13.11.2016.

Lawrence & Lorsch - Contingency Theory

Lawrence, P., and Lorsch, J., "Differentiation and Integration in Complex Organizations"
Administrative Science Quarterly 12, (1967), 1-30.

Summary

In this paper Lawrence and Lorsch develop an open systems theory of how organizations and organizational
sub-units adapt to best meet the demands of their immediate environment. They used interview data from
executives in six chemical processing companies to support the following propositions:

1. Organizations must balance differentiation and integration to be successful. Those companies who manage
to achieve high sub-unit differentiation and yet still maintain high integration between sub-units seem to be
best equipped to adapt to environmental changes.

2. Groups that are organized to perform simpler, more certain tasks (e.g., production groups) usually have
more formal structure than groups focusing on more uncertain tasks (e.g., research and development).

3. The time orientation of sub-groups is primarily dependent on the immediacy of feedback from their
actions. Thus sales and production groups have shorter time orientations than R&D.

4. The goal orientation of sub-units is based relative to the part of the environment that affects them the most.

Comparative study of six organizations in the same industrial environment. The researchers were most
interested in comparing the degree of inegration and differentiation between subgroups in each company, and
how these subgroups related to the environment the firm operated within.

Rather than start with the individual, they decided to start with an ecological view of the organizations and
their environment. They define an organization as a "system of interrelated behaviors of people wha are
performing a task that has been differentiated into several distinct subsystems, each subsystem performing a
secion of the task, adn the efforts of each being integrated to achieve effective performance of the system."

They define differentiation as "the state of segmentation of the organizational systems into subsystems, each
of which tends to develop particular attributes in relation to the requirements posed by it relevant external
environment.".

They define integration as "the process of achieving unity of effort amont the various subsystems in the
accomplishment of the organization's task."

They see basic subsystems as sales, production, and R&D. They segment tasks into sectors for market sub-
environment, technical-economic sub-environment, and scientific sub-environment. Their hypotheis was that
these subsystems would develop differently based how they interact with their environment.

Furthermore, they felt that the varying attributes would be:

1. Degree of Structure. Prior studies showed that more structure helped with simpler tasks, and a more
informal structure was better for more complex, uncertain tasks.

2. Orientation of Members Toward Others. They theorized that subsystems with environments of
moderate certainty would have more people in social interpersonal orientations, and subsystems with either
high or low certainty would have members more task-oriented interpersonal relationships.

3. Time Orientation and Members. Time orientation of members dependent on the time needed to get
definitive feedback from the environment.

4. Goal Orientation of Members: Member of subsystem would develop concern with the primary goals of
coping with their particular environment.
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13.11.2016. Lawrence & Lorsch - Contingency Theory

Based on these differences, they theorized that the more differentiated the subsystems were, the more
difficult it would be to achieve effective integration (and hence cooperation) between them.

Also, they hypothesized that overall performance was dependent on the degree of differentiation in
subsystems consistent with environmental requirement AND an a degree of integration between subsystems
consistent with the environment.

Finally, they hypothesized that when the environment requires high differentiation and integration,
integrative devices (task-groups, planning depts, cross-functional teams, etc.) will emerg.

Research Findings

They did their research in the chemical processing industry, which was going through rapic product changes
and improvements. They got all their data from interviews with top executives at each company.

They found that certainty ranking in the environment was scientific/product change (low certainty), market
situtaion (mod certainty), technical-economic (high certainty). They found that high requesite integration
between sales and research and research and production. There were also two subsystems within research
(applied and fundamental research).

Then they examined the relative levels of the four attributes under study at each company using various
scales:

1. Structure. Production tended to have the highest amount of structure. Fundamental research had least
structure. There was alot of variability between subsystems.

2. Interpersonal Orientation. Data suggested that sales groups were more socially oriented, and production
groups more task oriented.

3, Time Orientation. It was clear that time orientation was related to time for definitive feedback. Sales had
shortest time spans, research had longest time span.

4. Goal Orientation. As expected, sales people were more concerned with market subenvironment, product
with technical-economic. The research people were both in technical-economic and scientific
subenvironments.

Differentiation and Integration

Basically, the data confirmed that highly differentiated subsystems had more difficulty in integration.

Diff and Integ on Performance

By ranking the industry's market performance, and comparing their differentiation and integration scores, the
researchers confirmed that firms with high differentiation and high integration tended to do better than those
with low differentiation and low integration.

In Support of Lawrence & Lorsch -- Exam Question by Keith Rollag

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