation against integration.

Source: Williamson 1975; Mintzberg 1980, a synthesis of earlier research, offering propositions without a new test; Fayol 1949; Taylor 1911; Child 1973; Lawrence and Lorsch 1967a, a multi-firm comparative field study; Ouchi 1980, a conceptual article; Ashkenas and colleagues 1995.

Where it came from

Writers from 1911 to 1937 set it out to gain the economies of specialization as firms and agencies outgrew one manager's supervision.

The schools of organization design and the forms' origins, 1900 to now

Each row is a school's era; each square under them is a form at its first year. Select a row or a square to read it; on a form's page, its own square and span are marked, with the schools that treat it.

1900192019401960198020002020Bureaucracy and its criticsClassical administrationHuman relations and System 4Transaction cost economicsCarnegie schoolSocio-technical systemsLabor-managed firmModularity and mirroringStrategy and structureContingency theoryFrench bureaucratic schoolJapanese-firm literatureScandinavian and DutchConfiguration theoryInformation processingLabor processStrategic choiceGerman codeterminationOrganizational economicsInstitutional theoryPopulation ecologyResource dependenceBusiness groupsScandinavian institutionalSocietal effectNetwork perspectiveComputational designNew-forms debateAlgorithmic managementForms by first yearFunctional structure, 1911 to 1937Now

The forms by first year

1900192019401960198020002020Functional structure, 1911 to 1937Now

Schools that treat this form: Bureaucracy and its critics; Classical administration; Transaction cost economics and the M-form hypothesis; the Carnegie school and the attention-based view; Strategy and structure; Structural contingency theory; the French bureaucratic school (strategic analysis); Strategic choice; and Societal effect and comparative business systems.

