Mintzberg's Organizational Configurations

Understanding the Structure of Your Organization

Financial services firms are known for having tight procedures and rigorous control systems. Staff in
design agencies, on the other hand, can sometimes seem to operating as free agents. Big organizations
merge to achieve "synergies", but they sometimes also split divisions out into separate, more agile
companies.

So why are these organizations so different?

The reason for this variety is that an organization's structure can make a real difference to the way it
performs.

That's why some companies achieve success through strict controls and systems, but others that try to
duplicate that structure may suffer terrible results. It's also why a start-up company has to evolve its
structure over time as it grows, and as its strategy and its environment change.

Successful organizations are those that have figured out the best way to integrate and coordinate key
internal and external elements. And they understand the importance of reviewing and redesigning their
structures on an ongoing basis.

But with so many factors and combinations, how do you determine the best structure for your company at
any given time?

According to renowned management theorist Henry Mintzberg, an organization's structure emerges from
the interplay of the organization's strategy, the environmental forces it experiences, and the
organizational structure itself. When these fit together well, they combine to create organizations that can
perform well. When they don't fit, then the organization is likely to experience severe problems.

Different structures arise from the different characteristics of these organizations, and from the different
forces that shape them (which Mintzberg calls the "basic pulls" on an organization). By understanding the
organizational types that Mintzberg defines, you can think about whether your company's structure is well
suited to its conditions. If it isn't, you can start to think about what you need to do to change things.

Mintzberg's Organizational Types

The main successful organizational structures that he identifies are as follows:

 The entrepreneurial organization.

 The machine organization (bureaucracy).
 The professional organization.
 The divisional (diversified) organization.
 The innovative organization ("adhocracy").

We'll look at each of these in more detail.

The Entrepreneurial Organization

This type of organization has a simple, flat structure. It consists of one large unit with one or a few top
managers. The organization is relatively unstructured and informal compared with other types of
organization, and the lack of standardized systems allows the organization to be flexible.

A young company that's tightly controlled by the owner is the most common example of this type of
organization. However, a particularly strong leader may be able to sustain an entrepreneurial organization
as it grows, and when large companies face hostile conditions, they can revert to this structure to keep
strict control from the top.

The entrepreneurial organization is fast, flexible, and lean, and it's a model that many companies want to
copy. However, as organizations grow, this structure can be inadequate as decision-makers can become
so overwhelmed that they start making bad decisions. This is when they need to start sharing power and
decision-making. Also, when a company's success depends on one or two individuals, there's significant
risk if they sell up, move on to new entrepreneurial ventures, or retire.

The Machine Organization (Bureaucracy)

The machine organization is defined by its standardization. Work is very formalized, there are many
routines and procedures, decision-making is centralized, and tasks are grouped by functional
departments. Jobs will be clearly defined; there will be a formal planning process with budgets and audits;
and procedures will regularly be analyzed for efficiency.

The machine organization has a tight vertical structure. Functional lines go all the way to the top, allowing
top managers to maintain centralized control. These organizations can be very efficient, and they rely
heavily on economies of scale for their success. However, the formalization leads to specialization and,
pretty soon, functional units can have conflicting goals that can be inconsistent with overall corporate
objectives.

Large manufacturers are often machine organizations, as are government agencies and service firms that
perform routine tasks. If following procedures and meeting precise specifications are important, then the
machine structure works well.

The Professional Organization

According to Mintzberg, the professional organization is also very bureaucratic. The key difference
between these and machine organizations is that professional organizations rely on highly trained
professionals who demand control of their own work. So, while there's a high degree of specialization,
decision making is decentralized. This structure is typical when the organization contains a large number
of knowledge workers, and it's why it's common in places like schools and universities, and in accounting
and law firms.

The professional organization is complex, and there are lots of rules and procedures. This allows it to
enjoy the efficiency benefits of a machine structure, even though the output is generated by highly trained
professionals who have autonomy and considerable power. Supporting staff within these organizations
typically follow a machine structure.

The clear disadvantage with the professional structure is the lack of control that senior executives can
exercise, because authority and power are spread down through the hierarchy. This can make these
organizations hard to change.

Our article on Professional Services Organizations tells you more about working within this kind of
structure.
The Divisional (Diversified) Organization

If an organization has many different product lines and business units, you'll typically see a divisional
structure in place. A central headquarters supports a number of autonomous divisions that make their
own decisions, and have their own unique structures. You'll often find this type of structure in large and
mature organizations that have a variety of brands, produce a wide range of products, or operate in
different geographical regions. Any of these can form the basis for an autonomous division.

The key benefit of a divisional structure is that it allows line mangers to maintain more control and
accountability than in a machine structure. Also, with day-to-day decision-making decentralized, the
central team can focus on "big picture" strategic plans. This allows them to ensure that the necessary
support structures are in place for success.

A significant weakness is the duplication of resources and activities that go with a divisional structure.
Also, divisions can tend to be in conflict, because they each need to compete for limited resources from
headquarters. And these organizations can be inflexible, so they work best in industries that are stable
and not too complex.

If your strategy includes product or market diversification, this structure can work well, particularly when
the company is too large for effective central decision-making.

The Innovative Organization ("Adhocracy")

The structures discussed so far are best suited to traditional organizations. In new industries, companies
need to innovate and function on an "ad hoc" basis to survive. With these organizations, bureaucracy,
complexity, and centralization are far too limiting.

Filmmaking, consulting, and pharmaceuticals are project-based industries that often use this structure.
Here, companies typically bring in experts from a variety of areas to form a creative, functional team.
Decisions are decentralized, and power is delegated to wherever it's needed. This can make these
organizations very difficult to control!

The clear advantage of adhocracies is that they maintain a central pool of talent from which people can
be drawn at any time to solve problems and work in a highly flexible way. Workers typically move from
team to team as projects are completed, and as new projects develop. Because of this, adhocracies can
respond quickly to change, by bringing together skilled experts able to meet new challenges.

But innovative organizations have challenges. There can be lots of conflict when authority and power are
ambiguous. And dealing with rapid change is stressful for workers, making it difficult to find and keep
talent. However, given the complex and dynamic state of most operating environments, adhocracy is a
common structural choice, and it's popular with young organizations that need the flexibility it allows.

Mintzberg's classification is only one way of looking at the ways in which

organizations are structured. You can find out more about other aspects of
structuring – and its relationship to strategy and growth – in our articles
onMiles and Snow's Organizational Strategies, Porter's Generic Strategies,
and The Greiner Curve.

And read our article on Organization Design to learn more about how to
design your organizational structure, and which common elements to
consider.

Key Points
There's no one "right" organizational structure, so it's important to understand how structure relates to the
variety of attributes in a company. Mintzberg gives us a useful description of common structures that are
appropriate in different circumstances. None of these is necessarily ideal, and they're very simplified
versions of what exists in real life. In fact, it's common for a company to have a combination of elements
of each structural type.

When considering your organizational structure, analyze the environment, assess your internal needs and
capacities, and then make sure your structure is a good fit with your strategy and environment.