Product divisions, each with its own functions, run their businesses, while a general office sets strategy, allocates capital, and judges results.
What it is
A multidivisional structure groups the firm by product line or business, each division with its own functions and a head who answers for its results. Operating decisions sit in the divisions. Above them a general office, running no business itself, makes strategic and capital decisions and judges divisions by results.
The multidivisional form sets product divisions under a general office that runs no business
Select a unit or the letter to read it; the key above the drawing names the lines and the letter used. One line from the general office carries words, and they hold for all four divisions.
Reports toOStandardization of outputs
Select a unit or a letter to read it. O, standardization of outputs: The results of the work are specified, such as targets or product dimensions, and the method is left to the unit.General office. Layer: General office. Reports to no one. Runs no business itself: it makes the strategic and capital decisions and judges the divisions by results (Chandler 1962). A large number of divisions can report to it, a wide span at the top (Mintzberg 1980), and Williamson (1975) reads it as a miniature capital market inside a hierarchy.Product division. Layer: Product divisions. Reports to General office. By product. Holds most of the functions its product line or business needs, and its head answers for the division's results.Product division. Layer: Product divisions. Reports to General office. By product. Operating decisions sit here, not at the general office (Chandler 1962; Williamson 1975).Product division. Layer: Product divisions. Reports to General office. By product. Mintzberg (1980) argues that divisions are driven toward machine bureaucracy, so formalization is high within them, while the general office governs results; across the form it spans medium to high.Product division. Layer: Product divisions. Reports to General office. By product. Its manager holds Mintzberg's Type C, limited vertical decentralization; he stresses that divisionalization is not the same as decentralization.Division's own functions. Layer: Within each division. Reports to Product division. They report to the division's head. On Mintzberg's (1980) view the divisions share little more than pooled interdependence, so few liaison devices join them; a second view, our reading of Joseph and Ocasio (2012) and Hill, Hitt, and Hoskisson (1992), puts a band from direct contact to task forces and teams.Division's own functions. Layer: Within each division. Reports to Product division. Each division keeps its own line below the general office (Mintzberg 1980).Division's own functions. Layer: Within each division. Reports to Product division. Mintzberg (1980) records some horizontal and vertical specialization, between the headquarters and the divisions.Division's own functions. Layer: Within each division. Reports to Product division. Behavior is formalized here more than at the top, since the general office governs results rather than behavior (Mintzberg 1980).O, standardization of outputs. The results of the work are specified, such as targets or product dimensions, and the method is left to the unit.
The structure in words
- General office
- General office, reports to no one. Runs no business itself: it makes the strategic and capital decisions and judges the divisions by results (Chandler 1962). A large number of divisions can report to it, a wide span at the top (Mintzberg 1980), and Williamson (1975) reads it as a miniature capital market inside a hierarchy.
- Product divisions
- Product division, reports to General office, grouped by product. Holds most of the functions its product line or business needs, and its head answers for the division's results.
- Product division, reports to General office, grouped by product. Operating decisions sit here, not at the general office (Chandler 1962; Williamson 1975).
- Product division, reports to General office, grouped by product. Mintzberg (1980) argues that divisions are driven toward machine bureaucracy, so formalization is high within them, while the general office governs results; across the form it spans medium to high.
- Product division, reports to General office, grouped by product. Its manager holds Mintzberg's Type C, limited vertical decentralization; he stresses that divisionalization is not the same as decentralization.
- Within each division
- Division's own functions, reports to Product division. They report to the division's head. On Mintzberg's (1980) view the divisions share little more than pooled interdependence, so few liaison devices join them; a second view, our reading of Joseph and Ocasio (2012) and Hill, Hitt, and Hoskisson (1992), puts a band from direct contact to task forces and teams.
- Division's own functions, reports to Product division. Each division keeps its own line below the general office (Mintzberg 1980).
- Division's own functions, reports to Product division. Mintzberg (1980) records some horizontal and vertical specialization, between the headquarters and the divisions.
- Division's own functions, reports to Product division. Behavior is formalized here more than at the top, since the general office governs results rather than behavior (Mintzberg 1980).
- By product: coordinated by standardization of outputs.
Each product division holds its own functions and makes its operating decisions, and its head answers for its results. The general office keeps the strategic and capital decisions and coordinates the divisions by standardized outputs, judging them by results.
Source: Chandler 1962, several independent case histories by a historian; Mintzberg 1980, a synthesis of earlier research, offering propositions without a new test; Williamson 1975; Joseph and Ocasio 2012, one historical case study; Hill and colleagues 1992, a survey of many firms.
Across the dimensions (Chandler 1962, several independent case histories by a historian; Mintzberg 1980, a synthesis of earlier research offering propositions without a new test), grouping is by product or purpose and specialization is medium. Standardization and formalization span medium to high, since Mintzberg argues divisions are driven toward machine bureaucracy. Centralization is mixed, with limited vertical decentralization. Layers and span are moderate; the prime coordinating mechanism is standardization of outputs. Mode of exchange spans market and bureaucracy, Williamson's (1975) miniature capital market inside a hierarchy. Differentiation against integration is moderate and boundaries are closed, both our judgment. Lateral mechanisms are contested: hierarchy, rules, and goals alone for Mintzberg; a band from direct contact to task forces and teams, our reading of Joseph and Ocasio (2012) and Hill, Hitt, and Hoskisson (1992).