Select a school's row or a form's square to read it.Select a form's square to read it; open a school below.Bureaucracy and its critics1900s to 1950s, revived from the 1990sWhat it claimsWeber held that rational-legal authority exercised through an office hierarchy, written rules, trained officials, and promotion by qualification is technically superior in precision, speed, and reliability. Critics studied its unintended consequences, Michels's iron law sharpest.What it has shownMerton (1940) argued, with no test, that rules can turn from means into ends; case studies followed. The Aston group concluded that the type's dimensions vary independently, and Wagner's meta-analysis (2021) found that many of their interrelationships have weakened.Who disputes itHuman relations and System 4 sets the costs of impersonal rules to motivation and cooperation against the technical superiority Weber stresses.Bureaucracy and its critics in The Schools of Organization DesignClassical administration1910s to 1940s, and in German to the 1970sWhat it claimsThere are general principles of administration, among them division of work, unity of command, a scalar chain of authority, and a limited span of control, and a structure built to them will be efficient in most settings. Taylor added that planners should set work methods.What it has shownThe school offered reasoning and experience, not tests. Woodward (1965) found that the spans and levels of the more successful firms in her sample differed by production system, and Simon (1946) showed that the principles come in pairs that point in opposite directions.Who disputes itStructural contingency theory found that the structure of successful firms varies with technology and environment, where classical writers treat their principles as general.Classical administration in The Schools of Organization DesignHuman relations and System 41920s to 1960sWhat it claimsOutput depends on the social relations of work, the norms of informal groups, and the style of supervision as much as on formal design. Likert's System 4, overlapping work groups joined by linking-pin managers under participative management, outperforms authoritative systems.What it has shownThe founding evidence is the Hawthorne studies, which later reanalyses dispute (Carey 1967; Levitt and List 2011). Likert's support came largely from his own institute's surveys. Wagner (1994) found participation's effects on performance and satisfaction significant but small.Who disputes itLabor process and critical theory reads human relations as a technique of managerial control rather than a change in the distribution of power.Human relations and System 4 in The Schools of Organization DesignTransaction cost economics and the M-form hypothesis1937, then the 1970s to the presentWhat it claimsFirms exist, and are organized as they are, to economize on transaction costs. Hierarchy replaces the market when assets are specific, uncertainty is high, and exchange is frequent, and the multidivisional form should outperform the functional form in large, diversified firms.What it has shownArmour and Teece (1978) found, in United States petroleum firms from 1955 to 1973, a positive relationship between the multidivisional form and profitability while the form was spreading, but not once an equilibrium in organizational form was reached.Who disputes itThe network perspective on organizations: Granovetter argued that the theory undersocializes economic action, which is embedded in networks of personal relations that also produce trust and order.Transaction cost economics and the M-form hypothesis in The Schools of Organization DesignThe Carnegie school and the attention-based view1940s to the presentWhat it claimsPeople in organizations are boundedly rational, so structure matters because it sets the premises of their decisions and channels their attention: who sees which problems, which goals they pursue, and which routines they follow. Ocasio makes structure distribute attention.What it has shownMarch and Simon (1958) drew propositions from the existing literature, and Cyert and March (1963) added process models and simulations. Two studies show hierarchy shaping what is sent up as well as what is chosen (Reitzig and Maciejovsky 2015; Keum and See 2017).Who disputes itOrganizational economics: decision rights, authority, and complementarities models a principal and agents with defined objectives; the Carnegie school, firms as coalitions with unresolved goal conflict.The Carnegie school and the attention-based view in The Schools of Organization DesignSocio-technical systems1950s to 1980sWhat it claimsAn organization is a social system and a technical system that must be designed together. The same technology admits more than one way of organizing work, and groups that own a whole task and control its variances at the source perform better and are more satisfied.What it has shownTrist and Bamforth (1951) found that longwall mechanization broke up self-regulating work groups. A review of 134 experiments found them extremely successful overall, and Stewart (2006) linked team autonomy to performance; studies of socialist brigades and Volkswagen qualify it.Who disputes itLabor process and critical theory: Kelly argued that labor intensification, not joint optimization, accounts for what socio-technical redesign achieved, and that the part of pay incentives was seriously underestimated.Socio-technical systems in The Schools of Organization DesignThe economics of the labor-managed firm and of enterprise ownership1958 to the presentWhat it claimsA firm run by its workers behaves differently from one run for investors: Ward modeled the Yugoslav-style firm as maximizing income per worker. Hansmann argued that an ownership form's success depends on the balance between the costs of market contracting and of ownership.What it has shownBurdín (2014) found a 29 percent lower hazard of dissolution for Uruguayan worker-managed firms than for conventional ones, and Fakhfakh, Pérotin, and Gago (2012) found French labor-managed firms as productive or more so in every industry studied.Who disputes itOrganizational economics (Jensen and Meckling) contrasts the labor-managed firm, in which tradable residual claims are legally prohibited, with cooperatives and partnerships that arise out of voluntary contracting.The economics of the labor-managed firm and of enterprise ownership in The Schools of Organization DesignModularity and the mirroring hypothesis1960s to the presentWhat it claimsComplex systems are built of nearly decomposable parts, and an organization's structure tends to mirror the architecture of what it makes: modular products allow loosely coupled organizations, and tightly coupled products need tightly coupled teams. Conway's law runs in reverse.What it has shownColfer and Baldwin (2016) review the empirical studies and report both support and principled exceptions. Direct tests point both ways: MacCormack, Baldwin, and Rusnak (2012) found open source products more modular than their commercial pairs; dynamic components break the mirror.Who disputes itNo school in the record disputes it head on; it answers information processing, which meets the coordination load inside the organization; mirroring writers locate it in the product's architecture.Modularity and the mirroring hypothesis in The Schools of Organization DesignStrategy and structure1960s to 1980sWhat it claimsStructure follows strategy: firms that diversify by product or geography outgrow the centralized functional structure and, after a lag and usually a crisis, adopt divisions. Chandler drew this from the histories of DuPont, General Motors, Standard Oil of New Jersey, and Sears.What it has shownChandler (1962) is comparative business history of four firms set against a wider survey. Rumelt (1974) related diversification and structure to performance, and Egelhoff (1988), with 34 multinationals, found some of Stopford and Wells's relationships supported and others not.Who disputes itInstitutional theory: in Fligstein's model divisions spread with a product-related or unrelated strategy, presidents from sales or finance, and other firms in the industry changing; strategy was one of three.Strategy and structure in The Schools of Organization DesignStructural contingency theory1960s to the presentWhat it claimsThere is no one best structure. Performance depends on fit between structure and contingencies such as environment, technology, size, and strategy, on an open-system view of the organization. Drazin and Van de Ven separate fit as selection, interaction, and systems.What it has shownBurns and Stalker, Woodward, and the Aston group related structure to context; Drazin and Van de Ven (1985) supported selection and systems fit only. Pennings (1975) found that fit did not explain effectiveness; Schoonhoven (1981) found traditional hypotheses unsupported.Who disputes itStrategic choice: Child argued that contingency theory explains structure by the constraints of context and leaves out the political process by which power-holders choose strategic action, structural forms included.Structural contingency theory in The Schools of Organization DesignThe French bureaucratic school (strategic analysis)1960s to 1980sWhat it claimsA bureaucracy is a system of power relations organized around zones of uncertainty. Impersonal rules and centralization protect members from depending on one another, those who control uncertainties hold power, and, unable to correct its errors, it changes only through crisis.What it has shownLe phénomène bureaucratique (1963; English 1964) rests on two case studies, a clerical agency and a state industrial monopoly. L'acteur et le système (1977; English 1980) is theoretical.Who disputes itSocietal effect and comparative business systems: D'Iribarne argues that national logics of conduct, such as a French logic of honor, explain differences that Crozier attributed to power games.The French bureaucratic school (strategic analysis) in The Schools of Organization DesignThe Japanese-firm literature1960s to the presentWhat it claimsThe large Japanese firm coordinates operating decisions through horizontal information sharing among semi-autonomous shops and uses its ranking hierarchy mainly as an incentive scheme (Aoki). It creates knowledge through middle-up-down management (Nonaka and Takeuchi).What it has shownAoki (1986) is a formal model. Lincoln, Hanada, and McBride (1986) compared 51 Japanese and 55 United States manufacturing plants, and Nonaka and Takeuchi (1995) rest on case studies, chiefly of Japanese firms. Fruin (1994) found the enterprise system defined at three levels.Who disputes itLabor process and critical theory reads shop-floor delegation as control: Sewell and Wilkinson argue that just-in-time and total quality regimes delegate tactical responsibility while centralizing strategic control.The Japanese-firm literature in The Schools of Organization DesignThe Scandinavian and Dutch socio-technical schools1960s to 2000sWhat it claimsThe Scandinavian program sought democracy at work through field experiments with semi-autonomous groups, then through democratic dialogue. The Dutch school's design theory turns complex organizations with simple jobs into simple organizations with complex jobs.What it has shownEmery and Thorsrud reported field experiments in Norwegian industry; Gustavsen (1992) records that they spread less than hoped, his reason for turning to dialogue. Berggren studied work organization in the Swedish auto industry. The Dutch work rests on design cases and argument.Who disputes itThe Japanese-firm literature: defenders of the Toyota system hold that standardized work with employee participation learns faster; Berggren reports Swedish long-cycle plants matching a line plant on productivity.The Scandinavian and Dutch socio-technical schools in The Schools of Organization DesignConfiguration theory1970s to the presentWhat it claimsStructures cluster into a small number of internally coherent configurations whose elements reinforce one another, so organizations move between a few types in large jumps, not small steps. Mintzberg's five configurations each rest on one coordinating mechanism.What it has shownDoty, Glick, and Huber (1993) found that fit to Miles and Snow's ideal types predicted effectiveness while fit to Mintzberg's did not. A meta-analysis of 40 tests (Ketchen and colleagues 1997) found that configuration partly explains performance, more so with broad definitions.Who disputes itStructural contingency theory: Donaldson counters that most organizations sit at intermediate points on a continuum of fits, not in a few configurations, and that studies over time find mostly incremental change.Configuration theory in The Schools of Organization DesignInformation processing1970s to the presentWhat it claimsThe more uncertain the task, the more information must be processed during its execution. An organization either reduces that need, through slack resources or self-contained tasks, or raises its capacity, through vertical information systems or lateral relations up to the matrix.What it has shownGalbraith (1973, 1974) built the framework from cases and from Simon's theory of bounded rationality, and Tushman and Nadler (1978) set it out as an integrating concept for design. Daft and Lengel (1986) argued that structure must reduce equivocality as well as supply data.Who disputes itThe Carnegie school and the attention-based view: Ocasio holds that firm behavior results from how the firm channels and distributes attention, so structure governs where attention goes, not only how much is processed.Information processing in The Schools of Organization DesignLabor process and critical theory1970s to the presentWhat it claimsStructure is above all a system of control over labor. Braverman argued that management deskills work by separating conception from execution; Edwards traced a sequence from simple control by the boss to technical control through machines to bureaucratic control through rules.What it has shownHistorical and theoretical (Braverman 1974; Edwards 1979). Delbridge (1995), observing a Japanese-owned plant in England, found that just-in-time and total quality regimes combined the control of labor with management's economic goals more completely than piece rates had.Who disputes itBureaucracy and its critics: Adler argues that labor process theory ignores the progressive socialization of the labor process, which drives long-term skill upgrading, and disputes deskilling as the trend.Labor process and critical theory in The Schools of Organization DesignStrategic choice1970s to the presentWhat it claimsStructure is the outcome of choices by those with power in the organization, who decide on strategic action, including the structural form, the manipulation of environmental features, and the performance standards to be met. Context constrains but does not determine structure.What it has shownLargely conceptual: Child (1972) built