ffi

Prcfacc
T

'l'lrt: application o[ systematic methods to the conduct of busi-

rr,'ss is onc o[ the most striking developments of the present day.
'l lrt: srrt:t:cssful pursuit of business activities is increasingly based
orr <:;rrcfully developed plans and well-ordered arrangements. The
lrorly ol knowledge, called Organization, has become increasingly
lrclpl'rrl in accomplishing the objectives of the enterprise.
'l'his book is an analysis of the development and change of the
olganization structure of the individual company. It is an attempt
Io r:<xnbine the systematic thinking on this subject with the "rule
ol thumb" of practical experience. It essays an integration of the
lorrnal structure of the enterprise with the human forces that
rrrold and are molded by it. Thus it is designed to aid the prac-
I i<:al rnan of affairs as well as the student of organization.
'fhe study is confined largely to the ,organization of manLr-
l;r(:turing companies, with some reference to retail and service
;rr:tivities. Limitations of space and time have made impossible
I ;r dctailcd discussion of such related and important topics as
planning company activities, establishing policies, procedures,
lrrd controls. Each of these subjects merits a study of its orvn.
The main body of the report is divided into two parts: Part I
rlcals with the dynamics of organization. This is an analysis of the
rrrajor organizational problems as they arise at various stages ot
;r company's growth. Part II deals with the mechanics of organi-
.I
z:rtion. It offers detailed guidance for analyzing the existing
5

I
 lrlt('ANl'AllrlN
/\ lr 1'lANNlNl''\Nlrl)lvlll)l'lN(' llll lill\ll''\Nl
rrlrtt( llll(' .lrlrl lllrxlllylllf', ()l r ll'lllBllll4 ll'
lll llrl lrp'lrt ol lltr. lr|rrt
ttr.r.rls rrl tlrr. tttrlivrrlrr,rl
r.stlrlllis|rl,rl l)l;l( l l( ..!t, t., ( (,tll(,1 lll l(, lll(.
( 0nll)illly.
lttttl wtolr'lltt'
l,llrrt:st. l)lrlr.lrlirrrDt.rl;tttrl ('x('(ltll('(l lltt'tr'sr';ttIlt
(). ltirt" Arlrrritlisltlrtivr'
stu(ly ()v(.1.tr lrt:r.i,,.1 (}l lw() yt:lrr,s..firlrrt:s
ltt'l1t;tt itll rt'tg|s
Vicc lrrcsitlcrrt ltrrrl St.r:rt,ttrIy 0l AMA, Ptovirlt:rl
irirlctl ()ll tllc $lllv(.y,
o[ tlrc lrrtljccr,' Clarc Silvir, <rl.tltc AMA st,lrll.,
lrclpcditrclrcckirrgtltctttitttuscl.i[)talldt.clttlitrgtltcllt.trtll.,;tttrt
provided thc itrdcx.
thc AMA Arlvts'
Gratelul tltanks arc cxplcsscd to rrelllbers o[ Acknowledgments
who cvaluatcd Ilttr
ory Committee, listed o" u p"t"ding page'
and executives wlrost:
study in draft torm. The many comPanies
names aPPear on the following Pages
contributed generotrsly
material'
from theii rich experience to the factuil
I, this study, the prirnary
Lewnr,Ncn A' APPInY aim has been t., rrrnrrir{a -
^^*
President
. rr <'; r ga. i za t i on deve r op-
rvir' ,racricar realities. The
;" ; ;;; T::,f X"T;,1'."o1:i:r,",'fi:
had to be drawn, in the first
;rl:rr:., Il.,rn the wisdom of the"";;;;
*r""il",n"rities of the past. These
I::i(:,,lil':I;n},:,scientinc mu.,ug.-",, and trreir rouowers, --*i-i-
z,rr i<,,. I-rrcy rrave:||f,.ff1:*::,?1',:.1R]es of p.oa,
rv(: (:a,not afford now not seen before which
to overlook. ,,"0t
r h <'n. n r oct i fi
; ;;
tlr. urutyris rr,rr. ;[H::] rrf:
:i r,r1."i;j
without the i"'i'"r experience,
;l.,,I,,.I''||ffi::idtas' anarysis and

;:iit ;iT: tn=,,xllf t*?,fi pl,::ri Trtlr*,t;

r i,, r' cr,,,,, ;;*T," H.:,'
!l:j:.ll *,1.' ?1"TffjJ.i::illt
rrr

lrrrsirrr:ss leaders who have _"j. ,frir-p"ssible.

Ir. been our good forturr. ro
s'rrrr: ^as rhe o,tstancring iet trelp and. counsel from
'[
r.ga.ization. The st.dy was
practitioneri and thinkers
in the fierd
'l'
l.:rrvr.t'lrcc A. Applcy, prcsitlent
undertaken at the initiation
of
A ss,r i. I i<,n, .r,i j"","s
of ,i,
:
o. R ice, r r,
;'rrl St'r:rc.ary' At many stagcs, trris ^r*r,ffi.ll1lliu,YJlH:fi ff :
st,dy benefited mrt".i"ny
l"rrr tlrt: grri<larrr;c, rr,.,r,,gi, .,r.r"rp,rraencc^as ancr personal
siorr ol'1,r. (jol. Lyrr<lall discus_
Ur.rvir:k, itlni.,rrurr, Urwick,
Orr & part_
I
 ,|)
8 r,l,ANNrN(; ANr) t)r,tvr,:t.()t,tN(; I'ilr.r ( j()i\il,ANr r,rr,rNr,, \ iluN At:hN()\Vl,l, l)(;l\ll..Nls

ners, one o[ tlrc lolcrrrosl \\,tit('r's irnd plat:titiorrr.rs irr llris lrr.lrl rrr
England. It wr.rs lrt: wlro sullll('stc(l thc study ol or'1-i;rrrizlrtiorr ;rrolr
lems as thcy rrriry alisc:rl v:uiolls stages o[ thc c()ll)l)ilny glowtlr.
A number of issrrcs ()n ()l'ganization were discussed in corlcspclntl-
ence and intervicw witlr (lcrrr:r'al o[ the Army Dwight D. Eisen-
Itr,r l(n'tz, Vicc l'r't'sirl('lll, 'l'ltr' ( ir ttt'tt \\',tlr lr ( lorrrp;rtty
l)rrnt.t,tt' l\'l . N'l nsonr, I't'tsottttt'l I{t'st'lrtt ll l)itt'r'lot, At'tlrsl totl13
( lrrk (lrrrrlratry
l;owr,t,:rr N'lt;()<xrvttt;x, I)irt:r:tot', Ittt.crn;ttiottltl II;rrvt:st.cr (lotttPittly
( lr,.urrv li. Monsr, Vi<:c Prcsitlcnt, Mitltleapolis-II<lrtcyrvcll l{cgtr-

hower, who gave gencrorrsly ol' lris time, especially in regard to l;rtor' (lornpauy
the concept of the "staf{ assisl.ar)t." lr, r,:nuur<;K I{. Pon'l'rn, Vicc I'rcsident, Lester I}. I(night & Asso-

The following companics and in<lividuals gave valuable assist- l i;rt cs

ance through interviews and corrcspondence: forrN l)osl, Managcr, Inclustrial Relations Department, Conti-
rrt'rrtal Oil Company
JoHN J. Bassrll, President, Arnerican Enka Corporation l'ot'r'r,rr( N{. Pownr.r., Organization Planning, Continental Oil
Cvnrr- J. BarH, President, The Cyril Bath Company ( lonrl>any

C. E. BoswoRTrr, Manager, Organization Department, Ford Mo- srrr (lnnrrt,Es RENOLD, Vice President, British Institute of Man-
tor Company :lg('nlcnt; Chairman, Ilen'old and Coventry Chain Co., l,tcl.
Ar,vrN BnowN, Vice President-Finance, Johns-Manville Corpor- L. L. l)unrEy, Managcr, I)cpartment on Organization, Standard
ation ()il (lompany of Calilornia
Elrswonrn IluNrnn, United States Ambassador to Italy, formerly l)ANrr,l, I{rrclans, Assistanl. to tlte Presitlent, Armstrong Cork
President, National Sugar Refining Company ( iornpany

L. BynoN CrrEnnv, Consultant, Management Consultation Serv-
ices Division, General Electric Company
Br,nrnavr J. ConN, Vice President, Decatur Iron and Steel Com-
pany, Inc.
Hanor-n V. Cors, Retired Vice President, Ford, Bacon & Davis,
Inc.
LouNsnunv S. Frsrr, Organization Counsel, Standard Oil Com-
pany of California
O. Roctms FlyNN, Jn., Vice President, Seabrook Farms Company
HrNny lorur II, President, Ford Motor Company
SrR Panrrr;r HArrrlroN, Chairman, Henry Simon (Holdings) Ltd.
Joun M. IIarucocr, Partner, Lehman Brothers
g1p g,111r1,1r,riy IIrl,wonru, Chairman, Unilever Limited
llARol.l) F. Surnnv, Vice President, N4anagement Consultation
St'r'vir:es Division, General Electric Company
Ar.r,ur,:rr P. Sr-oeN, Jn., Chairrnan ,of the Board, General Motors
( lorporation
I. l,'. Sor.ris, Jn., Assistant. to the President and Manager, Central
l)lant, Line Material Company
SrH llnnolo Wrsr, I\,Ianaging Director, Newton Ctrambers & Co.,
Ltd.
l'rrlts ol' thc manuscdpt wcre read and discussed by a group of
,rrg-;rrrization spccialists ntecting from time to time in New York,
irrr lrtrling:

.|. L. IIr,:r'w()rutr, l)irc:t'tor, (lnilcver Limited

(1. If. IIoolr, l,lxccutivc Vicc I)r't'sirlcnt-Operations, United States lr. II. llnecc, Assistant Director, Organization and Staffing,
Stcc'l (iorrrlrlrrry
'I'hc Prudential Insurance Company of America
( lttnHt,t,;s l{. l looti, H., \/icr, I)r't'si<11.nt-Psl's6lnnel, The Chesa-
.f
l). (1. DclucrIIiI(Ty, Supervisor, Organization Planning, Ameri-
pr':rkr' :rrrrl ( )lri,r l{:rilrv:ry ( iorrrpany r:anIIarcl Rrrbber Company
'l'lrc lrrtt' ll,tturr' ,\. llort' ll. A. Iirnr,Iiv,Gcneral Supervisor, Coordination Division,
(:. 1,. IlrrsroN, .f rr,, l'rr':.irlcrrl, l,rrlicrrs Stt,r.l (lorrrlxrny Mt'tr'opolitan Life Insurance Company
 I
lo t,l ANNTN(; ANI) lll, \,t, t.( )t'tN(; 1 il1,. C( )t\il.,\ N \ t )lt(;ANtz/\ t t( )N
1,,. li. lilr zuAutu(:t,1, I\,1;rrrlgcr ol l)r.vt,lo1ln(.nt I,liulrring, S:rlr.s
l)ivisiolr, ( it.rrcral I,iro<ls ( ior'1tor':rt iorr
Il. li. liul,:rinaAN, Assistant lor Organization,
Johns-Manvillc
Corporation
J. I3. JovNr', Assistant to the President, American Enka Corp. Contents
J. E. McCaBE, Secretary, Merck & Co., Inc.
J. G. Nacno, Development Planning Specialisr, Sales Division,
General Foods Corp,oration Page
H. M. SIssoN, Manager, Organization Planning Department, lN.rnoouctlor.r l5
Merck & Co., Inc.
I'ART ONE: Tsr DyNeMrcs oF OnceNrzarrox
- A Study of Organization Problems ar Various Stages of Com-
pany Growth .. . . 25
I Stage I: Determining the Objectives and Dividing the
Work Accordingly 28
. Stage II: Delegating Responsibility: A problem of
Personality 50
Stage III: Further Delegationof Management Functions:
.Span of Control ....: .. 66
Stage IV: Reducing the Executive's Burden:
The Staff Assistant 83
Stage V: Establishing a New Funcrion (Functionalization):
The Staff Specialist . .. . o9

