Business Organization (Prof. Ricciardi e Prof. Broccardo)

MINZTBERG MODEL

So, every organization can be distinguished on the base of 5 key features:

Strategic Apex: it is the higher level of the company, the governance (which can include CEO and other

officers like CIO, COO, CMO and CFO) and Board of Directors/owners.

Operating Core: which includes production, marketing, sales and supply management/logistics.

Middle Line: it is the link between the two above, here

we have the middle level managers. So, they connect the

decisions of the strategic apex to the production of the

operating core.

Technostructure: it is constituted by all those people

that do not directly produce something but tend to give

order to those people that effectively produce. They take

decision and give instructions.

Supporting Staff: it is constituted by all those people and

department that provide support to the other

departments, they help me to conduct the operating

core etc, (e.g. broken chair, computers ‘errors). These

functions are sometimes outsourced.

So, for example the basic information system is contained in the supporting staff, on the other hand the top

of it is contained in the technostructure.

In the same way, also Research and Development depends on the nature of the company: it can be in the

operating core (if it is the main operations – university) or in the technostructure (if it is not the main

feature – automotive).

Human Resources, instead, are contained in the technostructure only, because they do not just support

(like IT support) but also, they tell people what they have to do (recruiting & training).

The same thing concern audit people.

Support Staff, Middle Line and Technostructure can also be not present in a small company, because they

are not essential, they can be outsourced and if the business is very small, then the CEO can directly

conduct the Operating Core. 11

Now we will analyse several configurations of business, based on their main and generic features which

are: 1) The entrepreneurial organization

2) The machine organization (bureaucracy)

3) The divisional (diversified) organization

4) The professional organization

5) The innovative organization

The Entrepreneurial Organization:

It is a small organization, here the entrepreneur does a lot of things; here we have the strategic apex, the

middle line (which can be absent or very small) and then the operating

core, which is essential.

In such organization we have no technostructure and no support staff.

This kind of business is successful when it is very young, and the number

of problems is affordable. Often the entrepreneur is overwhelmed by

work, because he is in charge to things which are usually carried out by

others.

The key part is the strategic Apex, the main coordination mechanism is

directly supervision and the management style and culture tend to be either authoritarian and paternalistic

or both.

The Machine Organization (Bureaucracy):

Here we have all the 5 features. The key component is the technostructure and the main coordination

mechanism is the operative process standardisation.

The technostructure create the system of rules that shape the whole

organization: they tell people what they have to do; it is very close

to the CEO.

The management style and culture are bureaucratic/formal

rationality.

Basically, it consists in a large company with mass production,

oriented to efficiency, not decentralized. It operates in a stable

environment.

The concept is that everything that is repeated is optimized, so with

the standardization we are able to coordinate better. However,

standardization it is not the only one present here, also hierarchical

coordination is important, but it’s not the main!

This type of configuration is also typical of public administration bodies. Bureaucracy is both an advantage

and a disadvantage (e.g. in crisis period you are not flexible).

The Divisional (Diversified) Organization:

It is a large diversified business, with strong decentralization towards the top and middle management.

Here we have the Strategic Apex and the Middle Line which include some smaller structure inside, some

divisions. Together with the middle line and the strategic apex we have the Technostructure and the

Support Staff. 12

Usually there is a specific manager dedicated to each division, called

division manager or general manager of such division. Thus, this

division inside tend to become independent organization and in some

cases, they actually do, when the company become a corporate.

Here the key part is the middle line, the main coordination mechanism

is the goal and sub-goals setting system.

The Management style and culture is defined as participatory/flexible

method.

In the strategy about the products is in the middle line, while in the Strategic Apex, financial decision and

goals are settled and a portfolio strategy is applied: to open close a branch or a division.

The more the business is differentiated the more the structure is near a corporate structure, so the

divisions are independent.

The Professional Organization:

It is very different from the previous configuration.

It contains many professionals in its operating core. They are high skills – trained people that work with

autonomy (lawyer, architect and doctors are examples of professionals). They know what to do, but inputs

are given from outside.