the argument from gaps in contingency findings, and the empirical case rests mostly on the modest share of structural variance contingencies explain. A 2026 review of 42 studies finds upper echelons theory their main theoretical anchor.Who disputes itStructural contingency theory: Donaldson replies that organizations mostly adopt the structures their contingencies dictate, to avoid the loss of performance misfit brings, so choice over structure is at most limited.Strategic choice in The Schools of Organization DesignThe German codetermination literature1970s to the presentWhat it claimsWorks councils and employee board seats form a structural layer through which coordination can become negotiation between management and employees. Defenders argue that it supports long-term employment, training, and cooperation; critics, that it weakens shareholder control.What it has shownJäger, Schoefer, and Heining (2021) found board-level codetermination left wages unchanged and, if anything, raised capital formation. Jirjahn (2011) reports studies pointing to positive works council effects; a meta-analysis found codetermination laws tied to lower productivity.Who disputes itOrganizational economics (Gorton and Schmid) found that firms with equal employee and shareholder representation did worse for their shareholders than firms with one-third employee representation.The German codetermination literature in The Schools of Organization DesignOrganizational economics: decision rights, authority, and complementarities1976 to the presentWhat it claimsDesign is the joint choice of who holds which decision rights, how performance is measured, and how it is rewarded. Rights should be placed where the specific knowledge lies, formal authority differs from real authority, and practices are complements that pay off in clusters.What it has shownIchniowski, Shaw, and Prennushi (1997) found, on 36 steel finishing lines, that lines using a set of innovative work practices achieved substantially higher productivity, consistent with complementarities. Bloom and colleagues found more decentralization where trust was higher.Who disputes itGhoshal argued that management research has shaped managers' worldview with ideologically inspired amoral theories, built on a scientific model that excludes human intentionality and so denies moral considerations.Organizational economics: decision rights, authority, and complementarities in The Schools of Organization DesignInstitutional theory1977 to the presentWhat it claimsFormal structures are often adopted because they are legitimate in the organization's field, as rationalized myths, and then decoupled from the work done. Organizations in a field grow alike through coercive, mimetic, and normative isomorphism, whether or not it is efficient.What it has shownTolbert and Zucker (1983) found that city characteristics predicted early but not later adoption of civil service reform, which they read as institutionalization. Palmer, Jennings, and Zhou (1993) found support for institutional and economic accounts of late M-form adoption.Who disputes itStructural contingency theory: Kraatz and Zajac found little support for neoinstitutional predictions in 631 liberal arts colleges, which grew less alike; the change they studied was curricular, not structural.Institutional theory in The Schools of Organization DesignPopulation ecology1977 to the presentWhat it claimsOrganizations face strong structural inertia, because selection favors the reliability and accountability of stable structures. Change in a population's forms comes mainly from founding and failure, not adaptation, and changing core features resets the liability of newness.What it has shownAmburgey, Kelly, and Barnett (1993) found that the effects of change on the hazard of failure vary by type of change and over time, and that rates of change depend on how often and how recently an organization has changed. Carroll and Hannan (2000) set out the program's methods.Who disputes itFor structural contingency theory, Donaldson argues that ecology understates managers' capacity to adapt structure.Population ecology in The Schools of Organization DesignResource dependence1978 to the presentWhat it claimsOrganizations depend on outside parties for critical resources, and structure follows the management of that dependence: units that cope with critical dependencies gain power, and boundaries are redrawn through cooptation, joint ventures, and mergers to absorb constraint.What it has shownPfeffer and Salancik (1978) assembled studies of boards, mergers, and joint ventures. A meta-analysis of 157 tests (Drees and Heugens 2013) corroborated the main prediction: organizations meet resource dependencies with interorganizational arrangements that raise their autonomy.Who disputes itTransaction cost economics and the M-form hypothesis explains boundaries by efficiency; resource dependence, by power and constraint.Resource dependence in The Schools of Organization DesignThe business-groups literature1978 to the presentWhat it claimsGroups of legally independent firms bound by ownership and social ties are a durable form of their own, neither one firm nor a market. Where institutions function poorly, groups can benefit member firms and can destroy value; they are sometimes paragons, sometimes parasites.What it has shownKhanna and Palepu (2000) found that affiliates of the most diversified Indian groups outperformed unaffiliated firms. A meta-analysis of 141 studies (Carney and colleagues 2011) found that affiliation lowers performance in general, less so where institutions are underdeveloped.Who disputes itOrganizational economics: agency writers read pyramids and cross-holdings as devices that separate control from ownership; Almeida and Wolfenzon offer a financing rationale for pyramids instead.The business-groups literature in The Schools of Organization DesignScandinavian institutionalism1980s to the presentWhat it claimsIdeas of organizing do not diffuse unchanged; they travel and are translated as they are adopted, so a form taken up in one place is not the same form elsewhere. Organizations can also be built of organizations (meta-organizations), which behave differently.What it has shownA discussion paper by Czarniawska and Joerges (1995) contrasts the diffusion of ideas with their translation, drawing on examples such as Swedish municipal reform; the work on meta-organizations (Ahrne and Brunsson 2008) is conceptual.Who disputes itInstitutional theory can read the same processes, seen from a translocal view, as institutional isomorphism, though translation holds that each adopter modifies an idea, so an institution re-created elsewhere is new.Scandinavian institutionalism in The Schools of Organization DesignSocietal effect and comparative business systems1980s to the presentWhat it claimsFirms matched on size, technology, and industry differ systematically by country, because how a society educates, trains, recruits, and promotes its workforce, and its industrial relations, shape how work is divided and supervised, so structure is partly a national product.What it has shownMaurice, Sorge, and Warner (1980) compared closely matched manufacturing units in France, West Germany, and Great Britain and found more pervasive differences in their organization than usually recognized. Whitley (1999) set out a comparative account of business systems.Who disputes itStructural contingency theory stresses culture-free elements of structure; matched comparisons find nationally different shapes of organization.Societal effect and comparative business systems in The Schools of Organization DesignThe network perspective on organizations1985 to the presentWhat it claimsOrganizations and their members are nodes joined by ties, and the pattern of ties shapes what they can do. Economic action is embedded in networks of personal relations (Granovetter 1985), and network forms are a distinct form, not a hybrid of market and hierarchy (Powell 1990).What it has shownPodolny and Page (1998) review the research and find that network forms foster learning, confer status and legitimacy, bring economic benefits, help manage resource dependencies, and give employees considerable autonomy, and they ask for attention to networks' dysfunctions.Who disputes itTransaction cost economics: Williamson treats the hybrid as a third generic form between market and hierarchy; for Powell, network forms are a distinct form, not a mix of the two.The network perspective on organizations in The Schools of Organization DesignComputational organization design and search1990s to the presentWhat it claimsDesign choices interact, so design space is a rugged landscape with many local peaks, and structure affects how well an organization searches it. Decentralizing interdependent decisions can trap units on poor peaks; temporary decentralization, then reintegration, can help.What it has shownMostly simulation, with one field test: Csaszar (2012), with more than 150,000 stock-picking decisions by 609 mutual funds, found that decision-making structure affects the number of initiatives pursued and the omission and commission errors made.Who disputes itNo school in the record disputes it head on; it disputes structural contingency theory, whose bivariate fit, its simulations show, cannot capture how the best design depends on interactions among choices.Computational organization design and search in The Schools of Organization DesignThe new-forms debate1990s to the presentWhat it claimsOrganizations must solve four universal problems (dividing tasks, allocating them, providing rewards, and providing information), and a form is new when it solves them in new ways. Self-managing organizations radically decentralize authority; skeptics hold hierarchy reappears.What it has shownFoss (2003) traced the rise and partial reversal of Oticon's spaghetti organization to the problem of selective intervention. A meta-analysis of 54 studies of 13,914 teams (Greer and colleagues 2018) found that hierarchy within teams on net slightly lowers team performance.Who disputes itBureaucracy and its critics: removing formal structure leaves informal elites whose power is unaccountable (Freeman), and democratic and network organizations are much less hierarchy-free than their labels suggest.The new-forms debate in The Schools of Organization DesignThe algorithmic-management literature2015 to the presentWhat it claimsSoftware does much of the directing, evaluating, and disciplining that managers and rules once did. Kellogg, Valentine, and Christin (2020) call algorithmic control a new contested terrain; Puranam (2021) treats dividing decisions between people and machines as a design problem.What it has shownMostly qualitative field studies of gig work. Wood and colleagues (2019), with 107 interviews in six countries and 679 survey respondents, found that algorithmic management tends to give remote gig workers flexibility and autonomy, but also low pay, isolation, and overwork.Who disputes itLabor process and critical theory reads control at work as contested terrain; Kellogg, Valentine, and Christin take up that view but argue that algorithmic control is distinct from earlier forms.The algorithmic-management literature in The Schools of Organization DesignFunctional structureOrigin: 1911 to 1937.Family: Classical hierarchies.Line and staffOrigin: 1916 to 1943.Family: Classical hierarchies.Multidivisional (M-form) by productOrigin: 1920s practice; named and analyzed 1962 to 1975.Family: Divisionalized forms.Machine bureaucracyOrigin: 1922 (Weber); 1979 (Mintzberg).Family: Classical hierarchies.Divisional by customer or market segmentOrigin: 1937; 2005.Family: Divisionalized forms.Matrix organizationOrigin: 1950s to 1960s practice; analyzed 1971 to 1977.Family: Lateral and multidimensional forms.Co-determined organizationOrigin: 1951 to 1976 (the laws); 1984 to 2022 (the main studies).Family: Forms from other traditions.Socio-technical autonomous work groupsOrigin: 1951 to 1965.Family: Team-based and self-managing forms.Stratified hierarchy (requisite organization)Origin: 1951 to 1989.Family: Classical hierarchies.Cooperative organizationOrigin: 1958 to 1999.Family: Forms from other traditions.Linking-pin organization (System 4)Origin: 1961 to 1967.Family: Team-based and self-managing forms.Divisional by regionOrigin: 1962 to 1972.Family: Divisionalized forms.Adhocracy (innovative organization)Origin: 1968 to 1979.Family: Professional, project, and knowledge forms.J-form (the Japanese firm)Origin: 1968 to 1990.Family: Forms from other traditions.Professional bureaucracyOrigin: 1968 to 1979.Family: Professional, project, and knowledge forms.Holding company (H-form)Origin: 1972 to 1975; 1987.Family: Divisionalized forms.Ambidextrous organizationOrigin: 1976 to 2004.Family: Professional, project, and knowledge forms.Simple structureOrigin: 1979.Family: Classical hierarchies.Hybrid structureOrigin: 1980 to the present.Family: Lateral and multidimensional forms.Missionary (ideological) organizationOrigin: 1980 to 1989.Family: Ideological forms.Network, modular, and virtual organizationOrigin: 1986 to 1990.Family: Network and market-like forms.Transnational and multidimensional organizationOrigin: 1987 to 1989.Family: Lateral and multidimensional forms.Business group (keiretsu, chaebol, family house)Origin: 1988 to 2007.Family: Forms from other traditions.Shamrock organizationOrigin: 1988 to 1989.Family: Network and market-like forms.Federal organizationOrigin: 1989 to 1992.Family: Network and market-like forms.Self-managing organization (less-hierarchical forms)Origin: 1989 to 2017.Family: Team-based and self-managing forms.Boundaryless organizationOrigin: 1990 to 1995.Family: Network and market-like forms.Front-back organizationOrigin: 1990s to 2007.Family: Lateral and multidimensional forms.Professional partnership (P2 form)Origin: 1990.Family: Professional, project, and knowledge forms.The corporate center and shared servicesOrigin: 1991 to 2000.Family: Divisionalized forms.Internal market organizationOrigin: 1993 to 1994.Family: Network and market-like forms.Process (horizontal) organizationOrigin: 1993 to 1999.Family: Lateral and multidimensional forms.Cellular organizationOrigin: 1994 to 1997.Family: Network and market-like forms.Hypertext organizationOrigin: 1994 to 1995.Family: Forms from other traditions.Team-based organizationOrigin: 1995.Family: Team-based and self-managing forms.Project-based organizationOrigin: 2000 to 2006.Family: Professional, project, and knowledge forms.Agile at scaleOrigin: 2001 to 2016.Family: Contemporary and emerging forms.Distributed (all-remote) organizationOrigin: 2002 to 2021.Family: Contemporary and emerging forms.Open-source and community-based organizationOrigin: 2002 to 2007.Family: Contemporary and emerging forms.Algorithmically managed organizationOrigin: 2015 to 2020.Family: Contemporary and emerging forms.Team of teamsOrigin: 2015.Family: Team-based and self-managing forms.