Stage VI: Coordination of Management Functions: Group

Decision-Making . u5
Stage VII: Delegation of Decision-Making:
Decentralization tc I

PART TWO: Tur MncuANrcs oF OnceNrzerrou

L lntroduction . . 17r
II. Deciding to Reorganize 173
III. Gaining Acceptance of the Decision to Reorganize r75
IV. Assigning the Job 178
V. Timing the Organization Change . . .. . .. . . 185
VI. Defining the Present Organization . . 188
VII. Construction of the Ideal Organization . .. . 194
PART TWO: Tun NfucuANICS oF OxcaNlznru>n (:ort'linued)
Pa.ge

VIII. Putting the Organization Plan into Efiect ' 205

IX. The Organization Chart 209

X. Preparing the Organization Manual 213

qol
XI. Gaining Acceptance of the Plan '
235
CONCLUSION
APPENDICES
A. Top Management Job Descriptions 245
r"""' 255
B. Committees
C. Decentralization 27t
D. Content of Major Management Functions ' ' " ' .. 282 Planning and Developirg the
E. Summary of Contents: The Managern'ent Guid'e .. 305
F. Organization Nomenclature in a Large Company .. 306
Company Organizatton
RIBLIOGRAPHY
... 3I0
General Bibliography on Organization
... 3ll
Structure
Part I
.., cll
Part IL...
320
The Content of Major Functions
The Organization of Selected Industries and Services ... 326

New DeveloPments in Organization . ' ...329

331
INDEX
f

Introduction

( ),,,,n*,rnlrorq is a subjcct which needs to be tr,eated not only

rvrtlr r('sl)(:(:1., becausc it is fundamental to company planning,
lrrt \villr lcalism, because it is of value only insofar as it is prac-
trr;rl. l)crlrilps thc following story will make this point clear:
( )n((' tltc king of the cor:kroaches visited the king of the grass-
lroplrcls :rncl complained bitterly about the unpopularity of his
trrlriclts. lirankly, he had come for advice-to find out how to
rrr;rlit. <:ot:kLoaches better liked. The king of the grasshoppers
l,rorrrist:rl to take the matter under advisement. Some weeks later
rlr('tw() kings met again. The king of the grasshoppers came
lortlr with his solution in a pompous fashion. "AIl you cock-
r,r:rllrr:s can easily become popular by becoming grasshoppers,"
Irr' ;rrrrrorrnced. The king of the cockroaches thought this very
1,,,,rrl a<lvice, but he still had one problem: "How can we cock-
r.;rr lrcs become grasshoppers?" he asked. The king of the grass-
lr')l)l)('l's thereupon lost patience and replied: "What a silly ques-
trorr! Wh/, I make policy-I think up the ideas. It's up to my
r,rrlrolrlinates to put them into practicel"
'l'lrr A\IA Study
Irr rrrost of the discussion we hear about organization, there is
too rnlrch generalization based on personal opinions, off-the-cuff
,lrscrvations and hunches; there are too many unverified theories
rvlrir:lr defy systematic analysis. The rules of thumb are useful
15

l6t,I,ANNlN(;ANl)l)1.]vl'tl)|.lN(;llll(ltt\ll.\|l\l)lll:^Nli|,A,l.l()N
only if wc kll()w \vll(:rl :lr)(t ltotv lo lrlr;rly llrr rrr l"rt t'xltttll>lc'
.,Keep your lincs o[ <:orlrrrrrrriculiort sltot l" ;tttrl " l l,ryc it sltort
span;f control" are botft wisc prqr:t'pls, lrttl tlrry lttt';tls, I (:()lltrA-
diCtOry. In shOrt, tgo many cxcctltivcs slltlltk ltlr.ttl otg:tttiz;ttional
problems in terms of what they l>clicvc thcy ttrttr4ltt. lo tkr t'rtt.ltcr
than in terms of what they are doir.g'
For this reason an attempt has been made to ctuplr;tsizc the
realities of organization in AMA's two-year research study of
company orgunizution. In the course of this study, we visited
,o*" +ti companies believed to have harmonious organization
structures. We participated in the work of changing comPany
organizations. We and analyzed over several hundred
"*u-ir"d
or[anization manuals and organizatrort charts. We talked to
and
.oir"sporrded with scores of outstanding thinkers and practi-
tioners on organization, among them General Dwight D' Eisen-
hower; Lt. Colonel Lyndall Urwick of England; T' S' Petersen'
Lewis L. Purkey, Lounsbury Fish and their associates at the
Standard Oil Company of California; L' F' McCollum' President
of the Continental Oil Company; Alfred P' Sloan, Jr" Chairman
oftheBoardofGeneral]\{otorsCorporation;AlvinBrownof
Johns-Manville; Luther Gulick,
Chiet o[ the New York City
-M"rrug.*.nt
Survey; the late Harry Hopf; Henry Ford II, Presi-
dent, Ford Motor Company; J. L. Heyworth, Director' Unilever
Ltd.; and many other Persons too numerous to mention' We
made an extensive survey of the existing literature on organiza-
tion, both American and foreign. We then submitted our study
to a distinguished group of organization specialists for review
and cliscussion. Finally, an AMA cornmittee of company presi-
denrs read and commented on the completed AI\,{A guide to
organization.
Definition of Organization Planning
Organization planning is the Process of defining and grouping
the activities of the enrerprise so that they may be tnost l'ogically
assigne<l :rncl effr:ct.ively exectltcd. It is concerned with the estab-
lisltntcttt <ll'r'clationships atnot.tU thc rtnits so as to fttrther the
.lrjt.r'tivcs ol lltt: cttlt't pt'isc. 'I'llt: followirrg lxrsi<: charactcrist.ir:s
IN l lltlt,t r( :I l( )N t7
ol otglrttiz;rliott slrorrlrl lrr kt'pt irr rrrirr<l in any rliscussion of
ot'grtniz;rt i<ltr llllrrrrirrg:
l. ()rsanization is a plrrnrrirrg ltrot:t:ss. It is concerned with
sctting rrp, rlcvclo; rirrg irn<l tnaintaining a structure or pat-
tcrn of working lclationslrips o[ the pcople within an enter-
prise. It is carricrl on continuously as changes in events,
personalitics and cnvironment require. Thus organization
is dynamic. Howcver, the resulting structure is static-i.e.,
it reflects the organization only as of a given moment of
time.
2. Organization is the determination and assignment of duties
to people so as to obtain the advantages of fixing responsi-
bility and specialization through subdiaision of work.
3. Organization is a plan for integrating or coordinating most
effectively the activities of each part of the enterprise so
tlrat proper relationships are established and maintained
among different work units and so that the total effort of
all people in the enterprise will help accomplish its ob-
jcctives.
4. Organization is a me'ans to an end. Goodorganization should
bc one of the tools of accomplishing the company's objec-
tivcs, but it sl-rould not become an objective in itself.
l' lrr I nrportance of Organization
'
()r'garrization has bcen in existence ever since the first group
ol rrrt'rr lrandcd togcthcr to hunt, to build and to fight. Construct-
rrr11 llrc wontk:rs of t.lrc Ancients, such as the pyramids and the
ll;rrrpiirrg (iarclcns of llal;ylon, required the organization of large
l,rlrol lorct.s. As carly a,s Iliblical times, it was written: "Seest thou
,r nr:ur rliligcnt in Iris ()rg-anization? He shall stand before Kings;
lr,' slr:rll n()t sl.an(l llcforc mean rnen." (Prouer,bs xxii, 29.) The
,'r('.rt in nri('s ol' anti<;rrily srrr:h as Alexander's and Julius Caesar's
,rrrl ,tlrcls lvt'r'c srrlrcllrly orgarrized. The churches, the military
.nr'l tlr('politittrl stalcs lril\,(: o{Ierecl rnuch evidence of man's
,,r,,,rrrir,rt iotr;rl irrgr,rrrrily irrrtl lolly.
\., tirrrr'\v('nl ()lr, nurrr's ar'<:rrrrrulatcd experience was written
ll' tr) I'nll('lris lr'llorvs oll olganizat.ion. Consider, for example,
I
'llll' (r)l\ll'AN\ lltll'ANt/A'l'll)N l|r|lrillrl I Ilr)N
l'l ANNINI; ANll lrl \'l'tl)l'lNl' ll)
Itl
()ttttt t,l'llillltr llt( r| ,r,,rilr .rtrrl tr,,rr cr .,trontir .,lrir'r lit,t.s g0r,s lr l.,tr13 \v:ty l()w:il.(l
,Iti14ltl,l.'rlt.rl,s
.\r,titrtt.t iltltltt,,t't ltt / lt,vt ltt /ltt.rilt,,'r.r , r r1rl,rllrrrrli rts lll|l)()t liilt((..
'trllrtr
()rtl't:ri'tt,g,l,ltt,ir /llttit.t: tttillt ttd'tlit:t: itl l'llc t:tt,st: oI l,lt,tlst:
wlrich gavt' I lrI l.rr lot s tvltir lt tttttsl lrc lltkt'tr itrlo rrt coruil l() (.nsllr'c l ll('
ulut ltattt: ttrtltttltltily ltti'\ttttt'tttl4tTI (l 'ontlotl' 1733) ,rilr \ r\',rl ,rrrrl lrroslrr.r ily ol llrr' (.()nrl)ilny lurvr: lrt:t.otttr: ittr.x,rtsitrgly
su(:h rulcs as tllc lollowing: ,,1111111 r 'llrc rcl;rtivcly sirrr;rlt.
lrr.olllt.rrrs ol llrr: ()wn(.1.-nrilp:rll(,1.
Unclertake no more than you can manage; Itr,rrllrtrlirrli lrrrtrslll lo tlrc rlcrrr;rrt<ls ol'tlrt: rrurr.kt't. Ir:rvu rrrrrlti-
Perform with delight and a kind of unweariness; to ;rlrr rl rrr rlillrr rrlty. i\lorlr.ur nrilnrll(,nlt'rrt is lrrr.gcly tlivol:r:<t lr.6rrr
Have your .,po" your own business and trust not wholly ,r\ rr rrlrrlr, yCt rl rrrrrsl llrkr, irrtO il(:(:()unl. n()t, ()nly lltc owttct.s'
servants;
"y., irr( rr'\r irr its rlccisiorrs, lrrrt :r lros(. ol otlrcr irrflrrcrrt:cs. Its <lrgani-
Be watchful over sffangers; /,rrlrr rrrrrsl lrt'so gr':rrr.rl;ls l() ir(l.illsl to [lrr: vagalics o[ tlrc rrrarkct,
Entrys of things
Trust not your Memoryl but immediately make ,l r ,rrrlrr'rir,r's, l;rlr,r' rrrriorrs :rrrtl crrr;rloyccs, g()vcrnntcntal anrl
\ in the ProPer books; r rr1111111111i1y |r'l:rtiorrslrips, lt'r'lrrrolouy :rnrl invcntions,
:rlcl tlre inr-
At propei times inspect your affairs; lr.rr r .l l.r.igrr lt'l:rt ions. ( )rrly <:;rrc['rrl organization planning
He who observes the Rules laid down' will be
liltely to thrive and
rrr,rl.r'r it lrossilrlt.to rrr;rlslurl lrrrrl rk:;rl adc<ltratcly rvitlr rhis nmlti-
prosPer in the World' Ittrlr ol l:rr lots.
'! lris irrrlr,r'r;rrrr'<' ,l .r'1;-;rniz:rtion
With the development of the study of economics' organization planning may grow with thc.
was treated more systematically' Some
writers' like the great econ- rrr, r,',rsrr11; sizt: ol corrrPanir:s-with the larger numbcr of plants

