Notes on Freeman,J. and M. Hannan. 1975. "Growth and decline processes in organizations.

" ASR #Contingency Theory Ref: Freeman,J. and M. Hannan. 1975. "Growth and decline processes in organizations." ASR 52:215 228.

INTRODUCTION
Administrative intensity
Defined as the relative sizes of two personnel components in organizations: administrative (or "supportive") and production-worker (or "direct") <A/P Ratios> Extant literature, mainly by Blau et al.   Bigger organizations have more highly elaborated structures with regard to both horizontal and vertical differentiation Size --> administrative intensity o Positive: Differentiation (increase administrative intensity)  Elaborate structures produce coordination problems for which the organization compensates by hiring additional administrators. o Negative: Economies of scale  Bigger organizations have previously made investments in organizational patterns required to manage a higher level of work activity.  Larger size makes for a more efficient use of specialized administrative effort. o Overall effect is usually negative: e.g., Hendeshot and James (1972) <the result of this study is opposite>

Cross-sectional analysis V.S. longitudinal analysis
Cross-sectional analysis V.S. longitudinal analysis on inter-relation of organization dimensions: yields different results   Three broad reasons for different results: (1) specification error in the models estimated, (2) differences in the lag structures for certain variables in the model, (3) failure of the equilibrium assumption which underlies cross-sectional analysis For the 3rd reason (Failure of the equilibrium assumption): o It can arise for enormous diversity of reasons. This paper argues one possibility: the process relating the sizes of organizational components may differ in organizational growth as opposed to decline. o If the process of studies are not symmetric in growth and decline, crosssectional analysis mixing growers and decliners will obscure the processes of interest. (Bulk of literature on administrative intensity is crosssectional.)

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Notes on Freeman,J. and M. Hannan. 1975. "Growth and decline processes in organizations." ASR #Contingency Theory

This study
Methodology
  Context: school districts Data set: 768 school districts as samples

Overview of research design
Effects of changes in demand for organizational services (increase/decline enrollment) on various personnel categories (direct, supportive)   IV: Enrollment DV: direct component (teachers) + supportive component <administrative intensity> o Increases in enrollment should have greater effects than declines o Assumption: cutbacks in the supportive component are more costly in the short-run for decision-makers than over-staffing. o ==> Cyclical rises and falls in enrollments--> increases in administrative intensity

Measurement
Measurement of direct and supportive components: expansion or contraction in the number of positions filled by members of the organization's population

Particular hypothesis testing
1. The Direct Component : No. of positions for teachers  Assumption: constant class size (in a particular school district)  H1, supported: Enrollment --> Direct Component (symmetric effect of direct component when growing/declining)  Change in enrollments ought to have proportionate effects on change in number of teachers. 2. The Supportive Component  H2, not supported: Enrollment --> Supportive Component  H3, supported: Direct Component --> Supportive Component  A given increment of decline in enrollment(direct component) will produce a smaller decline in the supportive component than the same increment of growth in enrollment (direct component). 3. Disaggregating the Supportive/Administrative Component  Profesional staff: providing nonteaching services directly to students  Our results indicate that enrollment (E) has no appreciable effect when teachers (T) is controlled, suggesting that the effects of E are channeled through T  Administrators: being responsible for control and finance  The hypothesis of divergence of growers and decliners is supported with respect to the change term but not the autoregression
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Notes on Freeman,J. and M. Hannan. 1975. "Growth and decline processes in organizations." ASR #Contingency Theory

Nonprofessional staff: residual category, no requirement on certificates, such as secretaries, clerks, janitors, school bus drivers, etc.  Identical to Administrator

CONCLUSION
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A/P ratios are too complex to be useful in many analyses and that cross-sectional analysis of organizational demography may be quite misleading. Suggests two complications for the study of organizational structure
 o

o

First, growth and decline are likely to bring about different effects on such structural variables as degree of differentiation (both horizontal and vertical), centralization and formalization. A turbulent environment producing oscillations in demand for the organization's products or services may produce an increase in administrative intensity even if there is no upward trend in the oscillations.

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