The schools by first year

  1. Bureaucracy and its critics1900s to 1950s, revived from the 1990sWhat it claimsWeber held that rational-legal authority exercised through an office hierarchy, written rules, trained officials, and promotion by qualification is technically superior in precision, speed, and reliability. Critics studied its unintended consequences, Michels's iron law sharpest.What it has shownMerton (1940) argued, with no test, that rules can turn from means into ends; case studies followed. The Aston group concluded that the type's dimensions vary independently, and Wagner's meta-analysis (2021) found that many of their interrelationships have weakened.Who disputes itHuman relations and System 4 sets the costs of impersonal rules to motivation and cooperation against the technical superiority Weber stresses.
  2. Classical administration1910s to 1940s, and in German to the 1970sWhat it claimsThere are general principles of administration, among them division of work, unity of command, a scalar chain of authority, and a limited span of control, and a structure built to them will be efficient in most settings. Taylor added that planners should set work methods.What it has shownThe school offered reasoning and experience, not tests. Woodward (1965) found that the spans and levels of the more successful firms in her sample differed by production system, and Simon (1946) showed that the principles come in pairs that point in opposite directions.Who disputes itStructural contingency theory found that the structure of successful firms varies with technology and environment, where classical writers treat their principles as general.
  3. Human relations and System 41920s to 1960sWhat it claimsOutput depends on the social relations of work, the norms of informal groups, and the style of supervision as much as on formal design. Likert's System 4, overlapping work groups joined by linking-pin managers under participative management, outperforms authoritative systems.What it has shownThe founding evidence is the Hawthorne studies, which later reanalyses dispute (Carey 1967; Levitt and List 2011). Likert's support came largely from his own institute's surveys. Wagner (1994) found participation's effects on performance and satisfaction significant but small.Who disputes itLabor process and critical theory reads human relations as a technique of managerial control rather than a change in the distribution of power.
  4. Transaction cost economics and the M-form hypothesis1937, then the 1970s to the presentWhat it claimsFirms exist, and are organized as they are, to economize on transaction costs. Hierarchy replaces the market when assets are specific, uncertainty is high, and exchange is frequent, and the multidivisional form should outperform the functional form in large, diversified firms.What it has shownArmour and Teece (1978) found, in United States petroleum firms from 1955 to 1973, a positive relationship between the multidivisional form and profitability while the form was spreading, but not once an equilibrium in organizational form was reached.Who disputes itThe network perspective on organizations: Granovetter argued that the theory undersocializes economic action, which is embedded in networks of personal relations that also produce trust and order.
  5. The Carnegie school and the attention-based view1940s to the presentWhat it claimsPeople in organizations are boundedly rational, so structure matters because it sets the premises of their decisions and channels their attention: who sees which problems, which goals they pursue, and which routines they follow. Ocasio makes structure distribute attention.What it has shownMarch and Simon (1958) drew propositions from the existing literature, and Cyert and March (1963) added process models and simulations. Two studies show hierarchy shaping what is sent up as well as what is chosen (Reitzig and Maciejovsky 2015; Keum and See 2017).Who disputes itOrganizational economics: decision rights, authority, and complementarities models a principal and agents with defined objectives; the Carnegie school, firms as coalitions with unresolved goal conflict.
  6. Socio-technical systems1950s to 1980sWhat it claimsAn organization is a social system and a technical system that must be designed together. The same technology admits more than one way of organizing work, and groups that own a whole task and control its variances at the source perform better and are more satisfied.What it has shownTrist and Bamforth (1951) found that longwall mechanization broke up self-regulating work groups. A review of 134 experiments found them extremely successful overall, and Stewart (2006) linked team autonomy to performance; studies of socialist brigades and Volkswagen qualify it.Who disputes itLabor process and critical theory: Kelly argued that labor intensification, not joint optimization, accounts for what socio-technical redesign achieved, and that the part of pay incentives was seriously underestimated.
  7. The economics of the labor-managed firm and of enterprise ownership1958 to the presentWhat it claimsA firm run by its workers behaves differently from one run for investors: Ward modeled the Yugoslav-style firm as maximizing income per worker. Hansmann argued that an ownership form's success depends on the balance between the costs of market contracting and of ownership.What it has shownBurdín (2014) found a 29 percent lower hazard of dissolution for Uruguayan worker-managed firms than for conventional ones, and Fakhfakh, Pérotin, and Gago (2012) found French labor-managed firms as productive or more so in every industry studied.Who disputes itOrganizational economics (Jensen and Meckling) contrasts the labor-managed firm, in which tradable residual claims are legally prohibited, with cooperatives and partnerships that arise out of voluntary contracting.
  8. Modularity and the mirroring hypothesis1960s to the presentWhat it claimsComplex systems are built of nearly decomposable parts, and an organization's structure tends to mirror the architecture of what it makes: modular products allow loosely coupled organizations, and tightly coupled products need tightly coupled teams. Conway's law runs in reverse.What it has shownColfer and Baldwin (2016) review the empirical studies and report both support and principled exceptions. Direct tests point both ways: MacCormack, Baldwin, and Rusnak (2012) found open source products more modular than their commercial pairs; dynamic components break the mirror.Who disputes itNo school in the record disputes it head on; it answers information processing, which meets the coordination load inside the organization; mirroring writers locate it in the product's architecture.
  9. Strategy and structure1960s to 1980sWhat it claimsStructure follows strategy: firms that diversify by product or geography outgrow the centralized functional structure and, after a lag and usually a crisis, adopt divisions. Chandler drew this from the histories of DuPont, General Motors, Standard Oil of New Jersey, and Sears.What it has shownChandler (1962) is comparative business history of four firms set against a wider survey. Rumelt (1974) related diversification and structure to performance, and Egelhoff (1988), with 34 multinationals, found some of Stopford and Wells's relationships supported and others not.Who disputes itInstitutional theory: in Fligstein's model divisions spread with a product-related or unrelated strategy, presidents from sales or finance, and other firms in the industry changing; strategy was one of three.
  10. Structural contingency theory1960s to the presentWhat it claimsThere is no one best structure. Performance depends on fit between structure and contingencies such as environment, technology, size, and strategy, on an open-system view of the organization. Drazin and Van de Ven separate fit as selection, interaction, and systems.What it has shownBurns and Stalker, Woodward, and the Aston group related structure to context; Drazin and Van de Ven (1985) supported selection and systems fit only. Pennings (1975) found that fit did not explain effectiveness; Schoonhoven (1981) found traditional hypotheses unsupported.Who disputes itStrategic choice: Child argued that contingency theory explains structure by the constraints of context and leaves out the political process by which power-holders choose strategic action, structural forms included.
  11. The French bureaucratic school (strategic analysis)1960s to 1980sWhat it claimsA bureaucracy is a system of power relations organized around zones of uncertainty. Impersonal rules and centralization protect members from depending on one another, those who control uncertainties hold power, and, unable to correct its errors, it changes only through crisis.What it has shownLe phénomène bureaucratique (1963; English 1964) rests on two case studies, a clerical agency and a state industrial monopoly. L'acteur et le système (1977; English 1980) is theoretical.Who disputes itSocietal effect and comparative business systems: D'Iribarne argues that national logics of conduct, such as a French logic of honor, explain differences that Crozier attributed to power games.
  12. The Japanese-firm literature1960s to the presentWhat it claimsThe large Japanese firm coordinates operating decisions through horizontal information sharing among semi-autonomous shops and uses its ranking hierarchy mainly as an incentive scheme (Aoki). It creates knowledge through middle-up-down management (Nonaka and Takeuchi).What it has shownAoki (1986) is a formal model. Lincoln, Hanada, and McBride (1986) compared 51 Japanese and 55 United States manufacturing plants, and Nonaka and Takeuchi (1995) rest on case studies, chiefly of Japanese firms. Fruin (1994) found the enterprise system defined at three levels.Who disputes itLabor process and critical theory reads shop-floor delegation as control: Sewell and Wilkinson argue that just-in-time and total quality regimes delegate tactical responsibility while centralizing strategic control.
  13. The Scandinavian and Dutch socio-technical schools1960s to 2000sWhat it claimsThe Scandinavian program sought democracy at work through field experiments with semi-autonomous groups, then through democratic dialogue. The Dutch school's design theory turns complex organizations with simple jobs into simple organizations with complex jobs.What it has shownEmery and Thorsrud reported field experiments in Norwegian industry; Gustavsen (1992) records that they spread less than hoped, his reason for turning to dialogue. Berggren studied work organization in the Swedish auto industry. The Dutch work rests on design cases and argument.Who disputes itThe Japanese-firm literature: defenders of the Toyota system hold that standardized work with employee participation learns faster; Berggren reports Swedish long-cycle plants matching a line plant on productivity.
  14. Configuration theory1970s to the presentWhat it claimsStructures cluster into a small number of internally coherent configurations whose elements reinforce one another, so organizations move between a few types in large jumps, not small steps. Mintzberg's five configurations each rest on one coordinating mechanism.What it has shownDoty, Glick, and Huber (1993) found that fit to Miles and Snow's ideal types predicted effectiveness while fit to Mintzberg's did not. A meta-analysis of 40 tests (Ketchen and colleagues 1997) found that configuration partly explains performance, more so with broad definitions.Who disputes itStructural contingency theory: Donaldson counters that most organizations sit at intermediate points on a continuum of fits, not in a few configurations, and that studies over time find mostly incremental change.
  15. Information processing1970s to the presentWhat it claimsThe more uncertain the task, the more information must be processed during its execution. An organization either reduces that need, through slack resources or self-contained tasks, or raises its capacity, through vertical information systems or lateral relations up to the matrix.What it has shownGalbraith (1973, 1974) built the framework from cases and from Simon's theory of bounded rationality, and Tushman and Nadler (1978) set it out as an integrating concept for design. Daft and Lengel (1986) argued that structure must reduce equivocality as well as supply data.Who disputes itThe Carnegie school and the attention-based view: Ocasio holds that firm behavior results from how the firm channels and distributes attention, so structure governs where attention goes, not only how much is processed.
  16. Labor process and critical theory1970s to the presentWhat it claimsStructure is above all a system of control over labor. Braverman argued that management deskills work by separating conception from execution; Edwards traced a sequence from simple control by the boss to technical control through machines to bureaucratic control through rules.What it has shownHistorical and theoretical (Braverman 1974; Edwards 1979). Delbridge (1995), observing a Japanese-owned plant in England, found that just-in-time and total quality regimes combined the control of labor with management's economic goals more completely than piece rates had.Who disputes itBureaucracy and its critics: Adler argues that labor process theory ignores the progressive socialization of the labor process, which drives long-term skill upgrading, and disputes deskilling as the trend.
  17. Strategic choice1970s to the presentWhat it claimsStructure is the outcome of choices by those with power in the organization, who decide on strategic action, including the structural form, the manipulation of environmental features, and the performance standards to be met. Context constrains but does not determine structure.What it has shownLargely conceptual: Child (1972) built the argument from gaps in contingency findings, and the empirical case rests mostly on the modest share of structural variance contingencies explain. A 2026 review of 42 studies finds upper echelons theory their main theoretical anchor.Who disputes itStructural contingency theory: Donaldson replies that organizations mostly adopt the structures their contingencies dictate, to avoid the loss of performance misfit brings, so choice over structure is at most limited.
  18. The German codetermination literature1970s to the presentWhat it claimsWorks councils and employee board seats form a structural layer through which coordination can become negotiation between management and employees. Defenders argue that it supports long-term employment, training, and cooperation; critics, that it weakens shareholder control.What it has shownJäger, Schoefer, and Heining (2021) found board-level codetermination left wages unchanged and, if anything, raised capital formation. Jirjahn (2011) reports studies pointing to positive works council effects; a meta-analysis found codetermination laws tied to lower productivity.Who disputes itOrganizational economics (Gorton and Schmid) found that firms with equal employee and shareholder representation did worse for their shareholders than firms with one-third employee representation.
  19. Organizational economics: decision rights, authority, and complementarities1976 to the presentWhat it claimsDesign is the joint choice of who holds which decision rights, how performance is measured, and how it is rewarded. Rights should be placed where the specific knowledge lies, formal authority differs from real authority, and practices are complements that pay off in clusters.What it has shownIchniowski, Shaw, and Prennushi (1997) found, on 36 steel finishing lines, that lines using a set of innovative work practices achieved substantially higher productivity, consistent with complementarities. Bloom and colleagues found more decentralization where trust was higher.Who disputes itGhoshal argued that management research has shaped managers' worldview with ideologically inspired amoral theories, built on a scientific model that excludes human intentionality and so denies moral considerations.
  20. Institutional theory1977 to the presentWhat it claimsFormal structures are often adopted because they are legitimate in the organization's field, as rationalized myths, and then decoupled from the work done. Organizations in a field grow alike through coercive, mimetic, and normative isomorphism, whether or not it is efficient.What it has shownTolbert and Zucker (1983) found that city characteristics predicted early but not later adoption of civil service reform, which they read as institutionalization. Palmer, Jennings, and Zhou (1993) found support for institutional and economic accounts of late M-form adoption.Who disputes itStructural contingency theory: Kraatz and Zajac found little support for neoinstitutional predictions in 631 liberal arts colleges, which grew less alike; the change they studied was curricular, not structural.
  21. Population ecology1977 to the presentWhat it claimsOrganizations face strong structural inertia, because selection favors the reliability and accountability of stable structures. Change in a population's forms comes mainly from founding and failure, not adaptation, and changing core features resets the liability of newness.What it has shownAmburgey, Kelly, and Barnett (1993) found that the effects of change on the hazard of failure vary by type of change and over time, and that rates of change depend on how often and how recently an organization has changed. Carroll and Hannan (2000) set out the program's methods.Who disputes itFor structural contingency theory, Donaldson argues that ecology understates managers' capacity to adapt structure.
  22. Resource dependence1978 to the presentWhat it claimsOrganizations depend on outside parties for critical resources, and structure follows the management of that dependence: units that cope with critical dependencies gain power, and boundaries are redrawn through cooptation, joint ventures, and mergers to absorb constraint.What it has shownPfeffer and Salancik (1978) assembled studies of boards, mergers, and joint ventures. A meta-analysis of 157 tests (Drees and Heugens 2013) corroborated the main prediction: organizations meet resource dependencies with interorganizational arrangements that raise their autonomy.Who disputes itTransaction cost economics and the M-form hypothesis explains boundaries by efficiency; resource dependence, by power and constraint.
  23. The business-groups literature1978 to the presentWhat it claimsGroups of legally independent firms bound by ownership and social ties are a durable form of their own, neither one firm nor a market. Where institutions function poorly, groups can benefit member firms and can destroy value; they are sometimes paragons, sometimes parasites.What it has shownKhanna and Palepu (2000) found that affiliates of the most diversified Indian groups outperformed unaffiliated firms. A meta-analysis of 141 studies (Carney and colleagues 2011) found that affiliation lowers performance in general, less so where institutions are underdeveloped.Who disputes itOrganizational economics: agency writers read pyramids and cross-holdings as devices that separate control from ownership; Almeida and Wolfenzon offer a financing rationale for pyramids instead.
  24. Scandinavian institutionalism1980s to the presentWhat it claimsIdeas of organizing do not diffuse unchanged; they travel and are translated as they are adopted, so a form taken up in one place is not the same form elsewhere. Organizations can also be built of organizations (meta-organizations), which behave differently.What it has shownA discussion paper by Czarniawska and Joerges (1995) contrasts the diffusion of ideas with their translation, drawing on examples such as Swedish municipal reform; the work on meta-organizations (Ahrne and Brunsson 2008) is conceptual.Who disputes itInstitutional theory can read the same processes, seen from a translocal view, as institutional isomorphism, though translation holds that each adopter modifies an idea, so an institution re-created elsewhere is new.
  25. Societal effect and comparative business systems1980s to the presentWhat it claimsFirms matched on size, technology, and industry differ systematically by country, because how a society educates, trains, recruits, and promotes its workforce, and its industrial relations, shape how work is divided and supervised, so structure is partly a national product.What it has shownMaurice, Sorge, and Warner (1980) compared closely matched manufacturing units in France, West Germany, and Great Britain and found more pervasive differences in their organization than usually recognized. Whitley (1999) set out a comparative account of business systems.Who disputes itStructural contingency theory stresses culture-free elements of structure; matched comparisons find nationally different shapes of organization.
  26. The network perspective on organizations1985 to the presentWhat it claimsOrganizations and their members are nodes joined by ties, and the pattern of ties shapes what they can do. Economic action is embedded in networks of personal relations (Granovetter 1985), and network forms are a distinct form, not a hybrid of market and hierarchy (Powell 1990).What it has shownPodolny and Page (1998) review the research and find that network forms foster learning, confer status and legitimacy, bring economic benefits, help manage resource dependencies, and give employees considerable autonomy, and they ask for attention to networks' dysfunctions.Who disputes itTransaction cost economics: Williamson treats the hybrid as a third generic form between market and hierarchy; for Powell, network forms are a distinct form, not a mix of the two.
  27. Computational organization design and search1990s to the presentWhat it claimsDesign choices interact, so design space is a rugged landscape with many local peaks, and structure affects how well an organization searches it. Decentralizing interdependent decisions can trap units on poor peaks; temporary decentralization, then reintegration, can help.What it has shownMostly simulation, with one field test: Csaszar (2012), with more than 150,000 stock-picking decisions by 609 mutual funds, found that decision-making structure affects the number of initiatives pursued and the omission and commission errors made.Who disputes itNo school in the record disputes it head on; it disputes structural contingency theory, whose bivariate fit, its simulations show, cannot capture how the best design depends on interactions among choices.
  28. The new-forms debate1990s to the presentWhat it claimsOrganizations must solve four universal problems (dividing tasks, allocating them, providing rewards, and providing information), and a form is new when it solves them in new ways. Self-managing organizations radically decentralize authority; skeptics hold hierarchy reappears.What it has shownFoss (2003) traced the rise and partial reversal of Oticon's spaghetti organization to the problem of selective intervention. A meta-analysis of 54 studies of 13,914 teams (Greer and colleagues 2018) found that hierarchy within teams on net slightly lowers team performance.Who disputes itBureaucracy and its critics: removing formal structure leaves informal elites whose power is unaccountable (Freeman), and democratic and network organizations are much less hierarchy-free than their labels suggest.
  29. The algorithmic-management literature2015 to the presentWhat it claimsSoftware does much of the directing, evaluating, and disciplining that managers and rules once did. Kellogg, Valentine, and Christin (2020) call algorithmic control a new contested terrain; Puranam (2021) treats dividing decisions between people and machines as a design problem.What it has shownMostly qualitative field studies of gig work. Wood and colleagues (2019), with 107 interviews in six countries and 679 survey respondents, found that algorithmic management tends to give remote gig workers flexibility and autonomy, but also low pay, isolation, and overwork.Who disputes itLabor process and critical theory reads control at work as contested terrain; Kellogg, Valentine, and Christin take up that view but argue that algorithmic control is distinct from earlier forms.

The forms by first year

  1. Functional structure: 1911 to 1937
  2. Line and staff: 1916 to 1943
  3. Multidivisional (M-form) by product: 1920s practice; named and analyzed 1962 to 1975
  4. Machine bureaucracy: 1922 (Weber); 1979 (Mintzberg)
  5. Divisional by customer or market segment: 1937; 2005
  6. Matrix organization: 1950s to 1960s practice; analyzed 1971 to 1977
  7. Co-determined organization: 1951 to 1976 (the laws); 1984 to 2022 (the main studies)
  8. Socio-technical autonomous work groups: 1951 to 1965
  9. Stratified hierarchy (requisite organization): 1951 to 1989
  10. Cooperative organization: 1958 to 1999
  11. Linking-pin organization (System 4): 1961 to 1967
  12. Divisional by region: 1962 to 1972
  13. Adhocracy (innovative organization): 1968 to 1979
  14. J-form (the Japanese firm): 1968 to 1990
  15. Professional bureaucracy: 1968 to 1979
  16. Holding company (H-form): 1972 to 1975; 1987
  17. Ambidextrous organization: 1976 to 2004
  18. Simple structure: 1979
  19. Hybrid structure: 1980 to the present
  20. Missionary (ideological) organization: 1980 to 1989
  21. Network, modular, and virtual organization: 1986 to 1990
  22. Transnational and multidimensional organization: 1987 to 1989
  23. Business group (keiretsu, chaebol, family house): 1988 to 2007
  24. Shamrock organization: 1988 to 1989
  25. Federal organization: 1989 to 1992
  26. Self-managing organization (less-hierarchical forms): 1989 to 2017
  27. Boundaryless organization: 1990 to 1995
  28. Front-back organization: 1990s to 2007
  29. Professional partnership (P2 form): 1990
  30. The corporate center and shared services: 1991 to 2000
  31. Internal market organization: 1993 to 1994
  32. Process (horizontal) organization: 1993 to 1999
  33. Cellular organization: 1994 to 1997
  34. Hypertext organization: 1994 to 1995
  35. Team-based organization: 1995
  36. Project-based organization: 2000 to 2006
  37. Agile at scale: 2001 to 2016
  38. Distributed (all-remote) organization: 2002 to 2021
  39. Open-source and community-based organization: 2002 to 2007
  40. Algorithmically managed organization: 2015 to 2020
  41. Team of teams: 2015

Twenty-three of the 29 schools run to the present, and 16 of those began in the 1970s or later. The forms arrive in waves: 14 of the 41 first appear between 1985 and 1994.