Where the multidivisional (M-form) by product 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: Product or purpose. Basis: Theory. Divisions are formed by product or business, each charged with serving its own markets. Sources: Chandler 1962; Mintzberg 1980.Specialization: Medium. Basis: Theory. Mintzberg records some horizontal and vertical specialization, between the headquarters and the divisions. Sources: Mintzberg 1980.Standardization and formalization: Medium to high. Basis: Theory. High within divisions, which Mintzberg argues are driven toward machine bureaucracy, while the headquarters governs results rather than behavior. Sources: Mintzberg 1980.Centralization: Mixed. Basis: Theory. The general office keeps strategic and capital decisions and leaves operating decisions to the divisions. Sources: Chandler 1962; Williamson 1975.Layers and span of control: Moderate. Basis: Theory. A large number of divisions can report to one headquarters, a wide span at the top, while each division keeps its own line below. Sources: Mintzberg 1980.Decision rights and the locus of authority: Limited vertical decentralization. Basis: Theory. Mintzberg's Type C, limited, parallel vertical decentralization to the division managers; he stresses that divisionalization is not the same as decentralization. Sources: Mintzberg 1980.Prime coordinating mechanism: Standardization of outputs. Basis: Theory. Standardization of outputs: the headquarters imposes performance standards on the divisions through performance control systems and monitors results. Sources: Mintzberg 1980; Williamson 1975.Lateral mechanisms: Hierarchy, rules, and goals only. Basis: Theory. Few liaison devices, since the divisions share little more than pooled interdependence. Sources: Mintzberg 1980; Joseph and Ocasio 2012; Hill and colleagues 1992. View 2: Direct contact and liaison roles to task forces and teams. GE, the textbook M-form, ran cross-level channels between the corporate office and its business units that made the architecture both differentiated and integrated, and in 184 large firms related diversifiers did better with arrangements that stressed cooperation between business units; the band is a reading of both. Sources: Joseph and Ocasio 2012; Hill and colleagues 1992.Differentiation against integration: Moderate differentiation, some integrating roles. Basis: Judgment. Divisions differ by market, and the general office's staff and controls join them alongside the hierarchy; judgment, since Lawrence and Lorsch studied functional units. Sources: Chandler 1962; Lawrence and Lorsch 1967a.Mode of exchange and control: Market and bureaucracy. Basis: Theory. Williamson reads the general office as a miniature capital market inside a hierarchy that keeps internal controls. Sources: Williamson 1975.Boundary permeability: Closed. Basis: Judgment. Each division is tightly coupled within and loosely coupled to the others, and the firm's edge is held by the general office; judgment. Sources: Mintzberg 1980; Ashkenas and colleagues 1995.
Nine of the eleven levels rest on theory, none on evidence, and two on judgment. One row is contested: Lateral mechanisms.
Source: Chandler 1962, several independent case histories by a historian; Mintzberg 1980, a synthesis of earlier research, offering propositions without a new test; Williamson 1975; Joseph and Ocasio 2012, one historical case study; Hill and colleagues 1992, a survey of many firms; Lawrence and Lorsch 1967a, a multi-firm comparative field study; Ashkenas and colleagues 1995.
Where it came from
Du Pont put product divisions under a general office in September 1921; at General Motors, Chandler credits Sloan with turning Durant's top office into a policy-making general office. Drucker (1946) studied General Motors from within before Chandler documented both firms (1962). The form began in large US industrial firms, first in chemicals and automobiles.
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.
The forms by first year
Schools that treat this form: Transaction cost economics and the M-form hypothesis; the Carnegie school and the attention-based view; Strategy and structure; Structural contingency theory; Configuration theory; Information processing; Strategic choice; Organizational economics: decision rights, authority, and complementarities; Institutional theory; and Computational organization design and search.
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
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- Scandinavian institutionalism1980s to the present
- 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.
- 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.
- 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.
- 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.
- 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
- Functional structure: 1911 to 1937
- Line and staff: 1916 to 1943
- Multidivisional (M-form) by product: 1920s practice; named and analyzed 1962 to 1975
- Machine bureaucracy: 1922 (Weber); 1979 (Mintzberg)
- Divisional by customer or market segment: 1937; 2005
- Matrix organization: 1950s to 1960s practice; analyzed 1971 to 1977
- Co-determined organization: 1951 to 1976 (the laws); 1984 to 2022 (the main studies)
- Socio-technical autonomous work groups: 1951 to 1965
- Stratified hierarchy (requisite organization): 1951 to 1989
- Cooperative organization: 1958 to 1999
- Linking-pin organization (System 4): 1961 to 1967
- Divisional by region: 1962 to 1972
- Adhocracy (innovative organization): 1968 to 1979
- J-form (the Japanese firm): 1968 to 1990
- Professional bureaucracy: 1968 to 1979
- Holding company (H-form): 1972 to 1975; 1987
- Ambidextrous organization: 1976 to 2004
- Simple structure: 1979
- Hybrid structure: 1980 to the present
- Missionary (ideological) organization: 1980 to 1989
- Network, modular, and virtual organization: 1986 to 1990
- Transnational and multidimensional organization: 1987 to 1989
- Business group (keiretsu, chaebol, family house): 1988 to 2007
- Shamrock organization: 1988 to 1989
- Federal organization: 1989 to 1992
- Self-managing organization (less-hierarchical forms): 1989 to 2017
- Boundaryless organization: 1990 to 1995
- Front-back organization: 1990s to 2007
- Professional partnership (P2 form): 1990
- The corporate center and shared services: 1991 to 2000
- Internal market organization: 1993 to 1994
- Process (horizontal) organization: 1993 to 1999
- Cellular organization: 1994 to 1997
- Hypertext organization: 1994 to 1995
- Team-based organization: 1995
- Project-based organization: 2000 to 2006
- Agile at scale: 2001 to 2016
- Distributed (all-remote) organization: 2002 to 2021
- Open-source and community-based organization: 2002 to 2007
- Algorithmically managed organization: 2015 to 2020
- 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.
It answered a central office overloaded with operating decisions about many businesses. Williamson (1975) made the history a theory, the M-form hypothesis, against the unitary form, whose central office makes both kinds of decision.