omist Alfred Marshall, classed organization

with the three basic r.rrrr,llcrl lry rlrrt' Iilrrr lrrrrl tlrc growth in the size o[ plants thcur_
capital' Marshall regarded r.l'r's. As tlrt'(:onrl)auy gr'ows in size, the chief of the operational
factors o[ production, land, labor and
organization as the activity which brings
the three other agents nnrr (1rl;rrrl or' <livisiorr) is lurther removed from heaclquartcr.s
,rrrrl lris ( ()nllol ovt:r poli<:ics that afiect him becomes recluied. on
together into Productive use'
organl- rlr. ,rlr.r' lr:rn<1, tlrc ntrrrrbcl of over-riding uniformities and con-
The increasingly .systematic planning of management It was rr,ls rlr:rr rr)lrsr. lrc a<lhcrcd to is also likely to multiply. Those
zatiol was develop"i atrri'g ihe indrrstrial revolution' rrlr, l;ry rk^vn 1>roccclu.es and policies and receive reports at heacl-
assembled into a usable boJy of knowledge
by the writers on
F' W' Tayl'or' H' L' Gantt (Ir,il t('rs ;rIr: increasingly removed from the "feel of the situation..,
the great trio
scientiflc management, -
ancl their successors, and the work o[
numer- Irrr rr';rsirrg sizc also intr,oduces the staff specialist, possibly with
and F. Gilbreth
- applic.ation' For l,,rr1' rlr:ri.s of command behind him, and the diremma arises
ous executives, so that today it has widespread
participating in the l,.r\\'r'('n lris advisory position to the line and the need to get his
example, more than half of the .companies
have a department or an r,lr',rs ,(('.Ptcrl and carried out. Finally, more systematic organi-
1950-;2 AMA seminars on organization /,rrrrlnrl stlucturing is required to make a success of increasing
An AMA random
individual in charge of organi'ation planning' , \r'(.rivt' participation at all levels through delegation of dc-
companies revealed that
survey of 150 large and iredium-sized , r"r)rr rrrrrking. Tlie growing complexity and specialization
aboutfour-fifithshaveoneoraSeriesoforganizationcharm,and of
manual' lrrr"rrrt'ss I'trnctions thus necessitates more systematic organization
a substantial proportion have an organization
of many writers l,l,rrrrrirre.
The experience o[ the Past and the thinking 'llr. rr.ud for organization planning varies not only in accord-
and practitioners have c'eut"d a body
of knowledge on organiza-
own organizational .rrrr. rvillr the importance of the factors already enumerated, but
tion which may enable its users to solve their rrrrlr rlrr: nature of the company's objectives and business (e.g.,
problems *itt i.,.'""ing success' The
value of organizational
of the firm's tlr. srrrql.-lrroduct versus the multiple-product firm), the complex-
knowledge in improving the accomplishment
 \Nl) l)l Il l lrl'lNli l lll' ll(|l\ll'\N\ olll' \Nl/A',l ll)N
::o l'l ANNlNl,
t.llrrrlrt I lltrN
itics rll llrr' Ptrrtlttr lt,,tt ltlttl st'llirrli PtolrlIttrs' gr'.l1ir;rPlrir:tl 't
lrlr
ity r,r 11 111,,rr irurrrrrrt'r:rlrlr' :rrtilir r:rl ollsr:rclr.s ro lrt:l.t.ct' r:ooperatiotr.
li,rr, tlrt. 1,,.rr,,,,,,litir.s irrv,lyt'rl, irrrliyirltrltl lrtrtl !ll()lll) r ltlr:rr
tlil(lili()lls lrrr,rlll', ()tli;lni/:ttirrr ;rl;utrrinll (.iul lrt'l1r to rt:rncdy some of the
l'or. Irantlliirg llt,opltt lrtr<l ltroltltlllls, illl(l tirt' lristoty
llll(l
lllr r,ilililr)D l() ilr:illy lrrrsint'ss r,r'glrttizltti<ltrs: It may reduce or
oI organiz.atiotl itt ttrc lxrlti<:rrlal itttlttstly'
' llrnr,rt( rlrrPlir':rlirrr ,l r.ll,r'l (r.t:srrltinu in executive manpower
Adaantages ol Organization l'lan'ning * ilrli), rl, lrrv:ry $,itlr "r'r'rl t:r1lr:" (lty shortening lines of commu-
It is rr, ,rr,,n ;rrrrl :rssignirrg rlclirritc rcsponsibility and authority);
There are distinct advantages to organizatior't planning' lil rl rr ,\ r' r r ro|r lirllrt iorr lrct rvccn rlillerent functions (such as manufac-
of value in defining, discussing and evaluating the comPany's rr il r l .r l r;r |kct inu) ; c l irrrinate unneccessary functions (checking
rrr
where rr

objectives. It indicates in clear and easily understood terms'

l

manual rlr, r.rrrlt'rrr:y ,l crrrpilc-builcling through a manpower budget

responsibilities lie' The resulting organization chart and
at a glance or "r. lr.ttt'r' srill, [hr.ugh financial audits); eliminate friction
are like a contour map of a geograPhical area
- rrlrr.ss"ll
r't'rlrrr:t.i.on of the nurnber of levels of management and
with relatively little .ffott un executive can grasP the whole com-
r lr.rr.r, .lol. l,;3^ical and rnore definite allocation of responsibil-
pany structore and his r'elation to it' For this reason the
chart
training devices'
rl' \), tt'rrrl to lcduce nristakcs by placing decision-making nearer
and the manual may constitute excellent r,r rl1,' improvc specialization, and properly balance the
As a conseq.,"rr.. of organization planning' top - executives , \I).ursi()ll ol various rnanagement functions.
','',,;rlcnts;
thus have
may be enabled to drop overloads of responsibility and t )rri;rrrizittion planning^ provides for continuing adaptation in
reviewing' coordina-
more time to devote ,o lo,tg-,t"t planning' ,,rrlcr to nrect changes in people, resources and environment. It
tion, and innovation, or whatever happen to be the company's
,rr,lr irr liccpine'the units of the organization in balance, avoiding
most important activities. Representatives o[ different
depalt-
together in the interest ' \, r'ssi\r(: or deficient strength among the company's departments.
ments may Ue able to work more closely Ilrc r l:rssic example o[ over-preparedness is the armored dinosaur
o[ over-all comPany obiectives' rrlro \r,irs so r,vell protected that he finally failed to,earn a living
As another rlsult, executives may have a greater oPportunlty ltlrr' ;rnalogy cited by Henry S. Dennison in his pathbreaking
to utilize their abilities, plan their own activities' develop and l,',, tl., () rganizati.on Engine ering),
train themselves and' others. Organization planning may provide \\/r' rn;ry summarize the advantages of organization planning in
the basis for estimating manpower resources and requirements tlrc rvor'<ls of the late Dr. H. A. Hopf, as follows: "That a business
and thus enable .o*pu,'y io i*ptove its system of
executive
" ,,ililr()l pcrmanently occllpy levels of effectiveness higher than
succession and replacement, and, in the process'
offer lletter pro-
rlr"s('(:loarly determined by the capacity of its executives is self-
motional opportunities to its younger men' , rirlcrrt, but it is not generally understood that the influence of
with
Organization planning may help to integrate personalities ,,rr1,r'r'ior organization upon the accomplishments of mediocre
human
the Jjectir., oi the enterPrise and make for inrprovcd , rlr rrl.ivcs can raise the enterprise to heights not otherwise attain-
relationships. As a famous sociologist Put it:
"' ' ' Tl':'e is no .rlrlt'."2
reason *hi . . . the labour of supplying society with
all the mate-
both r(i)pyright 1938 by Harry Arthur Hopf, New York. Quoted from an address
rial goods needed for its gt'"'uf-*fort should not become ,1, lirr.rtrl at a joint meeting of the Montreal Branch of the Engineering Institute
agrelable and attractive. There is no necessity of waiting
for the ,,1 (i;rrr:r<la, Nlontreal Personnel Association, Chartered Institute of Secretaries,
',,'ricty of Chartered Accountants of the Province of Quebec, and the Canadian
character' The
slow action of evolution in transforming human ",,rrlt1,
qf Cost Accountants and Industrial Engineers, and published in the Er-
of hu- ' rttr'r't.ittg lournal (Canada), Volume XX, No. 12, Decembei, 1937.
result can easily be brought about by the transformation
developed
man institutions."l Thus ionditions may be consciously
1 Lester [. Ward, Applied Sociology, Ginn & Company'
Boston' 1906' p' 336'
 o
a
(J

+) Cd
ti
CB
F{ x
a
(J

F
-

A Study of Organization Problems at

Various Stages of Company Growth

'
|
',,,
,,,,,.i,,r problems of organization can perhaps best be studied
rl ,l\rr.rrrrit: tel'ms, i.e., as they arise and change rvith the evolu-
I r,il r )l llrt: r:<trnpany. In this dynamic setting the causes and nature