Source: Fayol 1949; Weber 1978; Mayo 1933; Trist and Bamforth 1951, an interview-based field study in one industry; Burns and Stalker 1961, a field study of twenty firms; Mintzberg 1979; Child 1972a; Coase 1937; Meyer and Rowan 1977; Hannan and Freeman 1977; Galbraith 1973; Jensen and Meckling 1976; Crozier 1963; Emery and Thorsrud 1969; Yoshino 1968; Streeck 1984a; Kellogg and colleagues 2020, a review of earlier research through one theoretical lens, with no new data; Puranam and colleagues 2014, a conceptual argument; Chandler 1962, several independent case histories by a historian; Pfeffer and Salancik 1978; Simon 1946; Maurice and colleagues 1980, a comparison of matched factories in three countries; Levinthal 1997; Simon 1962; Braverman 1974; Hamilton and Biggart 1988, a comparison of three economies by scholars; Ward 1958; Czarniawska and Joerges 1995; Granovetter 1985.

Frederick Taylor's Principles of Scientific Management (1911) held that one kind of person should plan and another execute. Henri Fayol published Administration industrielle et générale in 1916; its division of work, unity of command, and scalar chain describe one chain of command over specialized work. Luther Gulick (1937) wrote for the President's Committee on Administrative Management; public administration is the form's second sector of origin, beside manufacturing.

Where it fits

Theory backs most ratings, many from Burton and Obel's (2004) model, the most developed scholarly fit model.

The functional structure against the twelve contingency factors

Each factor at its three levels, Fits, Partial, or Strain; select a row for its reason, sources, and grade.

Select a factor to read its reason, sources, basis, and grade.Size. Grouping by function pays once there is enough work to specialize; in a very large firm the top, where functions meet, is overloaded, though some single-business giants keep the form. Basis: Theory. Grade: conceptual only, no empirical test. Sources: Greiner 1972; Williamson 1975; Burton and Obel 2004; Pugh and colleagues 1969a; Podolny and Hansen 2020.Age. Ventures build functions unevenly, and those in unconventional markets build market-facing roles and elaborate internal process roles less than their peers; established firms are where the functional structure classically appears; long-established ones accumulate rules that harden the boundaries between functions. Basis: Theory. Grade: conceptual only, no empirical test. Sources: DeSantola and colleagues 2023; Greiner 1972; Mintzberg 1980.Environmental uncertainty (unpredictability, dynamism). Functions coordinated only through the hierarchy work when the environment is stable; as it becomes uncertain, decisions pile up at the top unless integrators and cross-functional teams are added. Basis: Theory. Grade: conceptual only, no empirical test. Sources: Lawrence and Lorsch 1967a; Burns and Stalker 1961; Galbraith 1973; Burton and Obel 2004; Burton and colleagues 2020a; Pennings 1975. View 1: Stable fits, Shifting partial, Unpredictable strain. Functions coordinated only through the hierarchy are overloaded as uncertainty rises, since more uncertainty means more information to process (Galbraith 1973), and fit requires information-processing capacity in proportion to uncertainty (Burton and Obel 2004). Sources: Galbraith 1973; Burton and Obel 2004. View 2: Stable fits, Shifting fits, Unpredictable partial. Functionally organized firms were the high performers in all three industries when their integrating devices matched the environment, the hierarchy in containers, individual integrators in food, and an integrating department with cross-functional teams in plastics, which goes beyond coordination through the chief executive. Sources: Lawrence and Lorsch 1967a.Environmental complexity. In the fit model's rules a simple environment calls for functions, and so does a complex one that cannot be split into segments; where it can be split, divisions serve better. Basis: Theory. Grade: conceptual only, no empirical test. Sources: Burton and Obel 2004; Pennings 1975.Munificence and hostility. Functions keep decisions at the top, which extreme hostility asks for, but coordinating them through the chief executive is slower than a hostile environment allows. Basis: Judgment. Sources: Burton and Obel 2004; Staw and colleagues 1981.Diversity of products and markets. Functions meeting only at the top work for one business; when firms added product lines, the central office was overloaded and firms divided by product. Basis: Evidence. Grade: a multi-firm empirical study or several independent case studies by scholars. Sources: Chandler 1962; Burton and Obel 2004; Podolny and Hansen 2020; Habib and Victor 1991. View 1: Single or dominant business fits, Related diversification strain, Unrelated diversification strain. Functions meeting only at the top work for one business; when firms added product lines, the central office was overloaded and firms divided by product. Sources: Chandler 1962; Burton and Obel 2004. View 2: Single or dominant business fits, Related diversification partial, Unrelated diversification strain. Apple ran hardware, software, and services, related businesses, under one functional organization as it grew about forty times in revenue, on its insiders' account, and among 144 multinationals strategy-structure fit had no effect on service firms' performance and mixed effects on manufacturers'. Sources: Podolny and Hansen 2020; Habib and Victor 1991.Strategy type. The defender's functional design with centralized control is the pairing Miles and Snow and Burton and Obel both make; analyzers may use it, and a prospector's need to move into new products cuts against it. Basis: Theory. Grade: conceptual only, no empirical test. Sources: Miles and Snow 1978; Burton and Obel 2004; Burton and colleagues 2015b; Burton and colleagues 2020a; Hall and Saias 1980; Galan and Sanchez-Bueno 2009; Child 1972a.Technology and routineness. Rules and the chain of command handle work whose exceptions are few and known; as exceptions without known answers multiply, they climb to the top and overload it unless lateral relations are added. Basis: Theory. Grade: conceptual only, no empirical test. Sources: Galbraith 1973; Perrow 1967; Burton and Obel 2004; Hickson and colleagues 1969; Child and Mansfield 1972; Mohr 1971.Interdependence. Grouping by specialty suits units that only share resources; work that passes between functions needs plans, and work that must go back and forth between them puts great interdependence on a structure that joins them only at the top. Basis: Theory. Grade: conceptual only, no empirical test. Sources: Thompson 1967; Miles and Snow 1978; Galbraith 1973.Knowledge intensity and professionalization. Grouping like specialists together works whether skills are learned on the job or in long training, but functions that meet only at the top keep decisions central, against the autonomy professionals pull for. Basis: Judgment. Sources: Mintzberg 1980.Global integration pressure. A function run worldwide from the center can integrate that activity across countries, but every decision across functions still climbs to the top, so integration pressure gives no clear reason for or against. Basis: Judgment. Sources: Chandler 1962; Burton and Obel 2004.Local responsiveness pressure. A centralized functional structure came under strain when firms spread into several regions with different needs, and the firms that Chandler studied turned to divisions. Basis: Theory. Grade: conceptual only, no empirical test. Sources: Chandler 1962.

Counting each contested cell by its first view, the 36 settings read Fits at 11, Partial at 18, and Strain at 7. Two of the twelve factor cells are contested, and three rest on judgment.

Source: Greiner 1972, a conceptual model with no systematic test; Williamson 1975; Burton and Obel 2004; Pugh and colleagues 1969a, a multi-organization comparative survey of 46 organizations; Podolny and Hansen 2020, a single company's account written by insiders; DeSantola and colleagues 2023, a longitudinal quantitative study of thousands of young ventures; Mintzberg 1980, a synthesis of earlier research, offering propositions without a new test; Lawrence and Lorsch 1967a, a multi-firm comparative field study; Burns and Stalker 1961, a field study of twenty firms; Galbraith 1973; Burton and colleagues 2020a; Pennings 1975, a quantitative field test of the structural-contingency model; Staw and colleagues 1981, a review of earlier evidence at several levels, with no new data; Chandler 1962, several independent case histories by a historian; Habib and Victor 1991, a multi-firm study of multinationals; Miles and Snow 1978; Burton and colleagues 2015b; Hall and Saias 1980; Galan and Sanchez-Bueno 2009, a multi-firm statistical study; Child 1972a; Perrow 1967; Hickson and colleagues 1969, a multi-organization comparative survey; Child and Mansfield 1972, a multi-firm comparative study; Mohr 1971, a quantitative field study of technology and structure; Thompson 1967.

Your own situation against the functional structure

Set any factor to outline its cell in the strip above; the lines under the switches give the counts, the form's place among the 41, and the misfit rules that fire.

Size
Age
Environmental uncertainty (unpredictability, dynamism)
Environmental complexity
Munificence and hostility
Diversity of products and markets
Strategy type
Technology and routineness
Interdependence
Knowledge intensity and professionalization
Global integration pressure
Local responsiveness pressure

Set: 0 of 12 factors. Fits on 0, Partial on 0, Strain on 0, Contested on 0.

Its place in the explorer's rankingEvery factor is on Any: all 41 forms tie, and the explorer lists them alphabetically.1st of 411st of 41, tied with one other1st of 41, tied with 0 othersSunk by a misfit rule: 1st of 41Sunk by a misfit rule: 1st of 41, tied with one otherSunk by a misfit rule: 1st of 41, tied with 0 others

  • Flagged (its sources disagree): A prospector run through functional departments. Disputed: Burton and Obel 2004; Burton and colleagues 2015b; Larson and Gobeli 1988; O'Reilly and Tushman 2004; against it, Podolny and Hansen 2020.
  • Flagged (its sources disagree): A prospector that decides everything at the top. Disputed: Burton and Obel 2004; against it, Burton and Obel 2004.
  • Flagged (its sources disagree): A large organization that decides everything at the top. Disputed: Burton and Obel 2004; against it, Mintzberg 1980.
  • Flagged (its sources disagree): Nonroutine work run through functional departments. Disputed: Burton and Obel 2004; Larson and Gobeli 1988; against it, Podolny and Hansen 2020.
  • Flagged (its sources disagree): Nonroutine work decided at the top. Disputed: Burton and Obel 2004; against it, Hickson and colleagues 1969; Child and Mansfield 1972; Mohr 1971.
  • Flagged (its sources disagree): Functional departments in an unpredictable environment. Disputed: Burton and Obel 2004; Burton and colleagues 2015b; against it, Burton and Obel 2004; against it, Podolny and Hansen 2020.
  • Sinks the form: Central decisions in a turbulent environment. Source: Burton and Obel 2004.
  • Flagged (it meets the form only through part of its profile): One way of working for very different parts of the environment. Source: Lawrence and Lorsch 1967a; Lawrence and Lorsch 1967b.
  • Flagged (it meets the form only through part of its profile): Differentiated departments joined only by the hierarchy. Source: Lawrence and Lorsch 1967a; Galbraith 1974.
  • Flagged (its sources disagree): The hierarchy alone carries an unpredictable environment. Disputed: Galbraith 1974; Galbraith 1973; against it, Burton and Obel 2004; Mintzberg 1980.
  • Flagged (its sources disagree): The hierarchy alone carries nonroutine work. Disputed: Galbraith 1974; Galbraith 1973; against it, Schoonhoven 1981.
  • Sinks the form: The hierarchy alone carries reciprocal work. Source: Galbraith 1973; Galbraith 1974; Thompson 1967.
  • Flagged (it meets the form only through part of its profile): Reciprocal work coordinated by standards. Source: Thompson 1967; Van de Ven and colleagues 1976.
  • Flagged (its sources disagree): A diversified firm run through one set of functional departments. Disputed: Chandler 1962; Rumelt 1974; Hoskisson and Galbraith 1985; against it, Habib and Victor 1991; Podolny and Hansen 2020.
  • Sinks the form: An unrelated diversifier run through functional departments. Source: Chandler 1962; Rumelt 1974.