In Japan, Hiramoto (2000), one historical case study in Japanese, dates Matsushita Electric's divisional restructuring to 1933, which it calls Japan's earliest, and its multidivisional structure to March 1934.
Where it fits
Five of the twelve ratings rest on theory, five on our judgment, and two on evidence. Burton and Obel (2004) is the most developed scholarly fit model; its rules are untested propositions.
The multidivisional (M-form) by product 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. Divisions each carry their own functions, which only a large firm can afford; the form exists to unload a general office that has grown too big to run every business. Basis: Theory. Grade: conceptual only, no empirical test. Sources: Mintzberg 1980; Williamson 1975; Chandler 1962; Cable and Dirrheimer 1983; Armour and Teece 1978; Hoskisson and colleagues 1993. View 1: Small strain, Medium partial, Large fits. The M-form economizes on bounded rationality in large firms whose general office is overloaded (Williamson 1975), and growth brought new administrative needs (Chandler 1962). Sources: Williamson 1975; Chandler 1962; Mintzberg 1980. View 2: Small strain, Medium partial, Large partial. Among the largest West German industrial firms the M-form had a large negative effect on profitability, and in one industry its advantage held only while the form was spreading, so at large size it is not a settled fit. Sources: Cable and Dirrheimer 1983; Armour and Teece 1978.Age. Divisions presuppose several established businesses and general managers able to run them, which young firms rarely have. Basis: Theory. Grade: conceptual only, no empirical test. Sources: Mintzberg 1980; Greiner 1972; Chandler 1962.Environmental uncertainty (unpredictability, dynamism). Self-contained divisions cut what each must share with the rest, which suits stable and shifting markets; whether they also suit fast, unpredictable change is not settled by any work, and one case recentralized as its information load rose. Basis: Judgment. Sources: Galbraith 1973; Burton and Obel 2004; Girod and Whittington 2016; Burton and colleagues 2020a; Miller and Friesen 1984; Burton and colleagues 2015b; Pennings 1975. View 1: Stable fits, Shifting fits, Unpredictable partial. In Burton and Obel's SAS case, the five self-contained business units of 1986 answered businesses with very different strategic demands, and when deregulation and alliances raised its information-processing requirements SAS was recentralized. Sources: Burton and Obel 2004. View 2: Stable fits, Shifting fits, Unpredictable fits. Self-contained tasks are one of the strategies an organization uses to cope with more uncertainty, cutting the information each unit must share. Sources: Galbraith 1973. View 3: Stable fits, Shifting partial, Unpredictable strain. Mintzberg places every divisionalized form, the multidivisional form included, in environments neither very complex nor very dynamic, the conditions it shares with the machine bureaucracy. Sources: Miller and Friesen 1984. View 4: Stable strain, Shifting partial, Unpredictable fits. Burton, Obel, and Håkonsson pair the divisional configuration with the locally stormy environment, which is highly unpredictable, so divisions facing a calm or varied environment sit in different columns of their Table 4.1, which they call a misfit. Sources: Burton and colleagues 2015b.Environmental complexity. Works disagree: the fit model's rules call for divisions where a complex environment splits into segments, while Mintzberg places the divisionalized form in environments neither very complex nor very dynamic. Basis: Theory. Grade: conceptual only, no empirical test. Sources: Burton and Obel 2004; Mintzberg 1980; Miller and Friesen 1984; Pennings 1975. View 1: Simple strain, Moderate partial, Complex fits. Divisions pay off when a complex environment splits into segments each division can read on its own; in a simple environment a functional structure is the better choice. Sources: Burton and Obel 2004. View 2: Simple fits, Moderate partial, Complex strain. The divisionalized form shares the machine bureaucracy's conditions and works best in environments neither very complex nor very dynamic; diversified markets, not a complex environment, call for it. Sources: Mintzberg 1980; Miller and Friesen 1984.Munificence and hostility. Threat tends to constrict control toward the top, and a general office drawn into operating decisions blurs the split between strategy and operations that the form depends on; Burton and Obel raise centralization only under extreme hostility and lower it under high hostility. Basis: Judgment. Sources: Burton and Obel 2004; Staw and colleagues 1981; Williamson 1975.Diversity of products and markets. Works disagree: divisions spread with diversification and suit related and unrelated portfolios on one view, while performance tests found the form's edge positive, absent, or negative, and scope studies found unrelated portfolios doing worse. Basis: Evidence. Grade: a multi-firm empirical study or several independent case studies by scholars. Sources: Chandler 1962; Hill and colleagues 1992; Fligstein 1985; Galan and Sanchez-Bueno 2009; Whittington and colleagues 1999a; Burton and Obel 2004; Williamson 1975; Campa and Kedia 2002; Villalonga 2004; Cable and Dirrheimer 1983; Armour and Teece 1978; Habib and Victor 1991; Palich and colleagues 2000; Berger and Ofek 1995. View 1: Single or dominant business strain, Related diversification fits, Unrelated diversification fits. Product divisions under a general office spread with diversification, and related diversifiers did better with cooperative controls, unrelated ones with competitive controls; the diversification discount shrinks or turns to a premium once self-selection and measurement are corrected. Sources: Chandler 1962; Hill and colleagues 1992; Fligstein 1985; Galan and Sanchez-Bueno 2009; Williamson 1975; Burton and Obel 2004; Campa and Kedia 2002; Villalonga 2004. View 2: Single or dominant business partial, Related diversification partial, Unrelated diversification partial. In performance tests the form's effect has been positive, absent, and negative: in West Germany it was large and negative and hardly changed with related or unrelated