,,1
',rii,rrrizirtion problems can be recognized most easily. Each
,,, rl,f r lrrolrlcm can be analyzed at the stage of the company's
1,r,,,r r11 rvlrr:n it typically arises,l when there are few complications
,l,l tlrl organizational problem is centered about just one factor
,,, ,lr,rrrlic in the compa[y's mode of operation. Just as it is easier
r,',,turly tlrt: rvorkings of dernocracy as they arise in one of the
,r'r,rll torvrrs o[ New England rather than in the United States as
,r r' lr,lr', so it appears to be desirable, in dealing with a subject
,,1 rrrr lr scopc as organization, to isolate and study the major
l,r,'l,l, rrrs irr<liviclually.
I trl.rrizrrriorr strrrlics usrrally are devoted to the study of large
, rl, nt('t l)r'is(: bcr:;rrrsc irtlirrurat.ion about larger companies is
'
,.,l, r,rll1, rrrolt: rvi<lcly rr:<:or'<lcrl ancl more readily available. Be-
,,., ,rl tlris, rrrolc <'rrrplr;rsis rtc:t:<ls lo be placed on organization
I t,rnrrli irr tlr<' srrutllcr li lrrrs. It was at the suggestion clf Lt.
t ,l,,rrr I l,yrrrl;rll llrrvi< li tlrlt Al\,lA rrtt<lcrtook this stttcly of corn-
'lr l, rot rrr;i1,,r'slr,rl llr:tl llu'\('lrrolrlcrns rtctt'ssatily:trisc at tlrc slirgc at which
, ,', .li1' rrrrcrl irr tlris sturly. 'l lrir ir trrcttly lt ntt:llrorl of cxJrosiliott to aitl itr
,'r,'t, ,,r,',nri/;tliorr lrrolrlcrrrs in:t sysl('nr;tli( l;rsltiott. ()llviorrsly, lltt: Ilt:tior orgatt-
,,',r;,r,,l,llnrr rlirrtrlsrrl lrr.rt.rrr:ry;rrirr.:rl ;rlrrrosl.:ttty sllrgc o[ a (:()nrl)iury'c

2lt
',,.1; I't ANNTN(. ,\Nt) trt Il tr)t'tNr, lill (,r)l\il,,\u\ rlt(.\Nt/\ttr)N I iltt(,ANl/A I t()N l.tr()ttl.t,Nts

l)itlli('s ol rlillt'r('ttl si./(':i, ;r:i,t nt(';uts ol rrrrlrr()\'ill' out knr)\\, 1('(lA('()l rl r l\lrr f ()tr SlAt;t,.s (lr, ( lrntt,Arur ( llrrr11, ttt (r ottlittttt,tl)
()t'g[rtlizilti()lt ;r liclrl irr tvlrirlr lrt'lr;rs lnit(l('nr:ri()t (()ntrilrrtliorrs. ,I ,\tr,', (4,,, (tt
It ttl li,ttt ltlrtt,ttr) Ltuu ttl tt,ttttl I,t,,lt!1,111
Many ol tlrc l:ttgt:t' ( ()ntl):lui(:s l;r<:c srrurll.scrrlr' lrrolllt'nrs ill lll('ir' ilntl tl \ l,t)\.\t l,lr Irt1111.11 111.11, ,
ilt l:L
,

subsidiarics ar)(l slr)all units. llowcvcr, llrost: sl:n'ting work in tlr<: I )r'lr.g:r I iorr ol Alor r: [\t;rrr;rgt.rrrr.trr
(l;0 t0() l,rrrrr liotrs: ,\fttttt ol Oottttttl
large firm fintl it dillicult kr vi.srralize the evolrrtionary proccss on I

which their company's present operation is based. Thereforc, it

5(x) l{r'rlrrirrg llrt. l,.xr.r.rrtivr,,s llrrrrk.lr;
(L(l 5(X)) 'l'lrr: Stttl
may be of interest even for large companies to study the various ! / t.ri.slrttt !
1,5(X) l,.st;rlrlis.hirrg- :r Nt.w lirrrr<.riorr
stages of growth, up to and including, of course, their own present (100 ,l(x)) .l.ltc,\tttll (lirrrrr
rion:rliz:rtitnr): Slt)t iuti.st
stage of development. I
5,()(x) ( loollirrirliorr ol A,l:rrr:rgt,ur<,nt. I,.rnrr:
It is proposed, in this book to study the aarious stages ol growth ( l (x) 500) tirrrrs: ()roult l)t,t.i;;io'tt-Alrthittg""
\ ll ,l{i.5,(xx) ..
in representatiue compamies. At each stage a new lactor of organi- l)r'tt'rrrrirrirrg tlrc. I)r:grcc ol l)c;k.g;r
(ovr:r' l"r(X)) ttttr: I )tt.t,tt I utl iztt I i o tt
zation pertinent to that stage uill be analyzed in isolation. It will I

then be related to preuiously noted, factori in organization.

';;ll,l'li;i",,1:iilii;lf-Jl[,,i,i:],11,i,1',',ij rl;1 .,"1,r,,,,,r sru,ric,r. .r
hc scc.,,rr
In this approach it would be ide.al to confine the analysis to ,,,r',,r,rr ,,,g;r,ir;rri,,rr"1,,,,1,r,.,,,,,,,;,y ';;;;i".il
|:,::t:t'ilt
the development and growth of a single company which would ,r,,,,r, r,,,r,rl i,,{: fil.,,,i:,,;:Trr]i:lr.rI,,:i iiij
-i1,. .rir..,.iir,l.i,"r",l,
;,r,lrlr.rrr is, .l
r.,r r,,,r,lr rr.llr.rls .rr,rrrsr.] ,,,ri. ,,.."r.r,.i1y ,i:a.,"
v(.ry rrrrrg'ly,ii"
be representative. Unfortunately, the existing histories of busi- ii,,,ff,,gr."i,ou. Iimitc<l sarnple.
ness enterprise give little or no attention to the problems of
growth in relation to organization. Time limitations and abs,ence
of essential records made it extremely difficult to conduct first-
hand studies of the problems of growth as related to one organi-
zation, though this certainly needs to be done to obtain real
continuity and comparability. Therefore, for our present purposes,
we must focus our study on different businesses at various stages
of growth.
The detailed study of each company to be presented here will
be suplemented at each stage by a summary of the experience of a
number of companies and a general framework of analysis which
will aid in solving the particular organization problem und,er
discussion. In the development from the small one-man business
to the large company, seven major organizational problems arise.
Each of these problems is identified in the accompanying chart
at the approximate stage of company growth at which it arises.
Srvr,N Me;on Srecrs or ColrpeNv Gnowrn
Stage ol g;6st (No. Organizational Problem
Grouth ol Employees) and its Possible Consequences

I c-l Formulation of Objectives: Diaision

(Any size) of Work
II 25 Delegation of Responsibility: The
(10) Accommodation ol Personalities
 llll l)tvtst()N ()tr w()lal(
:Ir
l,r'1 tylrt: ol lrrrr<:tiorrs llt;rl rrrr tsl l)(, (,\(,tlisr.rl.
;s1111
tlr,. ;rlolrr.icl.rlr ol: a storc <lcr:itlcs l,r.l rrs .slry tlr;tl
tlrat. lr<. trt'r,rls ;r s;rlcsrrutrr :rrrrl
,1,'livcry-lrran irr ortlcr l.o
rrrcct l.lrc objc<:t.ivt:.s sr,t.. I Iis orgtrniz;rl.irlrr
r', ;rs lollolvs:

Trlr, W. Torurun Gnocnny Sronr

Owner,Manager
Stage I: Determining the Objectives and
Dividing the Work Salesman
Dclivcryman

\r tlris point, the specific functions should be allocated:

Ouner-manager Salesman Deliueryntan

ILLUSTRATIVE CASES r I lrr: husband) (The wife)
t trrlr,r merchandise
(The chilclren)
1-
J- HE organization structure is a mechanism designed to help in ',, r irrventory minima and
Sell merchandise Deliver orders
Answer phone Open and close
the goals of the enterprise. However small an organization, it rrr;rxima Check on inventory store
must start by determining its objectives. For the resources of any I llll.ol slow_moving in_ Arrange window dis- Keep store clean
organization are limited and must be properly utilized if the com- r,(.trtory and stock short- plays
pany is to survive and to prosper. This requires a formulation of . r
l,;(:s
l,r,t l)rices and discounts
objectives and an assignment of responsitrilities. Allocation of
',rl'(,r'vise selling and sell
responsibilities is essential, even if the organization consists of \n,rrrge advertising
only one man, for he must divide his time as effectively as pos- l',r y lrills
sible. The allocation of responsibilities becomes even more im- I [|l l l1)l expenses
portant when there is more than one person in the organization. lr,'r.P rccords
For responsibilities which are not assigned are likely to be neg- I l,rrrrlle bank account
lected. If no one is specifically charged with the replacernenr of I l,rrrrlle taxes
inventories, for example, many items of merchandise rnay not be I l,rk(: contacts
available to customers. Specific assignment of responsibilities also ll.rrrrllc complaints
assures that they will be placed with those who can exercise them
best. ''iirrrilarly, in the small ma.nfacturing
organization, the basic
Even a small store owner must determine his objectives in " rr'irics must be determinecl as soon as the
order to build his organization. After deciding on location, types objectives are set.
1
"'rr;rll/ these consist of tlvo basic organ ization functions
of customers and merchandise, he must determine sales potentials, ,lrrr ri., and selling pro-
and possibly finance. In the beginning
prospective revenues, and costs. These factors influence the num- r"'r lrrnctions may be exercised ty the rhe
owner, with his rvife'per-
l'| rr)\;rrting as secretary,
28 and with a few workers addedgradualy:
 lr trrt t,itoN ()lr WORK 3I
30 PLANNING AND DEVELOPING THE COMPANY ORGANIZATION
L,rrrsirlt:r banks as friends and as absentee members of the
Tnr F. Srr-ve PmNt SnoP 'l
r r)rrl)lny; their interests to be recognized in the financial

Owner,Manager
Secretary.Bookkeeper
\vor[r, Y,/ w w
As a company grows its objectives can be broken down in
greater detail, as was recently done, for example, in the A. C'
Gilbert Company,l New Haven, Conn. (a medium firm):
Oaer-all obiectiues-
a. of the American Way of Life (opposing monop-
Preservation
oly in any form, whether in industry or labor unions).
b. Being a good citizen in communities of operation; assuming
a share of community responsibilities.
c. Research, development o[ know-how and an ever-advancing
technology.
d. Making the company a better place to work; getting enjoy-
ment out of work; good wages; fair play; recognizing the
dignity of the individual, maintaining a progressive personnel
Program.
Organizational consequences-
a. A limit to the expansion of the organization; absence of tie-in
agreements and other organizational devices which might aid
monopoly.
b. Establishment of a "Department of Relationships"'
c. Establishment of a seParate research dePartment.
d. Establishment of a personnel dePartment.
Financial objectiaes-
The company should make enough profit to:
a. Continually improve plant facilities and working conditions
so that production may become more efficient and work more
pleasant.
b. Provide a reasonable return to common stockholders.
c. Aim toward maiut;rining the sounclest financial structur(:
; ',
,1 ir ics.
t ttt.,trt!tttt()nill nt.elhods of accontplishing these objectiues include-
,r t,,r1rir:rl brr<lget procedures and follow-ups.
w lr r\ rr.rrtr:rlizcd department for the establishment of account-
rr[', ( ()st :rnd buclget controls with additional decentralized
,rlvrsoly (lcl)artments and control agencies.
, \ rr,rrtr':rlizt:tl I'un<l and bank loan procedure,
r r/, r ,,ltltt.lilt:,t
-
.r llrpr,lrr.st r;rr;rlity llrotlucts.
l,'r,rlr,,, r.xclrrsivcly through company organization.
, l\l.rrrrtr,rr:rrrr:c :rrrtl irrrPr.vement of the firm's market position
(lrt(('nt:tl{(' slr;rrr: ol sirlcs in major product markets).
t It
I tt tt t, rt I t t ttI rt I (.)tt,\c(!I1.11(cs-
l lrr,rr, olr.ir,r.rivr:s k:<l t() the organizational establishment o[
(,r) ir . rlrrirlity ( ()lltr()l (lcl)artment; (b) an extensive sales or-
p,rnt/;rtiorr, witlr lrr':rrrchcs in different parts of the country;
t, ) r r.rrtr':rlizcrl rrurr'kct research, marketing budgets, and
r lr,,,r.ly ( (,lll:rlir(:(l rrlrrlrol o[ results.
I ttl,lt, trlrtlitttt,s oltjttlittr:.s
[\l,rrr;rgr.r'iirl .r.w,tk.r.s shall do their share of worthwhile
I tr,tr ;rr tivitir.s :llrrl str.ivc to [urther the good name of the
1,,1111r;111y irr:rll wlrlks,l'lil'c. In the conduct of their personal
lrr.r rl*y slr:rll rkr rrrrhirrl4 t<l bring censure or discreclit to
tlrr' ( lrrrrgxury.
) )t iltt.lt,ttl rttnttl i ttt ltttt'l
llr'r lr.rl l, llrr.r.st;rlrlislrrrcrrt o[ a seParate public rclatiorrs
lrnrr liotr.
ltt, ltttil ttltltt littts
Lrlrlr,rrrr ,rr rlivr,r'silir:rti.rr: 'l'lrrrrrrglr diversity in prorltr<:ts,
'rr rrrn,rl lrllrks;rrrrl v:rllcys r':rrr llr: rnirrirnizetl irnd rrnl'irvorablc
, lr rrrIr'r trr
;rrrlrli. it( ( (.1)l:nl(.(: ,l itny otrc Protlrrt:t lrctlgctt
,t11,ttttttl

