Part 3: Open System Design Elements

Differentiation and Integration

Another response to environmental uncertainty is the amognt of differentiation ancl
integration among departments. Organizational differentiation refers to .,rl.re cliffer-
e.nges in cognitive and emotional orientations among managers in different
functional
departments, and the differr:nce in formal strLlcture among these departments.".re
w]-ren the external environrnent is comp,lex ancl rapidly changing, organizatignal
defartments become highly specialized to handle thi uncertaiity"in their external
se<f1o1. Success in each sector requires spe'cial expertise and behavior.
Employees in
an R&D department thus have uniqr-re a[titudes, values, goals, an<1 education that
dislringuish them froin employees in manufacruring or sales departments.
. A study by Paul Lawre,nce and Jay Lorsch examined three organizational
deflar.tments-manufacturing, research, and sales-_in ten corporations.io This study
fo{nd that each department ,evolved toward a different orieniation and structure ro
de{l with specialized parts o,f the externa.l environmenr. Exhibit 4.3 illustrates the
rna]rket, scientific, and manufacti.rring subenvironments identifieil by Lawrence and
Loisch. As shown in the exhjbit, each department inreracted with differenr exrernal
gr{ups. The differences that evolved among departmenrs within the organizations
arf shown in Exhibit 4.4.Ta work effecrrively with the scientific subenuironrnent,
RSpD had a goal of quality work, a long time horizon (up to five years), ar.r infor-
ma]l structure, and task-oriented employr:es. Sales was at the opposite extreme. It
ha{ a goal of customer satisfaction, was oriented toward the shori rerm (rwi1 weeks
or $o), had a very fonnal structure, and rvas socially oriented.
one outcome of high differentiation is tl.rat coordination among depart-
melnts becomes difficult. More time anel resources musr be devoted to achievins

EXHIBIT 4.3
Orgg:nizational ,i
:1.:l

Departments
Diffeientiate to
Meet Needs of
Sq6enviro.nmentS

,tt -*, ', -

' DePartment " t

s,f:;:,iib:j;,*

**t**,",itr
Chapter 4: The External Environment

EXHIBIT 4.4
Differences in Goals
and Orientations
arnong Organizational
Departments

Characteristic ll&D Department Manufacturing Department Sales Department

Goals l,lew developments, quality [.fficient production Customer satisfaction

Time horizon Long Short Short
Interpersonal orientation l/lostly task I ASK Social
Formality of structure l.ow r-righ High

Source: Based on Paul Fi. Lawrence and Jay W. Lorcch, OrEanization and Environtnent (flomewood, lll.: lMin, 1969),23 29

coordir.ration wl-ren attitudes, goals, ar-rd work orientation differ so widely. Integration
is the quality of collaboration atnong departrnents.ar llormal integrators are oftcn
required to coordinate departments. When the environrnent is highly unccrrain, fre-
qr,rent changes require more information processing to achieve horizontal coordination,
so integrators becomc a necessary addition to the organization strlrctrlrc. Sometimes
integrators are called liaison personnel, project rlanagers, brand managers, or coordi-
nators. As illustrated in Exhibit 4.5, organizations with highly uncertain cnvironmenrs
and a highly diffr:rentiated structllre assign about 22 percent of management person-
nel to integration activities, such as serving on cor-nmittees, on task forces, or in liaison
roles.a2 In organizations characterized by very sirnple, stablt: environmcnts, alm<;st no
managers are assigned to integration roles. Exhibit 4.5 shows that, as environmental
uncertainty increases, so does differentiation among deparr:ments; hence, the organi-
zation must assign a larger percentage of managers to coordinating roles.
Lawrence and Lorsch's research concluded that organizations perform better
when the levels of differentiation and integration matcfL thc lcvel of uncertainty
in the environment. Organizations that perforrned well in uncertain environ-
n'rents had high lcvels of both differentiation ancl integ;ration, while tl-rosr: per- Match internal organi-
forrring well in less uncertain environments hacl lower levels of differentiation zation structure to the
exterfial environment,
and integration. lf the external envF
ronment is complex,
make the organlzation
Organic verlius Mechanistic Management Processes str.ucture complex.
Associate a stable
Another respons: to environrnental uncertainty is the amolrnt of formal structure and environment with a
control imposed ,cn employees. Torn Burns and G. M. Stalker observed twenty indlrs- meehanlstic struc-
trial firms in EngJand and discovered tlrat internal rnanagement structure rvas related ture and an unstable
to the external environment.a'r 'When the extcrnal environment was stablc, tl-re internal envlronment with an
or,,grn ic. structure. It
organization was characterized by standard rules, procedures, and a clear hierarchy of
the efier,nal environ'
aLlthority. Organizations were formalized. They were also c,:ntralized, with most deci- men,t ig both comple-\
sions made at the top. Burns and Stalker called this a mecharnistic organization system. and, ohanglng, 'make
In rapidly chLanging environments, the internal organization was much looscr, the organization :

free-flowing, ancl adaptive. Rules and regulations often were not written clown or, if hlghly differentlated
and organic, and
rvritten down, wcrc ignorcd. People had to find their own way thror"rgh tl-re systern
use mechanisms to
to figr-rre out what to do. The hierarchy of authority was not clear. Decision-n-raking achieve coordination
authority was decentralized. Br-rrns and Stalker used the te:rm organic to characterize across departments.
this type of managernent strllctllre.
 Part 3: Open System Design Elements

EXHtEtr 4.5
Environmental
Uncertainty and
Organizational Integrators ,

lndustry P,l,!.9, es Foods Container

Environmenta I uncertainty High Moderate Low

Departmental differentiation High Moderate Low'
Percent management in integrating roles 22o/o !7e/o a%o

Source: Based onJay W. Lorsch and Paul R. Lawrence, "Environmental Factors and Organizational lntegration," Organizationat ptanning: Cases and
Concepts (Homewood, lll.: lrwin and Dorsey, 1972), 45.