strategy, in petroleum its edge vanished once the form had spread, and among multinationals strategy-structure fit had no effect on service firms' performance. Sources: Cable and Dirrheimer 1983; Armour and Teece 1978; Habib and Victor 1991. View 3: Single or dominant business strain, Related diversification fits, Unrelated diversification partial. Performance rose from a single business to related diversification and fell from related to unrelated, diversified firms lost value against focused ones, and conglomerate strategies were less stable than related diversification. Sources: Palich and colleagues 2000; Berger and Ofek 1995; Whittington and colleagues 1999a.Strategy type. Burton and Obel's 2004 rules prescribe a divisional configuration for an analyzer and a functional one for a defender, while Miles and Snow pair the prospector with a product structure and Burton, Obel, and Håkonsson's later book (2015) fits the divisional configuration to the prospector. Basis: Theory. Grade: conceptual only, no empirical test. Sources: Burton and Obel 2004; Miles and Snow 1978; Burton and colleagues 2015b; Burton and colleagues 2020a. View 1: Defender (exploitation) strain, Analyzer (exploitation and exploration) fits, Prospector (exploration) partial. Divisions are prescribed for analyzers with and without innovation; the prospector's list (simple, ad hoc, matrix, virtual network) leaves them out. Sources: Burton and Obel 2004. View 2: Defender (exploitation) strain, Analyzer (exploitation and exploration) partial, Prospector (exploration) fits. The prospector tends toward a product structure with decentralized control, and the later book (2015) calls the divisional configuration a good fit for the prospector and the matrix for the analyzer. Sources: Miles and Snow 1978; Burton and colleagues 2015b.Technology and routineness. The general office controls outputs and leaves each division to organize its own work, so routineness bears on the divisions' inner structure, not on the choice of divisions. Basis: Judgment. Sources: Williamson 1975; Hickson and colleagues 1969.Interdependence. Divisions that only share capital suit the form; whether links between them break it is disputed, since divisionalization rose with interdependence among tasks and fell only with less decomposable tasks, while Burton and Obel say divisions aim to minimize interdependency. Basis: Evidence. Grade: a multi-firm empirical study or several independent case studies by scholars. Sources: Zhou 2013; Burton and Obel 2004; Thompson 1967; Hill and colleagues 1992; Siggelkow and Levinthal 2003. View 1: Pooled fits, Sequential fits, Reciprocal partial. Divisionalization rose with the interdependence among tasks and fell only as tasks became less decomposable, related diversifiers did better when their arrangements stressed cooperation between business units, and Thompson has the earlier of two sequentially interdependent divisions sell its output to the later one. Sources: Zhou 2013; Hill and colleagues 1992; Thompson 1967. View 2: Pooled fits, Sequential partial, Reciprocal strain. The divisional configuration aims to minimize the interdependency of its subunits and cannot be used when the technology is not divisible, and in a simulation a permanently decentralized structure did not reach high performance when interactions were pervasive. Sources: Burton and Obel 2004; Siggelkow and Levinthal 2003.Knowledge intensity and professionalization. Headquarters coordinates divisions by performance standards, which need operational goals and push divisions toward machine bureaucracy; professional divisions whose output resists measurement sit less well under that control. Basis: Theory. Grade: conceptual only, no empirical test. Sources: Mintzberg 1980.Global integration pressure. Worldwide product divisions own their product everywhere, so they can integrate it across countries, the structure of Bartlett and Ghoshal's global type; without such pressure the M-form's case rests on product diversity, not geography. Basis: Judgment. Sources: Stopford and Wells 1972; Prahalad and Doz 1987; Habib and Victor 1991; Egelhoff 1988; Devinney and colleagues 2000. View 1: Low partial, Moderate fits, High fits. Worldwide product divisions own their product everywhere, so they can integrate it across countries; without such pressure the M-form's case rests on product diversity, not geography. Sources: Stopford and Wells 1972; Prahalad and Doz 1987. View 2: Low partial, Moderate partial, High partial. Multinationals chose structures consistent with the strategy and structure prescription, yet that fit had no effect on service multinationals' performance and mixed effects for manufacturers, only some of Stopford and Wells's relationships held on re-examination, and global firms can meet these pressures with a variety of configurations. Sources: Habib and Victor 1991; Egelhoff 1988; Devinney and colleagues 2000.Local responsiveness pressure. Worldwide product divisions run each product the same way everywhere, which suits one offering for all countries, Bartlett and Ghoshal's global type; strong pressure to adapt to each country cuts across product lines that own their product everywhere. Basis: Judgment. Sources: Stopford and Wells 1972; Prahalad and Doz 1987; Habib and Victor 1991; Egelhoff 1988; Devinney and colleagues 2000. View 1: Low partial, Moderate partial, High strain. Worldwide product divisions run each product the same way everywhere; strong pressure to adapt to each country cuts across product lines that own their product everywhere. Sources: Stopford and Wells 1972; Prahalad and Doz 1987. View 2: Low partial, Moderate partial, High partial. Multinationals chose structures consistent with the strategy and structure prescription, yet that fit had no effect on service multinationals' performance and mixed effects for manufacturers, only some of Stopford and Wells's relationships held on re-examination, and global firms can meet these pressures with a variety of configurations. Sources: Habib and Victor 1991; Egelhoff 1988; Devinney and colleagues 2000.
With the eight contested cells counted by their first view, the 36 settings show Fits at 15, Partial at 16, and Strain at 5. Judgment is the basis of five of the twelve cells.