lxrssible, witlr p:rrti<:rtlitr clnl>hasis <ltr ntirint:rirrirrg ;r gtxrtl Irr rrrlr.r t, lrrrvirlr. lrrll r.rrrployrrrr:rrt, cxistirrg pl;rrrl- I';rr:ilitit:s
lirpritl ;rositiorr. ,'lr,rll lrl rrrilirlrl lrrlly iurrl srrlr rrrrrrr':rctirrg rkrrrt: sysr.(:runticirlly
r S,.r. :rlso ltrr. t.xrr.llr.rrt oI llrt: (it'ttt't:rl ()lrirtlivcs of Nt:ttr:tgentcttl ,,r,11 r'lr,,r'r lrrrrrrl ;rrlvir;rlrlr. l.t' r(,:rs()ns ol' r.rr;r:rr.iiy, ,,,rrrrarrrry,
^t:ttrnr('nl
:rr1l tlrr. l{rr;rririlr. (irrrrlitiorrr lor I\llrlirtg 'l lrcttt itr 'l'ltr 1lltrrny,rrrttttl ()ttitlr ttl ,,r l,r, Jr ol npcr i;rlirr.rl rrr:rrlrirrr,r,y :trrrl krtow.ltow.
lltc Sl;tttrl.rtrl ()rl (lr)!rrl'.rlry ol (.tlilotttt.t, l!llll, ;r. lill
-
:i? t,t.ANNtN(;,\Nt) tlt\'t,t,rlt,lNt, t'ut, (,()i\l,;\N\ ()tt(;.\Nt./,\.1.1()N 8!
tl I I t t.tt 1 t r' t t,.t
( ) r gr t t t i t rt t i t tt r t : r t tr

I)ivisiort ol ptotlttr'tiorr lvolk irrtr> rlillctr,nt l)rr)(lu(:t <lt:p:rrt.-

ItrI
ffi tl
rncnts; cst.ablishntcrrt ol prrxlrrt:(.iorr lrrrrl <,rrgirrccling contr'()l
r.f iE
departmcllts; coordinat.ioll o[ productiolr ;rrrtl slrlcs through :r
committee of the executives concerned, Ji T{
U'J

Even this broad statement of company objecrives shows how

closely they can be linked to and influence the organization pat-
tern. The organization specialist can neglec[ them only at his Irt 3
own Peril. z
I:!.9 o
GENERAL ANALYSIS 50
!'6 4
sg o
e-
The Diai.sio'n of Basic Company Actiai.ties c
o
()
The alternative methods for dividing the work of a company E
a
o
-9 r
: o z
toward the accomplishment of its objectives are numerous. They t
d
.a
o
t4
include, traditionally, function, product, location, customers,
o
process, equipment, and time. It should be noted that in many --9 Io
!o
companies these various bases of division are combined, and co- oc
t'6 !? q
9E E
F
ordinated by checks and balances. But there is usually one pre- o d3
dominant type of subdivision of the major company activities, I E
.Pi
38 z
I
made by the chief executive officer himself, called "basic sub- t !
'a
.tB
g'i o
-.; B
division," "basic delegation," or "departmentation."
I I? -99
o
z
o
The first step in the division of work is the determination of >B /
o
.EE
the primary responsibilities of the enterprise that is, the pur- t5
ca o
-
pose of the enterprise, and the major functions necessary to ac-
o c
z
€o I
complish it. Thus, in a manufacturing enterprise, production is t
g (,
{o zf
one basic responsibility; in merchandising, it may be advertising;
in public utilities, the maintenance of equipment; in the liquor .l
I
c

business, the determination of credit risk; in flour milling, the \ .4,

d !6
9tJ
4
purchase of flour. g
&
The principal or primary subdivision of tl're activities of an E
d€
enterprise may then be divided on the following bases: o- I .q
UE
l. Function Major subdivision by function, subject-matter or >3 3I
Ib
principal activities is found in many enterprises where actual T
!
control thr,oughout a1l hierarchies and over all locations is exer- !':
o
o
.v
cised by the heads of managerial functions suqh as finance; 3I E

-
production (including plant design, construction and mainte- T.
o.I
nance, purchasing); manufacture; engineering (product design IT
3"
or research, possibly quality control); law (claims, tax laws, cor- E to
-E6
3io $
 3'l l,t.ANNtN(; ANt) t)t.vt,t.()t,lN(; t'ut,: c()t\il,ANl,()lt(;ANtzAtt(,N . , , r! I r,, i r,l \\r,ltl
:t5
l)()titl('trll:rirs); ltrrrrurrr rr.l:rtiorrs (rt'l:rtiorrs to.stot:klrolrlr:rs, t:nt " 't ' lrrtll on(', r)ur or rrrr, olr( \. r,1r 1r;tttt1rrr,, rtt rltq (icIrt:ral
ployccs, c()tullultity, ll()v(:l nln(:rrt); salr:s (rnat'kcting, a<lvcrtising). | ' |,r, Lrlrlr.lt), llrr.rr.lttilr.r,tl(,t r;rlritrt.l
is rrt:rrlr.st,1l;rral.ClyffOm
Many corrrpaincs arc so srrllrlivi<lctl at. tllc t.op. T'his arrang*cmcl)1. r' r ' r rr"r r,rrr)rr'\\{,r rrrrrs ( )r
irr rrrt, 1r',rrtrr:ti,tt of locomo-
has the advantages o[ spcr:i:rlization. More importantly, it shoul<l rlr, r.rlr., .t,trl t,,,ttt), l,(.;tt ;,t. trr;trlt. irt scltarate sections,
make possible adequate tirne for basic long-run planning anrl ,,,1 rrr,l ,r,,,,, rrrlrlr.rl rrr ;trr,rtlrr.r st.t:li,tr; tlrc rotating units
major decision-making and consultation for those in charge ol' , I. rr .rt,tlrlr slrr,lr; trrrtl ( ()utt()l u;r<lgt,ls in still another. are
In
the major management functions. But it may result in inter- 'r "r' 'l "rtrr,l 1i;rr11't'ts ,r irrrirrir. v:r.icty, the necessity for a
departmental jealousies and conflicrs over the limits of authority. ,trr l,r,rlrrr I
1rl;rrrl rr,;rlly ;rrisr.s.
It is also subject to considerable cqnflict among the local plant t, ,r, ,, ilr,\\s tlrr.;rr,rlrr.l ,r.g;,riz:rl.ion at The Kendall Com_
managers in multi-plant organizations. An example of a func- r "'| , rrr,,lrrrrrr srzt rl ( ()rrl);ary wlriclr is famous for its work in
tional type of organization setup is shown in the organization rrrIlrr Iil,ilt.t1,,('lll(.lll.
chart of the Dictaphone Corporation (Figure 1).
There appears to be a certain degree of uniformity in basic
managerial functions of the top organiZation structure, at least in
very large companies, as is shown in the accompanying illustra- ulrrD 0r otltclott
tions of abbreviated organization charrs (Figures 2-4). Of par-
I
ticular interest is the abbreviated organization charr of Standard ra
Oil Company of California (Figure 2), which employs the use of cronut 0f
D€ to t0
the conventional line and staff organization plan and, in addition, rttilottl
identifies in vertical arrangement the following basic functional
,
groups: Policy Making, Administration and Coordination, Stafi
and Service, and Operations.
1 nct ttauoctrt
2. Product Management activities may be grouped on the
l,lI
]ld
basis of the major types of products or services marketed, and sold onu otFtcttt
separately. This kind of grouping is used by some large companies
manufacturing a diverse product line.
At General Foods Corporation and International Harvester
Company, the major subdivisions of work are on a product basis.
Other examples are found in merchandising, automobile, chemi- 3nllourl ,trDilar
cltot, iltcutt a ttottr
cals and meat packing. Grouping by product has the advantage trrl .I

of bringing together and coordinating in one place major activ-

itics rcquired to make a particular product (purchasing, engineer-
ing, prr<lrrr:tion, distriltrrtion, etc.). Such an arrangement provides
I
:r I)ill'tir:rrlarly sorurrl llasis l'or decentralization. It may also make ,.

llossilrlc <:lost: (:()ntl()l :rrrrl accounting cornparability through [' nooucllr tafiurt TrlrttoailIl ot rrtrattaa
( ('nl l ill st;rll' :rgr.lrcics.
FIG. 2. ABBREVIAIED ORGANIZATION CHART
l'lvcrr irr llrr' "rrrorro plorlrr<:1. plants" (as Gcneral R. Johnson,
(STANDARD Otr cot pANy oF cAuFoRNtA)
I'tcsirk'rrt ol .folrrrsorr &.lolrttson, <lcscrillcs thcrn) it may be wise
 fop llonogomoot rl|lr r)tvtst(lN ()lr w()tu( 37

It',lrorvs:r lr:rsir: ()r',llruinrliorr lrrrilt :ll)()lrl tlrtcc tttltjot'l)l'o(ltlcts.

lr ;rlso slrorvs irr trrr int.t'r'csting- wrry tll(: l)l'()visi()r) o[ stall services
Grnrrol Stoff
r, tlrcsc liuc tlivisions, t.lr(: ol)cration ol wlrich is decentralized,
rllrrlc crxl'rlinat.i<ln an(l (:olltr-ol are centralized.
Monogemcnt
'(Gtoopt,
'1. l,ot:ul.ion (also callcd tcrritorial or geographical division or
divitione
ond plont) rlr'1r,rr tnlcntation). Undcr this type of arrangement, all activities

FtG. 3. ABBREVIATED ORGANIZAIION CHARI 1,,'rlolrrrt:d in a particular area are brought together. It is found
(GENERAt MoTORS CORPORATION) l|r ( ()till):ulies serving customers on a national or international