They are companies with professional which often produces services by drawing on “standard programs”.

This is completely different from the Taylorism way to perform a business, there is a high level of

autonomy.

The Management Style and Culture concern the

independency and the Main coordinating

mechanism is the knowledge/skills standardization.

This however does not mean that professionals just

work in these types of organizations (they can also

work in a bureaucratic organization.

For example, the university has as a method to

coordinate the various professionals (professors)

the publication duty of them, so they create teams

etc.

So, the key part of the organization is the Operating Core.

The technostructure is so small because, with such a high level of autonomy, all those rules are not

necessary anymore; however, it is present, because you do need something to control the results (e.g.

teaching evaluation program – Edumeter). The main challenger here is to check the results and can be

carried out also from outside.

On the other hand, the Support Staff is quite big, because we need them to do all the job that is not strictly

professional: in the hospital you do not pay directly the doctor, in the university the administration is not

carried out by professors. 13

The Innovative Organization (adhocracy):

Here there are no boundaries, the organizational configuration is often mixed. They can be companies that

operate on a “project” of the client (operating adhocracy) or companies that innovate on their own

initiative (adhocracy innovative) in very unstable

environment.

Some examples are:

• Symphony orchestra (entrepreneurial

organization: director; professional

organization: orchestra)

• Newspapers (professional organization:

journalists; bureaucracy: printers).

In many cases these organizations are temporary,

till the end of the project.

Technostructure is small because it is the project that tells people what to do, there is no standardization.

The Main Coordinating mechanism is the more flexible possible, the mutual adjustment and the

Management style and culture is the culture of learning and innovation.

The difference between configurations and structures is that:

Configurations are more synthetics and based on the logic while structures are more detailed and explain

how parts are put together. However, both of them concern structure!

14

th

Lecture Five – 10 May

Operating Structure:

Elementary:

It is the basic structure that belongs, usually, to medium small business.

The Management Grouping concerns few functions: grouping is classified by INPUT, in fact the labour is

divided by ability, competences (few functions: production, operational, administration).

In these kinds of firms, it is possible to identify between 2 or 3 levels for what concern the Vertical

st

Development. At the top we can find the owner (1 level) and the second is composed by administration

and production manager.

About the Horizontal Development (span of control), it is not so widespread, because usually we have to

control few employees: it is not so hard to control them in these kinds of companies. If the number of

employees increases, there is a problem: usually, the owner is also the manager and so we have a problem

→

with span of control the owner wants to control all the employees.

Decentralization is very low, the decision-making power is on just one person, so we have a centralized

structure.

Coordination is hierarchical, represented by the owner.

Technostructure and Support Staff are often not present; it is the manager that organize the various

activities in the company so technostructure is not present while the support staff is needed but, at the

same way, not present because external (outsourced).

Management System is normally under-developed and informal, the management control is not present in

a formal way, the top manager just asks the employees. ICT is not developed, and it is present in technical

department or for accountability, but not everywhere (so sectorial information and communication

technology system).

Management Style is authoritarian and paternalistic: the owner takes each kind of decision, like promotion

or other staff, so, the criteria are not written.

The advantages concern flexibility and it is easy to change strategy if things are not going so well.

On the other hand, we have some risks because all is based on the owner, there is not a managerial

approach, succession is a problem in this kind of company (if he dies): vulnerability.

Top

Management

Production Administration

manager manager

15

Plurifunctional Structure:

Management Grouping is classified by INPUT, but especially by the different functional areas, by

departments; in facts if we observe the top level and the middle level it is possible to identify the various

department (marketing, production and logistics, R&D, administrative and human resources). So, we group

the employees under the departments, specialized in different activities.

This kind of structure is adopted by medium companies; for what concern the Vertical Development, here

st

we have 3 or more levels: the 1 is the top management, then we have various department managers and

rd

the 3 level we have managers of one plant and of the other and so on. So, overall the company’s size is

increasing.

Here we have a selective Decentralization: the manager of one department has only the decision-making

power related to his department. For example, the marketing manager will have power on the price, but