Source: Mintzberg 1980, a synthesis of earlier research, offering propositions without a new test; Williamson 1975; Chandler 1962, several independent case histories by a historian; Cable and Dirrheimer 1983, a multi-firm statistical study; Armour and Teece 1978, a multi-firm statistical study in one industry; Hoskisson and colleagues 1993, a review of theory and earlier evidence, with no new test; Greiner 1972, a conceptual model with no systematic test; Galbraith 1973; Burton and Obel 2004; Girod and Whittington 2016, a multi-firm panel study; Burton and colleagues 2020a; Miller and Friesen 1984; Burton and colleagues 2015b; 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; Hill and colleagues 1992, a survey of many firms; Fligstein 1985, a multi-firm historical statistical study; Galan and Sanchez-Bueno 2009, a multi-firm statistical study; Whittington and colleagues 1999a, a multi-country study of large firms over four decades; Campa and Kedia 2002, a multi-firm statistical study; Villalonga 2004, a multi-firm statistical study; Habib and Victor 1991, a multi-firm study of multinationals; Palich and colleagues 2000, a meta-analysis of 55 studies; Berger and Ofek 1995, a multi-firm statistical study; Miles and Snow 1978; Hickson and colleagues 1969, a multi-organization comparative survey; Zhou 2013, an archival study of many US manufacturers over 11 years; Thompson 1967; Siggelkow and Levinthal 2003, a computer simulation, with no field data; Stopford and Wells 1972, a study of 187 U.S. multinational enterprises; Prahalad and Doz 1987; Egelhoff 1988, a multi-firm study of multinationals; Devinney and colleagues 2000, a formal model with no new data.
Your own situation against the multidivisional (M-form) by product
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 bound by heavy rules. Disputed: Burton and Obel 2004; against it, Sine and colleagues 2006; Adler and Borys 1996.
- Sinks the form: Self-contained divisions for a defender. Source: Burton and colleagues 2015b; Burton and colleagues 2020a; Burton and Obel 2004.
- Flagged (its sources disagree): Self-contained divisions for an analyzer. Disputed: Burton and colleagues 2015b; against it, Burton and Obel 2004.
- Flagged (its sources disagree): A small organization with a large one's rules. Disputed: Burton and Obel 2004; against it, Sine and colleagues 2006.
- Flagged (its sources disagree): Nonroutine work bound by procedures. Disputed: Burton and Obel 2004; against it, Adler and colleagues 1999; Adler and Borys 1996; against it, Hickson and colleagues 1969; Child and Mansfield 1972.
- Flagged (its sources disagree): Divisions whose work cannot be separated. Disputed: Burton and colleagues 2015b; Burton and Obel 2004; against it, Hill and colleagues 1992; Siggelkow and Levinthal 2003.
- Flagged (its sources disagree): Heavy rules in an unpredictable environment. Disputed: Burton and Obel 2004; against it, Sine and colleagues 2006; Bigley and Roberts 2001; Adler and Borys 1996.
- Flagged (its sources disagree): Reactor: a defender's structure kept after the environment changed. Disputed: Miles and Snow 1978; Burton and Obel 2004; against it, Sine and colleagues 2006; Bigley and Roberts 2001; Adler and Borys 1996.
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 bound by heavy rules fires when Strategy type at Prospector (exploration): flagged (its sources disagree). Disputed: Burton and Obel 2004; against it, Sine and colleagues 2006; Adler and Borys 1996.
- Self-contained divisions for a defender fires when Strategy type at Defender (exploitation): sinks the form. Source: Burton and colleagues 2015b; Burton and colleagues 2020a; Burton and Obel 2004.
- Self-contained divisions for an analyzer fires when Strategy type at Analyzer (exploitation and exploration): flagged (its sources disagree). Disputed: Burton and colleagues 2015b; against it, Burton and Obel 2004.
- A small organization with a large one's rules fires when Size at Small: flagged (its sources disagree). Disputed: Burton and Obel 2004; against it, Sine and colleagues 2006.
- Nonroutine work bound by procedures fires when Technology and routineness at Nonroutine: flagged (its sources disagree). Disputed: Burton and Obel 2004; against it, Adler and colleagues 1999; Adler and Borys 1996; against it, Hickson and colleagues 1969; Child and Mansfield 1972.
- Divisions whose work cannot be separated fires when Interdependence at Reciprocal: flagged (its sources disagree). Disputed: Burton and colleagues 2015b; Burton and Obel 2004; against it, Hill and colleagues 1992; Siggelkow and Levinthal 2003.
- Heavy rules in an unpredictable environment fires when Environmental uncertainty (unpredictability, dynamism) at Unpredictable: flagged (its sources disagree). Disputed: Burton and Obel 2004; against it, Sine and colleagues 2006; Bigley and Roberts 2001; Adler and Borys 1996.
- Reactor: a defender's structure kept after the environment changed fires when Strategy type at Defender (exploitation) and Environmental uncertainty (unpredictability, dynamism) at Unpredictable: flagged (its sources disagree). Disputed: Miles and Snow 1978; Burton and Obel 2004; against it, Sine and colleagues 2006; Bigley and Roberts 2001; Adler and Borys 1996.
Of the 39 contingency misfit rules, eight can fire for this form. Self-contained divisions for a defender, undisputed, sinks it; two disputed rules against divisions, and five that meet only the high end of its formalization span, flag it.
Source: Burton and Obel 2004; Burton and colleagues 2020a.
- Size. Contested. Williamson (1975), Chandler (1962), and Mintzberg (1980): strain small, partial medium, fits large. Cable and Dirrheimer (1983) and Armour and Teece (1978): partial at large too. Hoskisson, Hill, and Kim (1993), a review of theory and earlier evidence, with no new test, back neither view.
- Age. Fits established and old; partial young, since divisions presuppose established businesses and general managers (Mintzberg 1980; Greiner 1972, a conceptual model with no systematic test; Chandler 1962).
- Environmental uncertainty. Our judgment, contested four ways; no work tests the form here. Burton and Obel's (2004) SAS case, which recentralized as its information load rose: fits stable and shifting, partial unpredictable. Galbraith (1973), for whom self-contained tasks cope with uncertainty: fits throughout. Mintzberg (in Miller and Friesen 1984), for whom the form suits environments neither very complex nor very dynamic: fits stable, partial shifting, strain unpredictable. Burton, Obel, and Håkonsson (2015), pairing divisions with a highly unpredictable environment: the reverse. Both middles are our reading.