Ranking rule: by count of Fits on the factors the reader has set, then fewest Strains, then alphabetical; a fired misfit rule that no source disputes sinks the form to the bottom when every level of the form's profile meets it, a disputed one, or one that meets the form only through one end of a spanned level, one view of a contested profile cell, or one part of a two-part form, is flagged on the row (with both views where it is disputed), and a misfit between two of the reader's own settings is shown once above the list; a contested cell counts only where its views agree at the reader's level, and otherwise shows as Contested; factors on "Any" count for nothing; with every factor on "Any" the list is alphabetical and says so.

Open these settings in the explorer

The misfit rules that can fire for this form

  • A prospector run through functional departments fires when Strategy type at Prospector (exploration): flagged (its sources disagree). Disputed: Burton and Obel 2004; Burton and colleagues 2015b; Larson and Gobeli 1988; O'Reilly and Tushman 2004; against it, Podolny and Hansen 2020.
  • A prospector that decides everything at the top fires when Strategy type at Prospector (exploration): flagged (its sources disagree). Disputed: Burton and Obel 2004; against it, Burton and Obel 2004.
  • A large organization that decides everything at the top fires when Size at Large: flagged (its sources disagree). Disputed: Burton and Obel 2004; against it, Mintzberg 1980.
  • Nonroutine work run through functional departments fires when Technology and routineness at Nonroutine: flagged (its sources disagree). Disputed: Burton and Obel 2004; Larson and Gobeli 1988; against it, Podolny and Hansen 2020.
  • Nonroutine work decided at the top fires when Technology and routineness at Nonroutine: flagged (its sources disagree). Disputed: Burton and Obel 2004; against it, Hickson and colleagues 1969; Child and Mansfield 1972; Mohr 1971.
  • Functional departments in an unpredictable environment fires when Environmental uncertainty (unpredictability, dynamism) at Unpredictable: flagged (its sources disagree). Disputed: Burton and Obel 2004; Burton and colleagues 2015b; against it, Burton and Obel 2004; against it, Podolny and Hansen 2020.
  • Central decisions in a turbulent environment fires when Environmental uncertainty (unpredictability, dynamism) at Unpredictable and Environmental complexity at Complex: sinks the form. Source: Burton and Obel 2004.
  • One way of working for very different parts of the environment fires when Environmental complexity at Complex: flagged (it meets the form only through part of its profile). Source: Lawrence and Lorsch 1967a; Lawrence and Lorsch 1967b.
  • Differentiated departments joined only by the hierarchy fires when Environmental complexity at Complex: flagged (it meets the form only through part of its profile). Source: Lawrence and Lorsch 1967a; Galbraith 1974.
  • The hierarchy alone carries an unpredictable environment fires when Environmental uncertainty (unpredictability, dynamism) at Unpredictable: flagged (its sources disagree). Disputed: Galbraith 1974; Galbraith 1973; against it, Burton and Obel 2004; Mintzberg 1980.
  • The hierarchy alone carries nonroutine work fires when Technology and routineness at Nonroutine: flagged (its sources disagree). Disputed: Galbraith 1974; Galbraith 1973; against it, Schoonhoven 1981.
  • The hierarchy alone carries reciprocal work fires when Interdependence at Reciprocal: sinks the form. Source: Galbraith 1973; Galbraith 1974; Thompson 1967.
  • Reciprocal work coordinated by standards fires when Interdependence at Reciprocal: flagged (it meets the form only through part of its profile). Source: Thompson 1967; Van de Ven and colleagues 1976.
  • A diversified firm run through one set of functional departments fires when Diversity of products and markets at Related diversification: flagged (its sources disagree). Disputed: Chandler 1962; Rumelt 1974; Hoskisson and Galbraith 1985; against it, Habib and Victor 1991; Podolny and Hansen 2020.
  • An unrelated diversifier run through functional departments fires when Diversity of products and markets at Unrelated diversification: sinks the form. Source: Chandler 1962; Rumelt 1974.

Of the 39 contingency misfit rules, 15 can fire for this form: three would sink it and twelve would only flag it.

Source: Burton and Obel 2004; Burton and colleagues 2020a.

  • Size. Fits medium; partial for small and large. Greiner (1972) introduces functions as a firm grows past its founders; our reading of Williamson (1975) is that a very large firm overloads the top, where functions meet, though Podolny and Hansen (2020), an insiders' account, describe Apple keeping the form at great scale. The small level is judgment.
  • Age. Fits established; partial for young and old. Young rests on Greiner (1972) and on DeSantola, Gulati, and Zhelyazkov (2023), whose ventures build functions unevenly; old is theory and judgment, from Mintzberg (1980) on older organizations formalizing, a synthesis offering propositions without a new test.
  • Environmental uncertainty. Contested. Galbraith (1973) and Burton and Obel (2004): fits stable, partial shifting, strain unpredictable, since more uncertainty means more information than the chain of command can carry. Lawrence and Lorsch (1967): fits stable and shifting, partial unpredictable, since their functional firms did well when integrating devices matched the environment, in plastics an integrating department and cross-functional teams.
  • Environmental complexity. Fits simple and moderate; partial complex. In Burton and Obel's (2004) rules a complex environment that cannot be segmented still calls for functions; one that can, for divisions. The moderate level is interpolated.
  • Munificence and hostility. Partial throughout, our judgment: extreme hostility asks for central decisions (Burton and Obel 2004), and threat tends to constrict control (Staw, Sandelands, and Dutton 1981, a review of earlier evidence with no new data), but coordinating through the chief executive is slow. Cameron, Kim, and Whetten (1987), a six-year study of 334 institutions of higher education, found centralization affected by turbulence, not by decline.
  • Diversity. Contested, an evidence cell. Chandler (1962) and Burton and Obel (2004): fits a single business, strain for related and unrelated diversification. Podolny and Hansen (2020) and Habib and Victor (1991): partial for related lines, since Apple ran hardware, software, and services in one functional organization and fit did not predict service multinationals' performance.
  • Strategy. Fits defender, partial analyzer, strain prospector (Miles and Snow 1978; Burton and Obel 2004; Burton, Obel, and Håkonsson 2015).
  • Technology. Fits routine, partial mixed, strain nonroutine, as exceptions climb to the top (Galbraith 1973; Perrow 1967; Burton and Obel 2004).
  • Interdependence. Fits pooled, partial sequential, strain reciprocal (Thompson 1967; Galbraith 1973; Miles and Snow 1978).
  • Knowledge intensity. Fits low and moderate, partial high; judgment, on Mintzberg's (1980) premise that professionals seek decentralization.
  • Global integration pressure. Partial throughout, our judgment: a function run from the center integrates its own activity worldwide, but decisions across functions still climb. Burton and Obel's (2004) global functional configuration, for low foreign product diversity with high international involvement, is the nearest premise and sets no level.
  • Local responsiveness pressure. Partial low and moderate; strain high, since Chandler (1962) found centralized functional structures strained as firms spread into regions. His regions were mostly in one country, so the cell is theory.

What it does well

Each specialty gets a home where people doing the same work share methods and build depth, and each person has one boss in a plain chain of command.

The form pays for each function once, without the redundancy Cisco moved into functions to escape.

It suits a firm competing by doing a stable thing efficiently, the defender Miles and Snow (1978) pair with functions. Podolny and Hansen (2020), an insiders' account with no comparison group, credit Apple's functional organization with innovation benefits, though O'Reilly and Tushman's (2004) comparison cuts against that.

What it costs

Every decision touching two functions waits at the top, and no one below the top owns a whole product or customer. In Williamson's (1975) account, scaling up the unitary form confounds strategic and operating decisions; the overload is our reading.

Lawrence and Lorsch (1967) found that sales, production, and research differ in goals, time horizons, interpersonal style, and formality, so integration must be designed; the hierarchy sufficed only in their stable container industry.

How far units differ, and the integration that holds them together

Compare the units on the four orientations, judge how far apart they are, and choose a level to see the integrating device the high performers used at it.

What to compare between the units

  • Goal orientation
  • Time orientation
  • Interpersonal orientation
  • Formality of structure
Low differentiation, light integration. Units resemble each other in goals, time horizons, interpersonal style, and formality, and the hierarchy and its procedures integrate them.What the high performers usedThe managerial hierarchy.Where the study found itContainers.Moderate differentiation, some integrating roles. Units differ in some orientations, and individual integrators or committees join them alongside the hierarchy.What the high performers usedIndividual integrators.Where the study found itFood.High differentiation, heavy integration. Units differ sharply, and an integrating department, cross-unit teams, and open confrontation of conflict are needed to hold them together.What the high performers usedAn integrating department and cross-functional teams.Where the study found itPlastics.

The figure has no formula: Lawrence and Lorsch scored differentiation from managers' perceptions, on measures of their own that this figure does not reproduce, so the level is the reader's judgment.

LevelWhat it meansWhat the high performers usedWhere
Low differentiation, light integrationUnits resemble each other in goals, time horizons, interpersonal style, and formality, and the hierarchy and its procedures integrate them.the managerial hierarchycontainers
Moderate differentiation, some integrating rolesUnits differ in some orientations, and individual integrators or committees join them alongside the hierarchy.individual integratorsfood
High differentiation, heavy integrationUnits differ sharply, and an integrating department, cross-unit teams, and open confrontation of conflict are needed to hold them together.an integrating department and cross-functional teamsplastics

In Lawrence and Lorsch's ten firms, the high performers matched their integrating devices to how far their functional departments differed: the managerial hierarchy in containers, individual integrators in food, and an integrating department and cross-functional teams in plastics.

Source: Lawrence and Lorsch 1967a, a multi-firm comparative field study.

How it fails

How the functional structure fails, and the coordination failures behind it

The entry's failure modes at the left, each tied to the Coordination Failures patterns it names at the right; a pattern links its entry there.

Regulator overloadSiloed knowledgeDiffused responsibility
Regulator overloadSiloed knowledgeDiffused responsibility

How many ties the failure has. Highest: Decisions queue at the topCentral functions strained by many product linesKnowledge stays inside each functionNo one below the top owns the whole product or customerRegulator overloadSiloed knowledgeDiffused responsibility

Select a failure to read its place in the network.Decisions queue at the top. Degree 1Central functions strained by many product lines. Degree 1Knowledge stays inside each function. Degree 1No one below the top owns the whole product or customer. Degree 1Regulator overload. Degree 2Siloed knowledge. Degree 1Diffused responsibility. Degree 1
FailureDegree
Decisions queue at the top1
Central functions strained by many product lines1
Knowledge stays inside each function1
No one below the top owns the whole product or customer1
Regulator overload2
Siloed knowledge1
Diffused responsibility1

Four failure modes name three patterns; Regulator overload is named by two of the four.

Source: Galbraith 1973; Galbraith 1974; Burton and Obel 2004; Chandler 1962, several independent case histories by a historian; Lawrence and Lorsch 1967a, a multi-firm comparative field study; Gulati 2009.

Decisions queue at the top. As uncertainty or exceptions rise, decisions climb faster than the top can handle (regulator overload; Galbraith 1973, 1974).

Central functions strained by many product lines. Several product lines or regions strained Chandler's (1962) functional firms until they divisionalized (regulator overload, from breadth).