Top Monogemenl President

Salrl hoductlm
froorvu Vlco-?rrddrnl Ms*rrddrnl VlcG'h..ld.r,

lndurhiol
(Um)
Dcporlmcnt Ollltr Offlcr Offtc. Ag.ntt
|ftr Yr* lorton
F]G. 4. ABBREVIATED ORGANIZAIION CHARI
(DU PONT)

lull st ,rul[ #2 ,Y{lll $3 rull ta

STOCKHOLDERS fronllin Glanvilh Wcrtcrly Nowbcrg

OF DIR FIG. 6. IERRITORIAT DIVISION OT ACTIVIIIES

(AT ERICAN FELT COMPANY)

SECRETARY
\r;rl(i-e.g., the liquor business, railroads, chain stores, Iife insur-
ANO iIt( (: companies, the overs,eas branches of motor car and oil com-
ll,urics. The product and locational principles may be combined,
$rts iIlIt rro ltltl rvitlr different factories in difierent locations devoted to the pro-
Ptutn tlLtS flItsxllt DtYtSt0l Drvr!loil! r^iAtll
FUNCTION ^io rlru tion of difierent products (e.g., General Motors).
ofl cl0t 0r
,^rr\ l---.,rrrrs------ 'l'lrc major subdivisions of oil companies are often on a regional
l-.y1y111s113---- l,.rsis, since the natural unit of work centers around the major
luruor 0r tri',lrrll l--ttttotttt -'--- ,,il producing fields. Production and selling or the selling function
,rlorrt:.may often be subdivided on a regional basis. The advantage
,,1 srrch a division is that the power of decision-making is concen-
,I
tr:rtt:rl near the source of 'origin and is all-inclusive, with func-
r iorrirl central control. It prevents the losses of efficiency that
I I
I
rssl.
.u isc when a company spreads out too thinly. It ensures that care-
I
I
XEY.
utt tts?orsBlJl
6lrtt ltsPolslllLrl ----
HG. 5. PRODUCI OtoANlrAll()N (l(tt{D^lr COmPANY) -
38 pLANNING AND Dl,:vrrt,ol,INc'l'rlrl (x)Ml,ANy oR(;ANtzA.r.t()N ilil trtvtst()N ()lr w()lu( 39
ful account is taken of local conditions an important factor,
-
since the problems of selling may be different in different parts
of the country. It makes it possible to take advantage immediately
of favorable opportunities arising on the spor. k permits coordi-
nation on a manageable scale. It facilitates operation in times of
ernergency or war. Finally, it provides opportunity for training of
lower ,executives in a wide range of activities so rhat qualified
men will be available to fill vacancies in higher jobs.
Figure 6 illustrates territorial or geog:raphical division of com-
Pany activiries.
4. Customers. Major subdivision on a customer basis occurs in
certain fields radio and television, for example. Here emphasis
is principally-on selling programs to individual clients, such as a
llAfflc '

cigarette company, a soap manufacturer, etc. Lower level sub-

divisions on a customer basis are found, for example, on railroads
(Pullman and Coach travellers), and insurance companies (type
of policy-holders, sometimes divided by groups of serial numbers).
In a broader sense, not only customers, but other parties con-
nected with the enterprise may be represented on the organization )
chart. Figure 7 shows such a' division of functions in terms of
management communications to its own people at all levels
stockholders, suppliers, financiers, the consumer audience and the
-
general audience. While the usual organization chart shows the
structure of the management hierarchy, this chart shows the inter-
relationships (and their absence) between the various "publics" (
connected with the enterprise. It shows the functions which fall
llltlllt
into natural groupings and the combinations of functions which 00lliN

are possible in various managerial activities. For instance, in pre-

paring the company annual report, its uses and the varying inter-
ests of the different groups may be indicated by such a chart.
(This chart was prepared by A. F. Arnold, designer and manage-
ment consultant to industry.)
5. Process. In integrated textile concerns, major divisions may rIG. 7. DIVISION OF TUNCTIONS SHOWN IN TERMS
OF MANAOEMENT COMMUNICAIION
be made on the basis of operational sequence €.8., spinning,
-
weaving, trleaching, dyeing, inspection, boxing, shipping. In steel
and men's and women's clothing subdividing is oftcn based on
the process.
6. Equipment. In certain fields, erliriprrrcrrt <lt:tcrrrrirrcs ruajnr