- Environmental complexity. Contested. Burton and Obel (2004): strain simple, partial moderate, fits complex where the environment splits into segments divisions can read. Mintzberg (1980, and his 1984 chapter): the reverse, since the form shares the machine bureaucracy's conditions.
- Munificence and hostility. Partial throughout, our judgment, on the premise that under threat the center pulls decisions up (a tendency, not a fit, in Staw, Sandelands, and Dutton 1981, a review of earlier evidence at several levels with no new data), toward Williamson's (1975) corrupted M-form. Against it, Cameron, Kim, and Whetten (1987), a six-year study of 334 institutions of higher education, found centralization affected by turbulence but not by decline. Burton and Obel (2004) lower centralization under high hostility and raise it only under extreme hostility.
- Diversity. Evidence, three views. Chandler (1962), Hill, Hitt, and Hoskisson (1992), Fligstein (1985), Galan and Sanchez-Bueno (2009), a multi-firm statistical study, Williamson (1975), Burton and Obel (2004), Campa and Kedia (2002), and Villalonga (2004): strain single business, our judgment from Chandler's thesis, and fits related and unrelated. Cable and Dirrheimer (1983), Armour and Teece (1978), and Habib and Victor (1991): partial throughout. Berger and Ofek (1995), Whittington, Mayer, and Curto (1999), and Palich, Cardinal, and Miller (2000), a meta-analysis of 55 studies: strain single, fits related, partial unrelated. The first and third views clash: Berger and Ofek found diversification cost 13 to 15 percent of value; Campa and Kedia found the discount drops, sometimes to a premium, once self-selection is modeled, and Villalonga found a premium with census-defined business units (each a multi-firm statistical study). All three, and the meta-analysis, measure scope, not structure. Fligstein and Whittington show structure tracking strategy, not performance.
- Strategy. Contested; both views strain the defender, which both Burton and Obel books make functional. Burton and Obel (2004): fits analyzer, partial prospector. Miles and Snow (1978) and Burton, Obel, and Håkonsson (2015): fits prospector, partial analyzer.
- Technology. Partial throughout, our judgment: the general office measures results however routine the work (Williamson 1975), and operations technology was unrelated to wider structure in larger organizations (Hickson, Pugh, and Pheysey 1969, a multi-organization comparative survey in the English Midlands).
- Interdependence. Evidence, contested. Zhou (2013), an archival study of many US manufacturers over 11 years, Hill, Hitt, and Hoskisson (1992), and Thompson (1967): fits pooled and sequential, partial reciprocal; Zhou shows where firms divisionalize, not whether divisions perform, and reading relatedness as interdependence and sequential work as decomposable is our judgment. Burton and Obel (2004) and Siggelkow and Levinthal (2003), a simulation: fits pooled, partial sequential, strain reciprocal.
- Knowledge intensity. Fits low and moderate; partial high, since performance control needs operational goals (Mintzberg 1980).
- Global integration pressure. Our judgment, contested, on the premise that worldwide product divisions own their product everywhere and so can integrate it across countries: partial low, fits moderate and high. Stopford and Wells (1972), a study of 187 U.S. multinational enterprises, traced stages to area or worldwide product divisions and classified firms by foreign product diversity, not this pressure; Prahalad and Doz (1987) separate integration from responsiveness. Habib and Victor (1991), Egelhoff (1988), a multi-firm study of multinationals, and Devinney, Midgley, and Venaik (2000), a formal model with no new data: partial throughout. Re-examining Stopford and Wells's model, Egelhoff found some relationships held and others did not; Wolf and Egelhoff (2002), a statistical study of 95 German firms, found general support for the traditional fits.
- Local responsiveness pressure. Our judgment, contested, on the same sources: partial low and moderate, strain high, since adapting to each country cuts across product lines, or partial throughout.
What it does well
It unloads the top: Chandler's (1962) general executives, freed from operating duties, set strategy and allocate funds, which in Williamson's (1975) theory economizes on bounded rationality and opportunism better than the functional form. Ghoshal and Moran (1996) dissent: the theory's prescriptions are likely wrong and dangerous for managers, since organizations govern some activities by their own logic; Granovetter (1985) held that it undersocializes economic action.
Each business also gets an owner. In Drucker's (1954) federal decentralization, each product business has its own market, product, and profit and loss responsibility.
What it costs
Every division pays for its own functions. Autonomy is bounded: Sengul and Gimeno (2013), a population study of subsidiaries in one country, found that where subsidiaries met the same rivals in several markets, decisions were delegated but rights and resources narrowed.
Cooperation has to be arranged. Hill, Hitt, and Hoskisson (1992), a survey of 184 firms, found related diversifiers doing better when their arrangements stressed cooperation between business units; whether the form itself carries them, through its lateral mechanisms, is contested.
How it fails
How the multidivisional (M-form) by product 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.
How many ties the failure has. Highest: The general office is drawn back into running the divisionsLinked divisions run as if they were separateThe center's response works against the divisions'Regulator overloadSiloed knowledgeModel-world divergence
Select a failure to read its place in the network.The general office is drawn back into running the divisions. Degree 1Linked divisions run as if they were separate. Degree 2The center's response works against the divisions'. Degree 1Regulator overload. Degree 2Siloed knowledge. Degree 1Model-world divergence. Degree 1
| Failure | Degree |
|---|---|
| The general office is drawn back into running the divisions | 1 |
| Linked divisions run as if they were separate | 2 |
| The center's response works against the divisions' | 1 |
| Regulator overload | 2 |
| Siloed knowledge | 1 |
| Model-world divergence | 1 |
Three failure modes name three patterns; Regulator overload is named by two of the three.