Knowledge stays inside each function. The pieces meet only in the top team (siloed knowledge; Lawrence and Lorsch 1967).

No one below the top owns the whole product or customer. Responsibility is split among functions (diffused responsibility); in our reading, Cisco's customer distance is one sign.

Of the six rules firing undisputed, three sink the form: unrelated businesses run through one set of functions (judgment, extending Chandler 1962); units whose work feeds back and forth, linked only through the hierarchy (Galbraith 1973, 1974; Thompson 1967); and decisions held at the top while many dissimilar factors change unpredictably (Burton and Obel 2004). Three others, meeting only part of the profile, flag it: reciprocal work run by procedures (judgment, Thompson 1967), at the coordination span's standardization end; and Lawrence and Lorsch's two for a complex environment, on the contested differentiation cell: departments pulled apart but joined only by the hierarchy (the moderate to high view, the other's moderate end) and one way of working for very different parts of the environment (judgment; one view's low end).

Others are disputed and flag it. Burton and Obel's rules against a prospector, nonroutine work, or an unpredictable environment met by functions are theory, but the first two also rest on Larson and Gobeli (1988), a comparison of 540 development projects that found little support for the functional organization, and the first on O'Reilly and Tushman (2004), a practitioner's report of a multi-unit comparison: a quarter of functional designs reached their breakthrough goals, against more than 90 percent of ambidextrous ones, matching them only for breakthroughs that directly replaced existing products. All three face Apple's insiders' account; the third also meets their own rule recommending functions with liaison activities, or divisions, in one unpredictable setting. Galbraith's rule that the hierarchy alone cannot carry an unpredictable environment meets Burton and Obel's (2004) simple or divisional configuration for a simple, uncertain environment and Mintzberg's (1980) simple structure in simple, dynamic ones. Chandler's rule on diversified firms faces Habib and Victor (1991), a multi-firm study of 144 multinationals, where fit had no effect on service multinationals' performance and mixed effects on manufacturers', and Apple's single functional organization. The centralization rules for a large firm, a prospector, and nonroutine work meet Mintzberg's centralized machine bureaucracy, the simple configuration Burton and Obel recommend for a prospector, and the Aston reappraisal (Hickson, Pugh, and Pheysey 1969, a multi-organization comparative survey) with Mohr (1971), a quantitative field study of technology and structure, though Aldrich (1972), a reanalysis of the Aston data, reaffirmed treating technology as an independent variable, and Donaldson (2001) traces Mohr's null to methodological limitations, citing later job-unpredictability studies supporting contingency theory. Galbraith's rule for exception-filled tasks faces Schoonhoven (1981), a quantitative study of hospital operating room suites, where traditional hypotheses drawn from Galbraith were not supported.

In a quantitative test across a sample of organizations, Doty, Glick, and Huber (1993) found no effectiveness gain from resembling Mintzberg's types, while fit to Miles and Snow's predicted 24 percent of the variance in effectiveness; but Ketchen and colleagues (1997), a meta-analysis of 40 tests, found configurations partly explain performance, and Krabberød (2015) argues the test has not been shown exhaustive.

What the research found

Chandler (1962), several independent case histories by a historian, set four firms against close to a hundred others: diversification strained the functional structure and brought divisions; it does not measure performance. Hall and Saias (1980) argued strategy, structure, and environment are closely linked, structure later constraining strategic choices, and Galan and Sanchez-Bueno (2009), a multi-firm statistical study, found causation running both ways. Fligstein (1985), a multi-firm historical statistical study, found strategy one of three conditions for the move to divisions, beside a president from sales or finance and the industry's other firms having moved. In one historical case study, Freeland (1996) found General Motors, the paradigm case, deliberately not separating strategic from tactical planning for most of its history.

Lawrence and Lorsch (1967), a multi-firm comparative field study of ten organizations in three industries, found high performers matching departmental differentiation to their environments and integrating in proportion; all ten were functionally organized, so the study shows how functions are joined, not whether the form beats another. Walker and Lorsch (1968), a comparison of two matched plants, found the functional plant more efficient at current output and the product plant better at improving its capabilities; they conclude function seems to suit stable, routine tasks.

The Aston survey of 52 organizations in England (Pugh and colleagues 1968) found four underlying dimensions of structure, and Hinings and Lee (1971), a small multi-firm replication, judged their findings to "closely parallel" its own; but Wagner (2021), a meta-analysis of 346 correlations from 155 published articles, found many links among formalization, standardization, specialization, vertical differentiation, and decentralization weakened since an earlier meta-analysis.

How the Aston group took the bureaucratic type apart into four dimensions

Select a box to read what the records say of it, or the link under the drawing for the one disputed relation. The 1968 and 1969 Aston studies are cross-sectional, the 1969 one of 46 organizations in one region of England, and every study here was read in its abstract.

Links between branches:

Select a box to read what the records say of it.Structure as Aston measured it. The Aston group built scales for five primary dimensions of structure (specialization, standardization, formalization, centralization, and configuration) from 64 component variables in 52 work organizations in England, and four underlying dimensions emerged. The authors concluded that the concept of the bureaucratic type is no longer useful (Pugh and colleagues 1968). Configuration is not hung below, since the records read do not say where it loaded. Hinings and Lee (1971) judged that their replication's findings "closely parallel those of Pugh et al."Structuring of activities. Predicted from size and technology, with a multiple correlation of 0.75, in 46 organizations in the English Midlands (Pugh and colleagues 1969). Hinings and Lee (1971) found its three measures related to size in nine manufacturing organizations.Specialization. Aston scored functional specialization by how many specialist functions were held by full-time specialists, and this series' dimension note records it loading with standardization and formalization on structuring of activities. Hinings and Lee (1971) found the three in one group. Hanging it here is this series' reading, since the 1968 paper was read only in its abstract.Standardization. Aston's dimension for procedures. This series' note on standardization and formalization records the two loading together with specialization on structuring of activities, and Hinings and Lee (1971) found the three in one group. The 1968 paper was read only in its abstract, so placing it here is this series' reading.Formalization. Aston's dimension for written documents, which this series' note on standardization and formalization records loading with standardization and specialization on structuring of activities. Hinings and Lee (1971) found the same three in one group. Hanging it here is this series' reading, since the 1968 paper was read only in its abstract.Concentration of authority. Predicted from dependence on other organizations and location, with a multiple correlation of 0.75 (Pugh and colleagues 1969). Hinings and Lee (1971) found centralization and lack of autonomy related to dependence on other organizations.Centralization. Aston measured centralization by the level in the hierarchy with authority to take each of a list of decisions, and this series' centralization note records it loading with lack of autonomy on concentration of authority. Hinings and Lee (1971) found the two in one group. Hanging it here is this series' reading, since the 1968 paper was read only in its abstract.Lack of autonomy. This series' centralization note records it loading with centralization on concentration of authority, and Hinings and Lee (1971) found the two in one group. With the 1968 paper read only in its abstract, its place here is this series' reading.Line control of workflow. Predicted from the operating variability scale of charter, with a multiple correlation of 0.57 (Pugh and colleagues 1969).Size of supportive component. The fourth underlying dimension in Pugh and colleagues (1968). The records read give it no context predictor: the 1969 context study predicts only the other three.A disputed relation. Donaldson, Child, and Aldrich (1975) report moderately high negative correlations between structuring of activities and centralization in Child's national study of 82 organizations, and lower ones at Aston. It is one of the grounds on which this series contests the machine bureaucracy's centralization cell.

What had been treated as one bureaucratic type came apart into four underlying dimensions, three of them predicted by different parts of context. Wagner (2021) found that many of the links among formalization, standardization, specialization, vertical differentiation, and decentralization have weakened since an earlier meta-analysis found them significantly intercorrelated.

Source: Pugh and colleagues 1968, a multi-organization comparative survey; Pugh and colleagues 1969a, a multi-organization comparative survey of 46 organizations; Hinings and Lee 1971, a small multi-firm replication; Wagner 2021, a meta-analysis of 346 correlations from 155 published articles; Donaldson and colleagues 1975, a discussion.

Hickson and colleagues (1974), a multi-firm study in three countries, found context's relations to structure stable across them. The societal-effect school disputes that culture-free reading: Maurice, Sorge, and Warner (1980), a comparison of matched factories in three countries, found more pervasive differences than usually recognized among France, West Germany, and Great Britain. Crozier (1964), two case studies by a scholar, found centralization and impersonal rules leaving two French public services unable to correct their errors; d'Iribarne (1989) reads such material as national culture.

Among 34 cell-phone makers, Raveendran (2020), a multi-firm panel study of reorganizations, found that more function-like units made a move toward product- or market-based units likelier and brought the next reorganization sooner, and the converse for moves back. It does not test performance. The most recent study, DeSantola, Gulati, and Zhelyazkov (2023), a longitudinal quantitative study of 3,748 United States ventures, found ventures in unconventional markets building external-facing functions and elaborating internal process functions less.

The evidence ledger holds 14 studies filed under this form.

In practice: one published case

Ranjay Gulati's Harvard Business School case (2009) on Cisco Systems is one case study of a move into the functional form.

Until 2001 Cisco was split into three business units, each serving one customer type with its own complete product line. After the 2001 downturn the company reexamined that structure, which had become costly because activities were duplicated across the three customer-facing units. It moved from a decentralized to a centralized, functional structure. Cisco saw the move as necessary to avoid product and resource redundancies, but it threatened the company's customer centricity, since centralizing R&D and marketing made them more distant from customers.

Cisco responded with initiatives such as the Customer Focus Initiative, meant to keep employees' beliefs and actions focused on customers, and management accepted that its structure and its culture might be misaligned.

The companion article by Gulati and Puranam (2009) in Organization Science, one case study with a formal model, uses the reorganization to illustrate what they call compensatory fit: a strong informal organization can sustain a behavior that the new formal structure does not emphasize, and the inconsistency can yield ambidexterity. They conclude that this works only when such an informal organization already exists and the gains are large.

Source: Gulati 2009. Cisco Systems (2001): Building and Sustaining a Customer-Centric Culture, Harvard Business School case 409-061, 21 pages, January 6, 2009.

Variants and near relatives

The unitary form (U-form) is Williamson's (1975) name for the functionally departmentalized firm whose central office holds both strategic and operating decisions.

Functional foremanship is Taylor's (1911) scheme splitting the single foreman's job among specialist bosses: the foreman is superseded by eight men, among them the inspector, gang boss, speed boss, and repair boss, each giving the worker orders and help. Fayol (1916) answered it in print, welcoming a staff of specialists to reinforce foremen but calling the denial of unity of command false and dangerous.

The machine bureaucracy is its nearest neighbor. Both group by function, but the machine bureaucracy standardizes the work process itself through a staff of analysts and dense rules. The functional form chooses a grouping basis only; a small, informal functional firm is still functional.

Other relatives: the simple structure lacks function heads; line and staff splits command from advice; the process organization makes the end-to-end process primary; and the multidivisional form puts functions inside each product division. In government, the functional system of field administration is this form, each ministry running its own field service (Smith 1967); in the prefectoral system a prefect instead coordinates every ministry's field services in an area.

The functional structure beside its nearest neighbor, the machine bureaucracy

Select a number to fill what it marks in both drawings; the list under them gives the dimensions on which the two profiles differ.

It sets a basis of grouping and nothing else: like work goes with like under one head per specialty, the specialties meet only at the chief executive, and how far the work inside each is standardized is left open.

