Critical reflection of firms highlights a distinct coming together of various actors towards achievement of various ends which involve and rely on social structures, relationships and contexts and associated elements like reputation and mutual interests. What emerges are units of social arrangements geared towards collection action defined by execution of various tasks for individuals and groups as well as coordination between and among them forming a distinct organizational structure or form. This identifies these organization forms as ways of organizing activity which includes three major forms including relational and bureaucratic organizations forms and the market which are distinct in themselves in relation to the aforementioned characteristics. This paper discusses these organizational forms in terms of how they differ from each other as ways of organizing activity.
Relational, Bureaucratic Organization Forms and the Market
Godwyn and Gittell (2011) indicate that the relational organizational form is based on the idea that people are ‘fundamentally social beings and that our identities and understanding of the world around us are formed through interactions with others’. This focus on social interactions in the relational organizational form is underscored by how they allow employees to adapt and continually redefine their tasks as they gain insights from others. Further, it seems as the basis on which the relational organizational form can be differentiated from the bureaucratic organization form or the market as ways of organizing activity. In relation to social interaction, the bureaucratic organization form differs from the relational in that the former is designed in a way that shapes interpersonal communication by purposely limiting lateral connections between employees as they fulfil their roles. Specifically, the shaping of communication dynamics in such a way is indicated as a form of protection of the defining character of the bureaucratic organization form, that is, functional specialization.
Further, Godwyn and Gittell (2011) also affirm that this also allows accommodation of bounded rationality or limited information processing capacity of human actors, with regards to covering all possible contingencies that define varied transactions. The authors also aver that ‘information moves within functional stovepipes and is integrated at the top, while those on the front line work with some autonomy but only within their area of expertise’ (Godwyn and Gittell, 2011). As such, the interaction that can be deduced from this is one that is almost purely vertical taking a top-bottom approach founded on a rigidly defined hierarchical structure that favors functional specialization. This structure and the associated tasks whose accomplishment is based and guided by formal rules, leads to greater coordination at the top as they receive relevant information from various departments and functions which impact the firm while lateral communication is reduced. This aspect of communication is contrasted to one of greater coordination across the organization, which characterizes the relational organization form, instead of only at the top.
Moreover, this greater coordination across the enterprise defined as reciprocal relating that involves relational coordination and leadership between workers and managers highlights holistic and in-depth understanding of functions and their contributions as a whole (Gittell and Douglass, 2012). This is because workers in different functions are empowered to work as a whole by being able to see and understand how their individual parts relate to the whole as opposed to the rigid, seemingly-one-way interactions of the bureaucratic organization form. In general, the bureaucratic organization form is defined by functional specialization, hierarchical structure, formal rules as well as professionalism; which seem to reinforce each other. For example, bureaucratic organizations are defined by a formal hierarchical structure with centralized decision making and planning functions where control and authority flow from top to bottom. This approach is reinforced by a form of administration that is based and guided by formal rules formulated by senior managers and followed by subordinates, those at the bottom, who must rely on their expertise and organization into groups towards firm goal achievement.
The picture presented is one where worker obligations tied to professionalism is defined by formal rules established by those at the top of the hierarchy even though those at the bottom enjoy less autonomy due to their expertise required to fulfil functional roles. Conversely, the relational organization form, also referred to as the network or clan-based organization form, has a different structure of control, authority and communication founded on an interactionist view of social relations. Specifically, it is defined by ‘a network structure of control, authority and communication and a lateral…direction of communication throughout the organization, communication between people of different rank, also resembling consultation rather than command’ (Godwyn & Gittell, 2011). This highlights the differences between the relational and bureaucratic organization forms where the latter is defined by hierarchical structure of control, vertical interactions/communication and professionalism defined by a deliberate impersonal orientation emphasizing treatment of all firm stakeholders equally. Despite various shortcomings of bureaucratic organization forms as well as predictions of replacement by network or clan-based organizational forms, they are shown to hold their ground, as indicated by Olsen (2008), amidst numerous macro and micro-environment factors.
This is affirmed by Alvarez and Ferreira (1995) who indicate bureaucracies are being replaced by network organization forms as the underlying structural arrangement of new organizational form alternatives, driven by changes in competition and consumer demand. These new forms are explicated by Petkova (2015) as including post-bureaucratic (organic-flexible) and impermanent (adhocracy-disposable) organization forms. Characteristics of the market as a way of organizing activity is defined by Powell (1990) as quite distinct from the network or relational and bureaucratic organization forms in relation to elements such as means of communication, normative basis and degree of flexibility, among others. The means of communication defining bureaucracies (routines) and network (relational) organizational forms are contrasted to prices as the means of communication in markets. The normative basis factor contract-property rights (markets) is contrasted to employment relationship (bureaucracy) and complementary strengths (network) while degree of flexibility is high for markets while the other two are low and medium, respectively (Powell, 1990).
The methods of conflict resolution in markets is defined in terms of haggling, where parties (whose amount of commitment between them is considered low) basically have to rely on courts to enforce agreements. On the other hand, supervision and reputational concerns dominate methods of conflict resolution between parties in bureaucracies and network organizational forms where the amount of commitment among parties is rated medium to high (Powell, 1990). While tone or climate in markets are defined by precision and/or suspicion, bureaucracies and networks are formal and open-ended (mutual benefits) while actor preferences or choices are indicated as independent (markets), dependent (bureaucracy) and interdependent (network). Markets are also indicated in a literature review by Godwyn & Gittell (2011) as ‘the best solution when outcomes are easily measured and goals are highly differentiated’ while bureaucracies ‘when outcomes are somewhat easily measured and goals somewhat shared’ and networks ‘when outcomes are not easily measured but goals are strongly shared’. Nonetheless, Powell (1990) indicates that the three ways of organizing activities are defined by characteristics belonging to the others with bureaucracies having market-like features like profit centers, networks having formal rules and markets defined contracts as hierarchical documents.
That organization forms are distinct ways of organizing activities is undeniable especially when they are defined by elements like structures of control, authority and communication towards achievement of some ends which characterize human interaction. Basically, it is evident that the relational and the bureaucratic organization forms as well as the market are quite different but their combination, as indicated by Gittell and Douglass (2012), can address their different shortcomings while strengthening their different merits. Still, the three major organization forms share a few characteristics.
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