Source: Williamson 1975; Burton and colleagues 2015b; Burton and Obel 2004; Joseph and Ocasio 2012, one historical case study; Gaba and Joseph 2013, a multi-firm quantitative study in one industry.
The general office is drawn back into running the divisions. Williamson (1975) calls this the corrupted multidivisional: general management becomes extensively involved in operating affairs, and the overload returns (regulator overload). Freeland (1996), one historical case study, dissents: General Motors long violated the axioms of efficient organization on purpose, to create managerial consent.
Linked divisions run as if they were separate. When divisions' work feeds back and forth, the executive above drowns in coordinating details, a proposition of Burton, Obel, and Håkonsson (2015). Joseph and Ocasio (2012), one historical case study of General Electric, found periods when an elaborate system failed to coordinate corporate and business unit agendas.
The center's response works against the divisions'. Gaba and Joseph (2013), a multi-firm quantitative study in one industry, found business units answering poor performance with new products while corporate-level responses cut them. Calling this model and world divergence is our reading.
For a defender, which needs intense information sharing, self-contained divisions trip one undisputed misfit rule (Burton, Obel, and Håkonsson 2015). Three fire disputed: divisions for an analyzer, a misfit in the 2015 book that the 2004 rules recommend; divisions whose work cannot be separated, disputed by Hill, Hitt, and Hoskisson's cooperative arrangements and Siggelkow and Levinthal's simulation; and, at the formal end of the span and as our judgment, a defender's rule-bound structure kept after the environment turned unpredictable, a route to the reactor in Miles and Snow (1978), its rule-bound half disputed like the change rule. Four disputed rules fire against heavy formalization under a prospector, small size, nonroutine work, or unpredictable change.
Sine, Mitsuhashi, and Kirsch (2006), a quantitative study of new ventures in one sector, found more formalized founding teams doing better, against all but the nonroutine rule; Adler and Borys (1996), a conceptual argument separating enabling from coercive formalization, dispute all but the size rule; and against the change rule Bigley and Roberts (2001), one inductive case study, found a bureaucratic incident command system producing flexible temporary organizations. Against the nonroutine rule, Adler, Goldoftas, and Levine (1999), one case study of a single plant, found NUMMI's bureaucracy handling nonroutine tasks through metaroutines, and in the Aston reappraisal (Hickson, Pugh, and Pheysey 1969; Child and Mansfield 1972, a multi-firm comparative study) technology bore only on structure near the workflow.
What the research found
Armour and Teece (1978), a multi-firm statistical study in one industry, found the form more profitable in petroleum only while it was spreading. Cable and Dirrheimer (1983), a multi-firm statistical study of the largest West German firms, found a large negative effect, which they trace to German institutional and cultural features and partly to recent reorganization. Habib and Victor (1991), a multi-firm study of multinationals, found firms choosing the structures fit prescribes, but fit had no effect on service multinationals' performance and mixed effects for manufacturers. Hoskisson (1987), a multi-firm statistical study of 62 firms, found it raised returns for unrelated diversifiers, lowered them for vertically integrated firms, and had no significant effect for related ones; the form's main effect alone was not significant, and he urges reading his speculations very cautiously. Miller (1986) argued that such studies oversimplify by focusing on diversification and divisionalization and not on configurations; Donaldson (1987), a quantitative study of firms over time, replied, defending contingency theory: propositions on diversification, reorganization, and performance held, though neither contingency determinism nor strategic choice was completely adequate, and he advanced structural adjustment to regain fit.
Fligstein (1985), a multi-firm historical statistical study, found firms changed structure with related or unrelated strategies, presidents from sales or finance, and peers that had changed. Palmer, Jennings, and Zhou (1993), a multi-firm statistical study of adoption among late adopters, 1963 to 1968, found considerable support for an expanded institutional account (ties to adopters) and for key elements of the economic account, and little for the political. Whittington, Mayer, and Curto (1999), a multi-country study over four decades, found the divisional structure coming to predominate in Europe; Kay (2002) read the data as showing the conglomerate more persistent, and Whittington replied.
Rajan and Wulf (2006), a panel study of more than 300 large firms, found fewer levels between division heads and the chief executive and more of them reporting directly and made officers, which they read as delegation, though flattening, they say, is not simply centralization or decentralization. Wulf (2012), a summary for managers of her panel studies, with interviews and time-use data, found some delegation in pay but more control at the top. Qian and Xu's (1993) planned-economy M-form is only a contrast. Most recent is Joseph, Rhee, and Wilson (2023), one firm's longitudinal data from Motorola, which found corporate staff departures mattered most for subunits' recombinant innovation. These searches found no study since 2018 testing the M-form by name.
The evidence ledger holds 44 studies filed under this form.
In practice: one published case
The du Pont Company, as Chandler (1962) describes it, is one historical case study of the move into the form.
Du Pont had diversified into new product lines under a centralized, functionally departmentalized structure. In the first half of 1921, as the postwar recession deepened, it lost money on every product except explosives. After meetings of nearly all its senior executives in late August and early September 1921, the Executive Committee approved a plan for product divisions, and the Board approved it two weeks later.
In September 1921 the company put into effect autonomous, multidepartmental divisions, each with its own functional departments and central office. Above them sat a general office of staff specialists and general executives freed from operating duties to make strategic decisions and allocate funds.
Losses were soon converted into profits. The company never again faced a crisis as severe as that of 1921, and the structure changed little afterward.
Chandler concluded that at du Pont structure followed strategy: diversification created administrative needs that the functional structure could not meet, and the multidivisional structure met them. He presents it as one of four independent creations of the decentralized structure, with General Motors, Standard Oil (New Jersey), and Sears, Roebuck.