Functional structure

Strategic apexFunctionsChiefexecutiveEngineeringProductionSalesFinanceBy functionDW123333
Strategic apexFunctionsChiefEngineersProd.SalesFinanceBy functionDW123333

Reports toDDirect supervisionWStandardization of work processes

Machine bureaucracy

Strategic apexMiddle lineand staffOperating coreStrategicapexAnalystsFunctionmanagerFunctionmanagerSupport staffOperatorsOperatorsBy functionW1123333
Strategic apexMiddle line and staffOperating coreApexAnalystsFunctionFunctionSupportOperatorsOperatorsBy functionW1123333

Reports toAdvises, or reports indirectlyWStandardization of work processes

  1. Analysts beside the machine bureaucracy's line design the work standards its managers apply; the functional structure needs no such staff, and how far the work inside each function is standardized is left open.
  2. The functional structure also coordinates across its functions by the chief executive's direct supervision; the machine bureaucracy's prime mechanism is standardized work processes alone.
  3. The machine bureaucracy is tall, an elaborate middle line of function managers over large units of operators; the functional structure has one layer of function heads, and how tall it grows depends on size.

Differs on 6 of 11 dimensions

  • Specialization Medium to high; Machine bureaucracy: High
  • Standardization and formalization Medium; Machine bureaucracy: High
  • Layers and span of control Moderate; Machine bureaucracy: Tall
  • Decision rights and the locus of authority Vertical and horizontal centralization; Machine bureaucracy: Limited horizontal decentralization
  • Prime coordinating mechanism Direct supervision and standardization of work processes; Machine bureaucracy: Standardization of work processes
  • Differentiation against integration Low differentiation, light integration to moderate differentiation, some integrating roles; Machine bureaucracy: Low differentiation, light integration

The functional structure and the machine bureaucracy both group the work by function, and the functions meet only at the top. The machine bureaucracy adds a staff of analysts who standardize the work process itself, while the functional structure is a choice of grouping only.

Source: Fayol 1949; Taylor 1911; Williamson 1975; Mintzberg 1980, a synthesis of earlier research, offering propositions without a new test.

Moving into or out of it

Greiner's (1972) growth model, a conceptual model with no systematic test, brings organizations in from a simple structure after the founders' crisis of leadership. DeSantola, Gulati, and Zhelyazkov (2023) found ventures following divergent paths, not one sequence.

Greiner's five phases of growth, each ended by a crisis

Each box names a phase and, after its colon, the crisis that ends it; select a phase to read where a form in this series meets it. Greiner's is a conceptual model with no systematic test, and DeSantola, Gulati, and Zhelyazkov (2023) found young ventures following divergent paths, not one sequence.

Select a phase to read where a form in this series meets it.Phase 1. Creativity, the first phase, is led by founders and ends in a crisis of leadership. It is the phase of the simple structure, run by one leader, often the founder or owner.Phase 2. Under Direction, functions come in as the firm grows past its founders, which brings it from a simple structure into the functional form after the founders' crisis of leadership. Jobs grow specialized, budgets and work standards are adopted, and communication grows formal and impersonal, so on this series' reading organizations may grow toward the machine bureaucracy here. The phase ends in a crisis of autonomy.Phase 3. Delegation ends in a crisis of control. The line and staff page reads the coordination phase that follows as a headquarters above the units this phase delegated to, more than advisers beside one line.Phase 4. In Coordination, decentralized units are merged into product groups, and formal systems and headquarters staff multiply until the phase ends in a crisis of red tape. The line and staff form's ratings for size and age draw on this phase's headquarters staff.Phase 5. Collaboration: a matrix-type structure comes in, though Greiner's later commentary confines it largely to senior management, and the commentary has fewer consulting experts replacing control-oriented staff. Greiner marked the crisis ending this phase with a question mark in 1972, guessing at employees' psychological saturation; his later commentary calls that guess wrong and names a crisis of finding no internal solution for further growth.
  1. Phase 1. Creativity, the first phase, is led by founders and ends in a crisis of leadership. It is the phase of the simple structure, run by one leader, often the founder or owner.
  2. Phase 2. Under Direction, functions come in as the firm grows past its founders, which brings it from a simple structure into the functional form after the founders' crisis of leadership. Jobs grow specialized, budgets and work standards are adopted, and communication grows formal and impersonal, so on this series' reading organizations may grow toward the machine bureaucracy here. The phase ends in a crisis of autonomy.
  3. Phase 3. Delegation ends in a crisis of control. The line and staff page reads the coordination phase that follows as a headquarters above the units this phase delegated to, more than advisers beside one line.
  4. Phase 4. In Coordination, decentralized units are merged into product groups, and formal systems and headquarters staff multiply until the phase ends in a crisis of red tape. The line and staff form's ratings for size and age draw on this phase's headquarters staff.
  5. Phase 5. Collaboration: a matrix-type structure comes in, though Greiner's later commentary confines it largely to senior management, and the commentary has fewer consulting experts replacing control-oriented staff. Greiner marked the crisis ending this phase with a question mark in 1972, guessing at employees' psychological saturation; his later commentary calls that guess wrong and names a crisis of finding no internal solution for further growth.

Greiner's model opens with the founder-led phase of the simple structure; functions, specialized jobs, and work standards come in second, and formal systems and headquarters staff multiply over product groups in the fourth, the phase the line and staff page draws on. He calls the phases approximations drawn from case histories, and his later commentary replaces his 1972 guess at the crisis that ends the fifth.

Source: Greiner 1972, a conceptual model with no systematic test; DeSantola and colleagues 2023, a longitudinal quantitative study of thousands of young ventures.

Firms also move in from divisions, as Cisco did in 2001 and Apple in 1997 (Podolny and Hansen 2020, an insiders' account).

The classic move out is to divisions as product lines multiply, as Chandler's (1962) firms did after a lag, though Fligstein (1985) found strategy one of three conditions for it. Hoskisson and Galbraith (1985), a time-series study of six firms, found reorganizing to the multidivisional form improved financial performance, though the result concerns the act of reorganizing as much as the form. Hoskisson (1987), a multi-firm statistical study of 62 firms, found returns rose for unrelated diversifiers, fell for vertically integrated firms, and did not change significantly for related ones; only its interaction with strategy was significant, and he urges reading his speculations very cautiously. Girod and Whittington (2016), a multi-firm panel study, found sweeping restructuring helping in general but hurting in dynamic environments, where limited reconfiguration helped.

A firm keeping the form can add lateral relations, one of Galbraith's (1973, 1974) four ways to meet rising information load, which can climb to the matrix. Change & Transformation covers how to run the reorganization itself.

Galbraith's lateral processes, added one at a time

Start from rules, hierarchy, and goals; each time the means in place is overloaded, add the next process, or step back.

  1. Rules, hierarchy, and goals
  2. Direct contact
  3. Liaison roles
  4. Task forces
  5. Teams
  6. Integrating roles
  7. Managerial linking roles
  8. Matrix

Rules, hierarchy, and goals. Coordination runs through rules and programs, referral up the hierarchy, and goal setting, with no designed lateral links.Lateral mechanisms, level 1 of 5: Hierarchy, rules, and goals only.Direct contact. Managers who share a problem settle it between themselves.Lateral mechanisms, level 2 of 5: Direct contact and liaison roles.Liaison roles. Where contact between two departments is heavy, a liaison role is set up to handle it.Lateral mechanisms, level 2 of 5: Direct contact and liaison roles.Task forces. Temporary groups of representatives from several departments solve shared problems.Lateral mechanisms, level 3 of 5: Task forces and teams.Teams. Recurring problems turn the temporary groups into permanent teams.Lateral mechanisms, level 3 of 5: Task forces and teams.Integrating roles. A product, program, or project manager integrates across departments, at first with expert power only.Lateral mechanisms, level 4 of 5: Integrating roles and managerial linking roles.Managerial linking roles. The integrating manager gains formal power over budgets.Lateral mechanisms, level 4 of 5: Integrating roles and managerial linking roles.Matrix. Two lines of authority are held at once, so some positions report both to a function and to a product or project.Lateral mechanisms, level 5 of 5: Matrix.

His three other strategies, beside the ladder: slack resources, self-contained tasks, and vertical information systems.

Galbraith's order: the processes 'evolve as follows with increases in uncertainty', each taken up when the one before no longer suffices. The figure takes no uncertainty input and shows no cost per step: he gives none, saying only that more lateral relations mean more managerial intensity.

  1. Rules, hierarchy, and goals. Coordination runs through rules and programs, referral up the hierarchy, and goal setting, with no designed lateral links. Level 1 of 5: Hierarchy, rules, and goals only.
  2. Direct contact. Managers who share a problem settle it between themselves. Level 2 of 5: Direct contact and liaison roles.
  3. Liaison roles. Where contact between two departments is heavy, a liaison role is set up to handle it. Level 2 of 5: Direct contact and liaison roles.
  4. Task forces. Temporary groups of representatives from several departments solve shared problems. Level 3 of 5: Task forces and teams.
  5. Teams. Recurring problems turn the temporary groups into permanent teams. Level 3 of 5: Task forces and teams.
  6. Integrating roles. A product, program, or project manager integrates across departments, at first with expert power only. Level 4 of 5: Integrating roles and managerial linking roles.
  7. Managerial linking roles. The integrating manager gains formal power over budgets. Level 4 of 5: Integrating roles and managerial linking roles.
  8. Matrix. Two lines of authority are held at once, so some positions report both to a function and to a product or project. Level 5 of 5: Matrix.

Galbraith gives an order, not thresholds: as uncertainty rises, each lateral process is taken up when the one before no longer suffices, up to the matrix, and the more of them in use, the greater the managerial intensity. Beside the ladder he names three other strategies: slack resources, self-contained tasks, and vertical information systems.

Source: Galbraith 1974; Galbraith 1973.

The thinking behind it

Henri Fayol, Administration industrielle et générale (1916; Storrs's translation 1949): unity of command and the scalar chain, why functions meet only at the top; Simon (1946) called such principles contradictory proverbs; the human relations school (Roethlisberger and Dickson, Management and the Worker, 1939, ungraded here) found informal groups and supervision shaping output whatever the formal design, findings that reanalyses dispute.

Luther Gulick, Notes on the Theory of Organization (1937): the bases of departmentalization, process among them, which Simon (1946) found conflicting.

Frederick Taylor, The Principles of Scientific Management (1911): scientific management, planning separated from doing; human relations, socio-technical, and labor process critics target its fragmented jobs, though Nyland, Bruce, and Burns (2014), a documentary history of two organizations, qualify the labor-process reading with the Taylor Society's international work for participatory management.

Oliver Williamson, Markets and Hierarchies (1975): the unitary form, scaled up, confounds strategic and operating decisions. Tests of his M-form hypothesis are mixed: Armour and Teece (1978), a multi-firm statistical study in one industry, found its profit edge only while the form spread.

Alfred Chandler, Strategy and Structure (1962): structure follows strategy, from four firms; its causal direction is disputed.

Paul Lawrence and Jay Lorsch, Organization and Environment (1967): differentiation and integration, why functions drift apart.

Jay Galbraith, Designing Complex Organizations (1973), with his 1974 article: uncertainty drives information load, the overload and its remedies.

James Thompson, Organizations in Action (1967): the three kinds of interdependence, and why the form suits pooled.

Raymond Miles and Charles Snow, Organizational Strategy, Structure, and Process (1978): the strategic types, which pair the form with the defender.

Richard Burton and Børge Obel, Strategic Organizational Diagnosis and Design (2004): the multi-contingency model, the source of most fit ratings here.

Ranjay Gulati and Phanish Puranam, "Renewal through Reorganization" (2009): compensatory fit, keeping customer focus through a move into functions, under restrictive conditions.

Also called

U-form, or unitary form (Williamson 1975), and departmental structure. Chandler (1962) writes of the centralized, functionally departmentalized structure; Taylor (1911) of functional management, for the shop-floor variant; Gulick (1937) of organization by major process.

Works cited

On this page, “read” means read by this series: where a line says a work, or part of one, was not read, the series did not read it.

Back to the explorer