,l:: t,r.\NNrN(; ANI) l)r,rvlir.()t'lNc'l'tlt.l (x)Nll'AN\' ()lt(;ANlzA'll()N
willr tlrt'cc sttbsidi;try
<:llrssilyirrg itrrlrrstriltl it<:tivitit's,
for car:[r:
l. The problems of policy, performance and compensation, iden-
tified as technical problems.
2. The problems of planning, production and inspection, identi-
fied as functional problems.
The problems of administration, management and oPeration,
3.
identified as jurisdictional problems.
4. The problems of communication, cooperation and control, iden-
tified as organizational problems.
5. The problems of executive capacity dealing with intellect, voli'
tion and ethics, identified as leadership. problems.
6. The problems of employee stimulation, application and disci'
pline, identified as institutional ppoblems.
7. The problems of expectancy, efficiency and economy, identified
as measurement problems.
The author attempts, on the basis of wide practical experience,
to bring out the inter-operation and relationships of the 2l ele-
ments of performance, so that stafi needs can be reduced, while
the coordination process is improved. It is claimed that this plan
of division has the advantages of economizing stafi services, im-
proving communication, cutting down jurisdictional problems,
and providing better balance in general.
The foregoing are some general guides for determining how
the work of the organization may be subdivided, and what con-
sequences may follow. Their specific application will depend
upon the special needs of the enterPrise. There is no indication
from this list that any one way of grouping activities is better
than another. If one basis is adopted, then other bases will have
to be intermixed. Even when a ProPer primary basis of dividing
work has been decided on, its specific limits must be determined.
For example, suppose it has been decided that it will be best to
divide sales activities on a territorial basis. This still leaves open
the question as to how the territories are to be split up. It is not
always practical to determine sales territQries by geographical
boundaries. The problem must be solved in terms of selling a
particular article in a particular situation.
For these reasons it is necessaly to develop criteria which are
,, L 1 r l.' I rrl \\(,11. 4:t
1,, ll'lrrl rrr rlclirlirrg rvlrir lr tttcllrorl ol grorrlrirrg lo rrst'. 'l'lr;rl
<:lassifit:atiotts
rr' tlro(l slrottlrl llrr,tt llc clroscrr rvlrir:lr s:rtislics lrcst tlrc <;r'itt.r'ia
ililrlr I I 'rnsi(l(.r':lti()n. ittrrl is lrcsl :r<l;rptcrl to irrrlivirlrral nccrls.
I :tu't't,IUA tr()tt l)ti't'tit{MINING TIIti DtvISION
()lf tlnst(: ACTIVITIES
Irr y,r'rrcr';rl, llrr: variorrs l'rrnr:tions which must be pcrformccl to
,l ,rr11;vllill tlrc objcr:liv<.s of thc enterprise should be so assignecl
,u t,r olrtlrirr tlrt: gr'(:;ltcsl. lxrssiblc advantage from the division oI
l,tl,nt
I \\'orh slrorrkl lrt: so <livitlcrl that the incumbent of a position
rlrorrlrl lre:rlllc to bcr:orrrc a specialist and increase his knowl-
lrll'r' 1;,, tlrt: pirrli<;rrl:rr job assigncd to him.
' :,1,.'i i:rl lrlriliti<ts slroul<l bc used to the full.
'l t,rr)ul)s ol peoplc (tlivisions, departments) should comprise a
rr,rrk:rlrl<:, Ironrol4r:rrcorrs and separate field of activity. The
n.rtlr(. ol' tlrt:ir work slrnuld be similar or complementary (the
lnnn(.r' is ;rrobubly rnore important in the lower executive
r,rrrks, lhc lattcr more important in the upper ranks).
llrrcc rrr:rjor critcria ntay be distinguished for dividing work
|,,n()nli(' arr<l non-c<:ononric criteria and the size of the com-
t"'
l,,,tt,trnir' lillicicncy
l,,rrrorrrit: <;rilcria rr:latc [o bnsiness efficiency. These in turn
lr,rq lrr' r'valrratt:<l in tcrnt.s o[ saving money, contributing more
rrr tlrr' r r)rrrl)irny's rcvcnltc, in the speed,or accuracy of transacting
llt,rlltrtr.
I lr.rt ;r;trtit:rrlar grorrpirrg ol' activities should be chosen which
r,lll rrr;rlir. tlrt: grcatr:st. t:ontrilrtrtion to the profitability of the
'rr, rlltrrr'. 'l'ltis may takc rnany clifferent forms, some of which
r, rlr\( rrsscrl llclow.
Lllrtjttr t:tntlribrr.tiort.s lo .srtr-uiaal and profr,tability. In the
,ll1 rt.r1',r.s ol a r:orrrlr:uty's llt()wth the ftrndamental problem is
rl,r rrl .r onotrri(: srrrvivul. 'l'lris rrray rcquire improvement of the
l,r,,lrrr rlr)n l)l(x:(:ss s() llrltl gootls will be turtrcd out on time and
,' rrlrrrr tlrr'prollcr'<'osl lirrrits. ll rrury r-r:<;rrilc sur:r;csslrrl ar:qrrisition
,,1 ,,ilr(r's ol r';rw Drillcriirls, rrs irr llrc lirnbcr in<lustry attcl tninirrg.
 44 t,t,r\NNtNc ANt, t,r,r\,t,:,()t,tN(; uil,' (r)Nu,ANl,(lta(,ANtz^,t,t()N
()r, rnost (:orrlnr()nly, it
rrruy x:r1rrir.c irt:r;rrisitiorr ol <:rrslr tlrr"orrglr
sales to mcet currcnt cxpcr)scs ancl to brrikl rrp a rcscr.vc ol wor.k
ing capital. These basic objectivcs tencl to bccor,c the major
function in the business, with the executive in crrarge becomirrg
in fact the most important official in the business.
Once production or sales have reached satisfactory levels and
have become more or less stabilized, they may well lapse into
secondary activities, while research and control become dominant,
The primary aim at this point may be technical superiority. If
this is under pressure by competitors, or the company itself is
forging ahead, this very instability will greatly increase rhe impor-
tance of the technical function especially if the firm,s comper-
itive superiority rests on it. The- development by the research or
style departmenr of innovations which .will accelerare rhe growth
of the company are likely to be primary functions. Or the pri-
mary activity, from the standpoint of profits, may be that of
integration, consolidation and establishment of centrar control.
Once the firm has reached its final stage of g:rowrh and is at the
point of defending its share of the marker, sales may again become
predominant.
2. The company may wish to take full advantage o,f speciali-
zation and therefore may group rogether similar functions or
specialties. Thus the selling function is often divided into groups
of closely related products in a food company, confectionery
products, for example, may -be grouped together so that salesmen
can devote themselves to selling one product group well rather
than dissipate their efforts over many products. Similarly, activ-
ities which serve the same purpose may be most efficiently grouped
together-e.9., recruitment, interviewing, testing, hiring and in-
duction may be handled by the employmenr department, while
the employee benefit activities are handled separately by a welfare
department
3. Lines of communication may be sh,ortened by a particular
type of grouping. Thus specific functions in subsidiary plants may
communicate directly with the corresponding headquarters func-
tion without going through the local plant'manager-e.g., con-
trol and auditing.
4. Duplication may be reduced or abolished by consolidating a
rlr trlvlst()N ()lr w()ltl( 45
r tr( ullrr lrrrrr tiorr rvlrir lt rv;rs ;lr,virlrrsly widcly scattered, e,g,,
l,
rlr, r rrrrsoli<llrtiorr ol tlrr: 1x,r'sorrrrcl lrrncti<tn into a headquarters
,1,
;r.r r lilt('llt.,
''
llrtl,uttt:t: rrury lrt: irrrllrovcrl and bctter operating results
ril,illl('(l by c<turbining dillcrcDt parts of a job under, several men
,rt,r ()nc conlplctc job undcr onc man. Joseph B. HaIl, President
,,1 llrt' I(r'oger Company, describes such a change in operations
, , lolloWS:
llrrtil the past few years, weoperated on a functional basis with
'|u(' rllan responsible for buying and another man responsible for
.r'llirrg. Sometimes there was friction between these men. If, for
lr\l:rnce, merchandise failed to sell, the sales promotion man
,l,rirrrcd that the merchandise was inferior; whereupon the buyer
rr'rrrlrl intimate that the sales promotion man had missed his true
r,rr:rlir)n and should be farming or cleaning the streets. The situa-
rr,lt was somewhat like that between the meat managers and the
l,rrx(,1'y managers; in both cases it was difficult to hold men respon-
urlrk, when each man handled only a part of the complete job.
I similar cleavages between difierent
,rlro:rrls have experienced
I, r oI
r tlle
r., system.
t, 'l'lre extent of delegated authority may be widened so that
r ., r r ('xeclrtives have a greater power of decision-making, This
r, r rlrt' :rdvantage that people on the spot who are most familiar
,rlr rlrt: problems can make better and speedier decisions.
I t tilormity and consistency of policy may be brought about.
| ,r , \irnrple, if a personnel department is set up, there is likely
,, r,riult greater uniformity in pay for similar jobs, more con-
, r, rr r policies with regard to merit rating and promotion, hiring
',,,,1 tr:tining.
(lorr,trol may be improved. Work may be so divided that
,",rl.rr rrnits are created so that there is better comparability of
llrr,, ilDd production efforts. On the other hand, control may
| , n l,r oved by separating inspection activities from the gr.oup
-
',r'prrration of the financial ,or auditing function from a sub-
,'lrrrv lrlitrt, separating credit from sales for fear salesmen will
I r,o t'lisy on the creditors.
'r \r livities may be grouped in the department which makes
,tt,\l ellectiue use of them. For example, a company might
I
.l{r l,l ,\NNrN(; /\Nt) l)t \'l l.()l,lN(; '.llili r.()Nil"\NY r)lt(;ANtzA'll(}N
( lltr('llt tilk(' ovcl llrt: l.r':titt
()nsi(l('r' lr:rvirru tlrr' lrrorlrrt liorr rlr'p:rr
irrg I'rrnr:l.ion lr'()nr tlrc pclsorurcl (lclxu'tnlcr)t il'tlris is tlrc bcst way
to gain acccptancc lrorrr lorcrncn ancl horrrly-rated employees.
10. Cornpetition may be the criterion for dividing activities.
Accordingly, the work may be split up into different departments
or factories so that the results are fairly comparable. For example,
in cement companies the work is distributed to different plants
which are usually highly comparable. Sometimes it may be neces-
sary to proceed on the opposite line of reasoning and join two
types of work in order to suppress competition which hurts the
total effort of the company.
ll. Job interest may be severely impaired by over-specializa-
tion of individual jobs as well as of whole departments. Where
work is divided too finely, with littte variation or change, the
monotony may obscure the meaning of the job and its relation to
the end product, and give rise to job dissatisfaction and quits.
Over-specialization is likely to require extra suPeriors (to deal
with the resulting discontent) and an elaborate system of formal
controls.
Non-Economic Factors
There may be important non-econornic factors to consider in
the division of work. These frequently make for autonomy in a
particular activity. Thus a special division may be set up to look
after special interests connected with the enterprise, e. g., a divi-
sion on stockholder relations or local community relations. Or
the division is created to arouse attention to the particular activ-
ity defense work, governmental relationships, safety (Central
- Power Company), executive health, or salary evaluation.
Maine
At the National Biscuit Company, for example, the head of the
Sanitation Department reports directly to the president because
the company attaches primary importance to the maintenance of
sanitary conditions. Or a special division may be created for a
particular wlan-to feather his ego, to "kick him upstairs," to
take account of reduced abilities, or to retain some of his services
on retirement (e.g., the position of Honorary Chairman of the
Board). Division of work may have to be fitted to traditional
arrangements within the company. For example, both the produc-
tlt ltlvl'll(rN lrli w()llK 'l'l
tt'rl ilu(l s;tlcs tttltttttg('l lrlily ltltvt'r'rlttltl stlrrrrlirrli irr;r srrlrsirli.rry
,rn,l lx.1,qivr.tt crgtutl tx)lv('ls, lrtll lltctt'ttt;ty lrc tto plltttl llliltlltll('l'
I)r llrr. ollicr: nttrrlit,{('l' trr;ty llrkt' ()v('l l)('lsottttr'l rvotk ltt'r':tttst'
()t'
1l1rrr.rrt.ty tttll lrt't:ttottglt ol it to irrstily lr ltrll tirlrt: rlivisiott'
,r g,,rrtir rrl:rr rlivisiott ttlily (()lrtillll(: l() (x('lll)y :trt itltpot'l:tlll lx)si-
tt"l rvitltitt,,lltt: t:otttpany silrrply bct:attsc it Iras t:xistt:rl lirr lt lottg
rlrrr' ('.t{., Itt ()rlc (:()lrlPally lllc cngincet' in t:llargc tll' lrri<lgc-
l,rllrlrrrg (rlfc,llcst at:riviry irr r.lrc c'rnpany) hca<lcrl rtp it trrrtiot'
,lr*r,, ,,,r,f ,.rpnrt,,4 to ttrc prcsiclcnt long aftcr lrrirlgc-llrriltling
lr r,l lrr.r oruc a minor activity. Prcconceiaed idea.s an<l prittt:i1>lt's,
,,rr,l ,.xcr.ssivc rcliancc on forntalit.y may also be powcrlttl l'il(:1.(,1's
ril 1lru( lrrt'ing a busincss cnlcrprise.
l,rrr;rlly, thc personal inleresls or hobbies of thc chicf cxccrrtivt:
r,,r1, pl:ty a role. For example, Mac Fisheries were origirtally
,r,l,lr.rl ro thc Lever soap busincss in order to facilitate salc <ll' tlrt:
, rrr lr ol lishermen of sorne islancls on the West Coast of Scot.latr<l
Irr N'lr('st) development the first Lord Leverhulme took a privat'c
lill('t ('$1 .
t )lrviottslY, not all the factors mentioned above are eitherratiott-
,rl ,rr rk:sirable determinants of the division of work within an
. iltil l)l'isc. However, their existence should be taken into accottnt
,rrrrl tlrr: rcasons for their existence understood before any attemPl
lr rrr,rrtt: to change the status quo.
',r r' ol Oompany
l'lrc linal major criterion for dividing the work of the organi-
r,rrr,rr is the size of the company. The importance of the chicf
varies as the comPany
1,r,lrk'nts faced by the top management
yr,rrvs. Ilence the maior functions exercised and supervised by
thc
This may be illustrated
,lrr.l t'xccutive are likely to change also'
l,y tlrt: Work Table which the great French industrialist' Henri
l ry,rl, <lrew up (see Page 48).
l'rorn this table the following conclusions may be drawn:
l..t.lremostimPortantabilityoftheheado[thesmallindus-
rr r,rl cotnpany is technical ability.
l' As one goes uP the chain of command, the relative impor-