Source: Chandler 1962. Strategy and Structure: Chapters in the History of the Industrial Enterprise, MIT Press, Cambridge, MA (xiv and 463 pages); several independent case histories by a historian.
Variants and near relatives
The strategic business unit layer regroups a firm's groups and divisions into the product-market segments it serves, managed as a portfolio (Hall 1978).
The cooperative and competitive M-forms (Hill, Hitt, and Hoskisson 1992) suit related and unrelated diversification.
Williamson's transitional and corrupted M-forms are one form adjusting and one whose general management runs operations.
The global product division gives each worldwide division its product everywhere (Stopford and Wells 1972).
The semi-autonomous public agency runs a public task under its own management while a ministry sets its aims; Pollitt and colleagues (2004) studied such agencies in four countries. New Public Management (Hood 1991), behind much of this devolution, and whole-of-government (Christensen and Lægreid 2007), which answers it, are doctrines, not forms.
Federal decentralization is Drucker's (1954) term for autonomous product businesses, paired with functional decentralization; despite the word, it is divisionalization, not the federal organization, whose center acts on behalf of its units.
The in-house company system (kanpanī-sei) is Sony's 1994 split into a strategic corporate area and eight company areas run like subsidiaries inside one legal entity; Shimotani (2012), a business historian's review, reports that it spread.
The recombinant multidivisional form keeps its divisions but moves their charters (Galunic and Eisenhardt 1996, an inductive field study of ten divisions in one corporation; 2001), inside one firm, unlike the modular organization under network.
The plant within a plant (the focused factory), from Skinner's (1974) practitioner article, is a divisional move inside one site, which Huckman and Zinner (2008), a quantitative study of many sites in one industry, call divisional focus; lacking a general office, its nearest relative is process organization's lean value-stream organization.
The Holding company (H-form), the nearest neighbor, has a center that owns and finances but does not plan or integrate; this form's general office allocates capital among divisions and monitors them strategically.
The multidivisional form beside its nearest neighbor, the holding company
Select a number to fill what it marks in both drawings; the list under them gives the dimensions on which the two profiles differ.
Its general office actively allocates capital among divisions and monitors them strategically, where a holding company's center only owns the businesses and watches their financial returns.
Multidivisional (M-form) by product
Reports toOStandardization of outputs
- The general office keeps the strategic and capital decisions and leaves operating decisions to the divisions; the holding company's parent leaves strategy and operations to each business.
- The general office imposes performance standards on its divisions and monitors their results; the parent's control is financial only, capital in and returns out, standardized outputs at their thinnest.
- The divisions are parts of one firm; the subsidiaries are legally separate companies.
- The multidivisional form is moderate, a wide span at the top over divisions that each keep their own line below; the holding company is flat to moderate, a thin parent with an intermediate holding only in some groups.
Differs on 4 of 11 dimensions
- Standardization and formalization Medium to high; Holding company (H-form): Medium
- Centralization Mixed; Holding company (H-form): Decentralized
- Layers and span of control Moderate; Holding company (H-form): Flat to moderate
- Differentiation against integration Moderate differentiation, some integrating roles; Holding company (H-form): Low differentiation, light integration
In each form a center runs none of the businesses under it and judges them by results. The multidivisional general office allocates capital among its divisions and monitors them strategically; the holding company's parent owns legally separate companies and watches their returns.
Source: Chandler 1962, several independent case histories by a historian; Williamson 1975; Rumelt 1974, a multi-firm study of large corporations; Mintzberg 1980, a synthesis of earlier research, offering propositions without a new test; Belenzon and colleagues 2019, a large multi-group quantitative study.
Moving into or out of it
The classic move in is from functions, after a lag and usually a crisis, as at du Pont. Hoskisson and Galbraith (1985), a time-series study of six firms, found reorganizing to the form improved performance, quantum reorganizations more than incremental ones. Configuration theory expects such large jumps; Donaldson (2001) replies that fits form a continuum and change toward fit is mostly incremental, not quantum. Girod and Whittington (2016), a multi-firm panel study of large US corporations, found sweeping restructuring associated with better performance in general but worse in dynamic environments, where limited reconfiguration did better. Raveendran (2020), a multi-firm panel study of 102 reorganizations in one industry, found more product- or market-based units made a later move back toward function-like units likelier, and more function-like units a sooner move the other way.
Change & Transformation covers running a reorganization.
The thinking behind it
Alfred Chandler, Strategy and Structure (1962): structure follows strategy, from four firms; Hall and Saias (1980) argued that strategy, structure, and environment are closely linked and that structure later constrains strategic choices, and Galan and Sanchez-Bueno (2009) found each drives the other.
Alfred Sloan, My Years with General Motors (1964), a memoir: coordinated decentralization.
Peter Drucker, Concept of the Corporation (1946): decentralization as a principle of the large corporation; The Practice of Management (1954): federal decentralization.
Oliver Williamson, Markets and Hierarchies (1975): the M-form hypothesis and the corrupted M-form.
Henry Mintzberg (1980): the divisionalized form as a configuration coordinated by outputs. Doty, Glick, and Huber (1993), a quantitative test across a sample of organizations, found fit to his types did not predict effectiveness; Ketchen and colleagues (1997), a meta-analysis of 40 tests, found configurations partly explain performance, though it pools strategy types with structures.
Charles Hill and Robert Hoskisson, with coauthors (1992, 1993): cooperative and competitive M-forms, and the debate reviewed.
Neil Fligstein (1985) and Robert Freeland (1996): adoption, and the paradigm case, read beyond efficiency.
Also called
M-form; divisionalized form (Mintzberg 1980); diversified organization; product divisions; divisional form, the name in Mintzberg's (2023) revision. Chandler (1962) writes of the multidivisional and the decentralized structure.
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