GENERIC ISSUES IN RESTRUCTURING

Sooner or later, internal or external changes force every structure to remodel. When the time for restructuring comes, managers need to take account of tensions specific to each structural configuration. Consultants and managers often apply general principles and specific answers without recognizing key differences across architectural forms. Reshaping an adhocracy, for example, is radically different from restructuring a machine bureaucracy, and reweaving a web is a far cry from nudging a professional bureaucracy. Falling victim to the one-best-system or one-size-fits-all mentality is a surefire route to disaster. But the comfort of a well-defined prescription lulls too many managers into a temporary comfort zone. The iceberg looming ahead falls outside their field of vision.

Mintzberg’s imagery suggests general principles to guide restructuring across a range of circumstances. Each major component of his model exerts its own pressures. Restructuring triggers a multidirectional tug-of-war that eventually determines the shape of the structure. Unless various pushes and pulls are acknowledged and managed effectively, the result may be a catastrophe.

The strategic apex—top management—tends to exert centralizing pressures. Through commands, rules, or less obtrusive means, top managers continually try to develop a unified mission or strategy. Deep down, they long for a simple structure they can control. By contrast, middle managers resist control from the top and tend to pull the organization toward balkanization. Navy captains, school principals, department heads, and bureau chiefs become committed to their own domain and seek to protect and enhance their unit’s parochial interests. Tensions between centripetal forces from the top and centrifugal forces from middle management are especially prominent in divisionalized structures but are critical issues in any restructuring effort.

The technostructure exerts pressures to standardize; analysts want to measure and monitor the organization’s progress against well-defined criteria. Depending on the circumstances, they counterbalance (or complement) top administrators, who want to centralize, and middle managers, who seek greater autonomy. Technocrats feel most at home in a machine bureaucracy.

The support staff pulls in the direction of greater collaboration. Its members usually feel happiest when authority is dispersed to small work units. There they can influence, directly and personally, the shape and flow of everyday decisions. They prefer adhocracy. Meanwhile, the operating core seeks to control its own destiny and minimize influence from the other components. Its members often look outside—to a union or to their professional colleagues—for support.

Attempts to restructure must acknowledge the natural tensions among various components. Depending on the configuration—machine bureaucracy, professional bureaucracy, simple structure, divisionalized form, or adhocracy—each component has more or less influence on the final outcome. In a simple structure, the boss has the edge. In machine bureaucracies, the technostructure and strategic apex possess the most clout. In professional bureaucracies, chronic conflict between administrators and professionals is the dominant tension, while members of the technostructure play an important role in the wings. In the adhocracy, a variety of actors can play a pivotal role in shaping the emerging structural patterns.

Beyond internal negotiations lurks a more crucial issue. A structure’s workability ultimately depends on its fit with the organization’s environment and technology. Natural selection weeds out the field, determining survivors and victims. The major players must negotiate a structure that meets the needs of each component and still works in the organization’s environment.

Why Restructure?

Restructuring is a challenging process that consumes time and resources with no guarantee of success. Organizations typically embark on that path when they feel compelled to respond to major problems or opportunities. Various pressures can lead to that conclusion:

• The environment shifts. At American Telephone & Telegraph, a mandated shift from regulated monopoly to a market with multiple competitors required a massive reorganization of the Bell System that played out over decades. When AT&T split off its local telephone companies into regional “Baby Bells,” few anticipated that eventually one of the children (Southwest Bell) would swallow up the parent and appropriate its identity.

• Technology changes. The aircraft industry’s shift from piston to jet engines profoundly affected the relationship between engine and airframe. Some established firms faltered because they underestimated the complexities; Boeing rose to lead the industry because it understood them (Henderson and Clark, 1990).

• Organizations grow. Digital Equipment thrived with a very informal and flexible structure during the company’s early years, but the same structure produced major problems when it grew into a multibillion-dollar corporation.

• Leadership changes. Reorganization is often the first initiative of new leaders. It is a way for them to try to put their stamp on the organization, even if no one else sees a need to restructure.

Miller and Friesen (1984) studied a sample of successful as well as troubled firms undergoing structural change and found that those in trouble typically fell into one of three configurations:

• The impulsive firm: A fast-growing organization, controlled by one individual or a few top people, in which structures and controls have become too primitive and the firm is increasingly out of control. Profits may fall precipitously, and survival may be at stake. Many once-successful entrepreneurial organizations stumble at this stage; they have failed to evolve beyond their simple structure.

• The stagnant bureaucracy: An older, tradition-dominated organization with an obsolete product line. A predictable and placid environment has lulled everyone to sleep, and top management is slavishly committed to old ways. Information systems are too primitive to detect the need for change, and lower-level managers feel ignored and alienated. Many old-line corporations and public bureaucracies fit this group of faltering machine bureaucracies.

• The headless giant: A loosely coupled, divisional organization that has turned into a collection of feudal baronies. The administrative core is weak, and most of the initiative and power resides in autonomous divisions. With little strategy or leadership at the top, the firm is adrift. Collaboration is minimal because departments compete for resources. Decision making is reactive and crisis-oriented. WorldCom is a recent example of how bad things can get in this situation. CEO Bernie Ebbers built the company rapidly from a tiny start-up in Mississippi to a global telecommunications giant through some sixty-five acquisitions. But “for all its talent in buying competitors, the company was not up to the task of merging them. Dozens of conflicting computer systems remained, local network systems were repetitive and failed to work together properly, and billing systems were not coordinated. ‘Don’t think of WorldCom the way you would of other corporations,’ said one person who has worked with the company at a high level for many years. ‘It’s not a company, it’s just a bunch of disparate pieces. It’s simply dysfunctional’” (Eichenwald, 2002c, p. C4).

Miller and Friesen (1984) found that even in troubled organizations, structural change is episodic: long periods of little change are followed by brief episodes of major restructuring. Organizations are reluctant to make major changes because a stable structure reduces confusion and uncertainty, maintains internal consistency, and protects the existing equilibrium. The price of stability is a structure that grows increasingly misaligned with the environment. Eventually, the gap gets so big that a major overhaul is inevitable. Restructuring, in this view, is like spring cleaning: we accumulate debris over months or years until we are finally forced to face up to the mess.