Exhibit 4.6 sr.rmmarizes the differences in organic and mechanistic systems. As

environmental uncertainty increases, organizations tend to become rnore organic,
which means decentralizing authority and responsibility to lower levels, encour-
aging employees to take care of problems by working directly with one another,
encouraging teamwork, and taking an informal approach to assigning tasks and
responsibility. T'hus, the organization is n.rore flLrid and is able tcl adapt conrinually
ro changes in the external environrnent.aa Complete the questionnaire in the "How
Do You Fit the Design?" box for some insight into whether you are more suired ro
working in an organic organizati<)n or a rnechanistic one.
The learning organization, described irr Chapter 1, ar.rd the horizontal and virtual
network structures, described in Chapter 3,, are organic organizational forms that are
used by companies to compete in rapidly changing environments. Guiltless Gourmet,
which sells low-fat tortilla chips and otlrer high-quality snack foods, provides an
example. When lar:ge companies like lrrito Lay entered the low-fat snack-food market,
Guiltless Gourmet shifted to a flexible network structure to remain comDetitive. The
company redesigned itself to become basically a full-time marketing tirganizarion,
while production and other activities were,rutsourced. An 18,000-square-foot plant in

EXHtBtr 4.6
Mechan istie:and'.ordanic
Forms,

Me.,E! ai$-tib'! ::',.-rri::1:r'-:::::

: ' :, ,
,.,,r :'.,,,,, Organlo

1. Tasks are broken down into Employees contribute to the

specialized" separate parts. common tasks of the department.
2. Tasks are rigidly defined. Tasks are adjusted and redefined
through employee teamwork.
3. There is a strict hierarchy of 3. There is less hierarchy of authority
authority and control, and there are and control, and there are few rules.
many rures.
4. Knowledge and control of tasks 4. Knowledge and control of tasks
are centralized at the top of the are located anywhere in the
organization. organization.
5. Communication is vertical. 5. Communication is horizontal.

Source: Adapted from Gerald Zaltman, Robert Duncan, anrl Jonny Holbek, innovatlons and Qrganizations
(New York: Wiley, 1973), 131.
 Chapter 4: The External Environment

Austin was closed ancl the workforce clrt frorx 125 to :rbout 10 core people who handle
rnarketing and satles promotions. 'I'he flexible structllr:e allowed Guiltless (iourmct tcl
adapt cluickly to claanging market conditions.ai

Planning, Forecastinrg, and Reliponsilveness

The whole point rrf increasing internal integrarion arrd shilting to more organic pro-
cesses isto enhance the orgarrization's ability to quickly rcspond to sudden changes
in an uncertain environment. It might seem that in an. environment where everything
is changing all tbe time, planning is r-rseless. However, in uncertain cnvironrncnts,
planning and environmental forecasting actr-rally become ,more imporranr as a way

:;:;;:;::::
::=$E

it,,iri::
:::21,111

Does your mind best fit an organization in a cerlain or

uncertain environment? Think back to how you thought Scoring: Give yourself one point for each item you marked
behaved as a student, employee, or in a formal or infor- as, Mostly True. lf you scored less than 5, your mindful.
mal leader position. Please answer whether each follow- n:ss level may be suited to an organization in a stable
ing item was Mostly True or Mostly False for you. rather than unstable environment. A score of 5 or above
suggests a higher level of mindfulness and a better fit for
Mostly Mostly ar organization in an unceftain environment.
True False Interpretation: in an organization in a highly uncertain
errvironment evefihing seems to be changing. In that
1. I always offered comments on my
case, an important quality for a professional employee or
interpretation of data or issues.
mienager is "mindfulness." which includes the qualities
2, I welcomed unusual viewpoints of being open minded and an independent thinker. ln a
of others even if we were working st;]ble environment, an organization will be more "mecha-
under pressure nistic," and a manager without mindfulness may perform
3. I made it a point to attend indus- okay because much work can be done in the traditional
try trade sholvs and company way=:]R.aR. uncertai n environ me nt, everyone needs to facil-
ae.hnnl\ a\/pntq itaternerr thinking, new'ideas, and new ways of working.
4, I explicitly en0ouraged others A high score on this exercise suggests higher mindful-
to express oprposing ideas and ne'sS and a better fit with an "organ[c" orgiqnization in an
arguments. ur,certain environment.
5. I asked "d.umb" questions. Source: These questions are based on ideas from R. l-. Daft and
6. I enjoyed hearing about new R. M. Lengel. Fusion Leadership, Chapter 4 (San Franc,sco. Catif.:
Berrett Koehler, 2000); B. Bass and B. Avolio, Muttifactor Leadership
ideas even when working toward
Questbnnalire, 2nd ed. (Menlo Park, Calif.: l\4ind Garden. Inc); and
a deadline. Karl f. Weick and Kathleen l\,4. Sutcliffe, Managing the lJnexpected:
7. I expressed ar controversial As:;uring High Performance in an Age of ConptZxiiy (San Francisco.
opinion to bosses and peers. Calif.: Jossey.Bass, 20O1).

8. I suggested vrays of improving my

and others u,ays of doing things.