Stage II: Delegating Responsibility:
A Problem of Personality
A, ,"" ENTERrRTsE grows in size, the number of employees
reporting to the owner-manager increases. He has charge of an
increasing number of management functions, carrying the load of
long-range planning and innovation, policy-making, execution
and control. At this stage, it may become necessary that the owner-
manager delegate a major management function, if he is to handle
the others efiectively.
The need to delegate responsibilities is the first major organi-
zation problem that arises with growth. This problem is one of
personality-in part it is personal, in part it is personnel, as Lt,
Col. Urwick has put it so well.
On the personal side, the owner-manager may find it extremely
difficult to delegate any part of his work. He may feel that nobody
can do it as well as he, and he may be right. Nevertheless, because
his time is limited, he must concentrate on those matters which
he alone can handle or which he can handle far better than any-
one else. However, the owner-manager may be unable to delegate,
because he does not trust his subordinates. He may not want to
place anyone else in a position of any importance in the enter-
prise. Even if the owner-manager acknowledges the need to dele-
gate, he may be unable to do so effectively. He may insist upon
50
rrrrr \lll'tt, ltl,,l,oN\lllllll\' 5l
t,
', nrl, /rrrsrr1.i1,,r'slrotts, ,ltrr ittsttttr liotts, /ri.r rv;ry ol r[oirrg t.lrirrgs
,,l,,1rtr rl
l;,y :r rrcrv tlr'p;rrlrnt'ttl lrt'lrrl so llr:rt llrr: lltt.tcr is nothing
,,,,,r, tlr,rrr ;r glolilrcrl r lcrk. llt' rrr;ry lrr: rrrrwillirtg to give up the
1,,,. I'r'ts()rr:rl IclillionslriP t0 lris t'rttPloyct:s.
I lrr ltrr.tottttrl plolllcrrr llrr irtg thc owncr-rrtanager may also
, ,r, scr iorrs l)t()lx)t tiotrs. l'r't'st:r)t lrIcIIrl)ers of management,
rr, lr tlrc lirlt'rrfcrr:rrrrl tlrt't'rrgittccr, may have been hired origi-
,r,i
,,,111 lrlr;rus(' llrr/y lvt'r't'goorl :r[ t:arrying out the chief executive's
, l, r. Norv tlrt'y rrrry (:xl)c(:t prornotion to higher managerial jobs,
| , rr,, r,l lorrg st:r'vict: urr<l scniority, even though they are not
1,, rlrlrlrl lol llrcrrr. ll't.hclc is no policy of promotion-from-within,
,"r.rrlr'rs rvitlr prodrrr:t.ion cxpcrience and familiarity with mod-
,
', rr.rrilll('rn(:ut. lnctlro<ls rnay be hired instead. But this may
,r ,, lr rr liorr illrrong thc cxisting personnel. There may also be
rlr, ;,r,,lrlcrrr ol rivalry bctwccn a new executive and the presi-
l, rr, ,rl')ir;rvltt:r[ in t:ascs whcre there is an overlap of functions-
1,,, r.rtly rvlrr:r'c cupital has been supplied by the newly arrived
, r r tlll\('.
ILLUSTRATIVE CASE
\ , ,,., nr;ty llr: t:itcd to illustrate the dominating
efiect of exec-
1,, r,,rr;rlit.y on small organizations. The following is the
r lrr,,rory o[' :r small cnterprise (25 employees) which failed
,,,, lr l)( ( :ursc of the chief's inability to delegate. Its organization
r, rr( r, .,lrorvll as Iiigure I.
I lrr, r r)nrl)ill)y produced plastic novelties, which required ag-
, ,,, ,,'llirrg if the public was to accept them. Accordingly, a
,,t,1',, ,,lly ;rlrlc man was put in charge of sales. However, the
,' r, ,,1 \ r( ('
l)r'csident went to his head. He considered it his func-
, r , , nt('rt:lin prospective customers lavishly, and drew heavily
.' l,r , ,, 1)(]rs(f account. He brought in little business.
I r,, 1,rc;irlt:rrt of the company had planned to devote himself
I ',,,1rr, riorr problems. He had much energ'y and spent almost
t,, ',,r1 rrrg hours in the plant. But he had confidence only in
, , ll llllrrrrsc o[ this, he interfered frequently with his pro-
r,,r,r.unucr. He inspected the work of the employees regu-
,rr,l rrsrutlly detected work methods which he considered
lrl' I'l ANNTN(; ANI) tlt,\',trt trt,tN(, l'iltr (:(lt\ll,/\N\' ()lt(i;1Nt/.,\'l t()N
t Proridonl
ta@lrrr- Cl.* - Oril -
ioollopo Woei I &.d
lm io<to9itlg
t IEffi.
Wclo
FIG. I.
THE PRESIDENI PIASTICS CORPORAIION
faulty. So at times he took over the operator's job himself and
worked at the bench. Then he decided'that he was not satisfied
with the packaging of the merchandise and so he took to wrap-
ping the paper and tieing the strings himself. Because he did a
poor job, the subordinates usually had to do the packaging over
again. He distrusted his mail clerk, and so he affixed the stamps
himself and carried the letters to the post office.
In the meantime, working capital was dwindling fast and was
not being replenished through sales. So the president tried to take
over the sales function in addition to his production work. He
collected addresses of possible customers from the telephone book,
compiling the mailing lists himself. He made Lrp the promo-
tion folders and spent a good deal of money on hit-and-miss
advertising.
In the meantime, product and engineering design were neg-
lected. No real effort was made to tap other sources of capital.
There was no change in personnel. Machinery and raw materials
which were urgently needed were not ordered on time. As things
became worse, more functions were taken over by the chief exec-
utive. He believed that, because he was president, he could do
everything, and do it better. As a consequence, he accomplished
nothing. He lost the cooperation o[ his people, he lost customers,
his sources of funds dried up. Being immersed in small details,
he did not even notice the rapid and inevitable march of his
business toward total destruction. In the end only he, the presi-
dent, was left, presiding over a rubble of debt.
r.r rrr.\IlN(; ltl\l.l)Nsllill|I\' 53
r rl
( ;1,,N t,,ltAt, ANAt.Ylilli
i\l,rrry olg;rrriz;rtirlrr rlltlr()t itics tlcny llurl pr.r'.sonality should bc
.rr irrlo it('(:()lu)l irr rlivirlirrg ul) thc (:()rnl)any's work. They fear
Vtrttr- rlr rt srrllr a corrsi<lt:r'irt iorr rrriglrt vitiatc rvhat thcy believe is
tL.
, ,,, rrtr,rlly rin irnpct's()n;rl pir,t'r. oI engineering.
It rvorrl<l \llc a gravt: (.n()t llot to pay close attention to the
Llffi lohrm ',r,nr('('r.ing,aspccts ol' org:rniz:rtion and its principles. But it
,.,'rrlrl lrt'an c<ltally glavt'cll'or to imagine that a single type of
,,r,,uri/:rtion, or a singlc slou:rrr of organization, is the solution to
,,, ry lrrrsincss problcrn. ()r'ganizations are no more than frame-
, ,,rlr irrto which living 1x'oplc must be fitted. They are not, as
, , r utivcs intcrviewed corrrplained, straight-jackets, which re-
,, rrrr llt'xilrility, initiativt. ;rn<l spontaneity, or an iron cast of
,,,1,,, rvlrich rcgulate evr:ry :r<'ti<ln and tell exactly what must be
,1,,r, ()n ('\,cry occasion. I'<.rlur1ls,it may be said that, to the extent
'', r\lu( lr an organization is irnpersonal, its efficacy in unifying
rlrr ,rr livitics o[ people will lrc impaired.
llrlst'<'onsiderations laisc tlrc question as to whether there is
,,rr lrcst organization slrllctrrrc. Can we say that one type of
u lu/,rtion is definitcly srrpcrior to another? "Better" in terms
,,1 rvlr,rl profits, satisfar:tion? And how do we isolate the effects
,l ,,r1',rrriz:rlion from othcr inflrrences? Can we furnish scientific
1,r,,,1r' l'r'r'lrirps all we can sly is that experience or the "logic" of
''rl rnt/,ttion, or a rough t'r'olr<trnic calculation would aPPear to
,r rl r r)n(' way of organiziug- a particular activity better than
lr,rlltr'l.
lllt lvclr i[ organizat.iotr rvt'r'r: scientific, there would remain
,1,, l,r,rlrlcrrr of fitting all kirrrls of people successfully into that
r,,r, tur,'. lt rnay be askc<l rvlr<:ther this is desirable, whether in
r,, | ,,rl.i,urizal.ion is not rrtt,rt'ly a method of improving working
, ' I rtrlrrslrips. Is organizatiorr lnaster or servant?
t t ttl lixccu,l,iue Persort.rrlity on Organizati.on
,l',tt
\;,,rr lrorrr tlrcsc vcry t'r'rrl problems, there always remains the
t,,, ,rr,rn rvlrt:tlrcr thc tkrtrrirrating personality (or personalities)
,,r rlrr lrrrsirr<'ss will volrrntrrrily fit into a set of working relation-
t,i1,, rvlrir lr rklcs lt<lt Iit lris or tlrcir conceptions. If not, the best
I t,,rrr (l (lrlliurizittiotr stt'trr:trrrt: rvill not work. Thereforc, somc
 t4 r,r ANNtNr, ANt) r)r,\,t,r,t,rN, .rr, .r()A,.ANt.
:rrrllrorilics lrolrl, il llrr.org:rrrir;rtiorurl pllrrr is ro lrr.:rr.rr.1rlcrl, rvr.
Ir;rvt'1.l lrrkc sorrrl ir((:(,llnl ol rlrr. lrr.r.sorr;rlity ol tlrr. lir.y rruur (or
nr<:rr) irr tlrt: r'rlrrr;xrrry.
'l'his is olrviorrs wh<:n wr: look at sorrrc ol'rlx: grcar. irr<trrslrirrl
organizations o[ our tinrc. onc <:<>rrld hardly rlcrry, lirr cxarrrlrlr.,
that the onc-man organization which fitted Flcnry riord, sr. rlirl
not fit his grandson, Henry Ford II. The former b,ilt up rlrr.
business from scratch and was familiar with its many aspects. I lr,
had his finger in every pie, often staying at the plant day arrrl
night. He boasted that his corporation had "no organization, ,,,
specific duties attached to any position, no 1ine of succession or
of authority, very few titles and no conferences." He made many
personal decisions and for a long time delegdted relatively littlc.
There was a strict functional control Jrom Ford headquartcr.$,
with little freedom permitted lower down the managemenr echr.
lons. Henry Ford believed in keeping free from anyone else,s irr
fluence and concentrated the production of all his needs in verticll
fashion in one place, River Rouge, as far as possible. At the en<t,
the operations of his company became so widespread and Iris
physical capacity declined so that adequate controls in some funr:.
tions became impossible. With Henry Ford II there came a conr.
plete change in the organizational srrucrure. His own knowledge
of the business could not equal that of his grandfarher to srar.t
with. The extent of decision-making and the sum of unsolverl
problems had increased to such an extent that delegation becamc
imperative
Henry Ford II is an advocate of human engineering and conr.
posite decision-making. He believes in the utilization of highly
specialized and able talent, in a more precise formulation of a
complex set of relationships, and an extensive delegation of clc,
cision-making. Accordingly, an executive vice president was ap.
pointed with great policy-making and administrative powers. A
group of top functional specialists headed up large staffs of sales,
finance, engineering, personnel, and organization experts. Various
manufacturing divisions were set up on a semi-autonomous basis.
Again contrast such personalities as W. C; Durant and Alfred
P. Sloan, Jr. at the General Motors Corporation, the one a great
promoter, the other a great organizer. Or contrast the heads ol'
()t((;ANtzA.r t,N
lr.l',il,ll[ttl\ 55
,., i ,'rl.lu/,tll()n\, ('\('tr t\nt,, .r ltiglrly cr.rrlt;rlizt.rl (:ol)t.rol, witll
r, 1,, rr l' \Vrxxl :rt Sr,;rrs, l(or.lrrrr k ;rrrrl (1o., a highly deccntral-
I ,r,l llcxilrlr. otlq;rrriz:rtiorr. As (it:rrcml Wood describes his
, ,,,r ,'l r rlrr': "\Vlrilr. sy:il( nts :rlt' irrrl>rlrlant, oltr main reliance
,, I rl[r rys lrr. lrrrt ()lt trr(,lt r:rllrt:r'tlran on systems. If we devise
,lrlror,rt(. ;t sysl(.rrr 0l clrcr:ks and balances it will only be a
,,r,, ,rl trrnr. lrr.lorc tlrt.st.ll,r'cliance, and initiative of our man-
rrrll lrt'rlcsl loyr,<l ;rnrl orrr organization will gradually be
rr r rrr rl rrrlo :r l:ugt: lrru'carrt:racy." Many other great business
,
',1, r, r,,1s11l ly1, nr('llti()nc(l whose very names are associated with
, ,,,1., t)'1r|s Ol olg;tttiz;rt.ion.
I ll,rrrrrtr;rlr'ly, wc (::tnl)ot attclnpt to analyze in so short a space
,r rrl'.r( I ol. pt:r'sonality on organization (or, what is equally
,,, t., ,, r r il t , llrt. r't:vcrsr). W. rnust confine ourselves to some asp€cts
r t,,,,.,'n,rlity ;rs it :rll'c<:t.s organization, as follows: (l) Types of
| ,, ,,,, rrr,rlicr.s; (2) rlrc valtres of the chief executive; (B) the
,,,t,,,r ,,1 tlrc t,xcr:rrtivc's cnvironment; and (4) the impact of the
,,,1,,1 1;1.11 or
lilruization.
, I 1l'r t ol I)cci.sion-Malters
li ,,r,ry, lrr'possible to "type" the chief executive so as to deduce
,r,. lrrr,l ol olganization structure which he is in fact (not on
| ,t,,,) lrl.t'ly t<l have. The following "types" are taken from the
,,1 ,,1 rlrt.psychologist Erich Fromm.s Obviously, there are no
| ,,', rr1,, s, lrrrt they are intermixed, with characteristics of certain
, t,, , l,rcrlorrrirrating. Dr. Fromm's five "orientations" and their
,,,,1, r, r r)n llt(i company's organization structure may be summar-
, L,l,,llorvs (the quotations are from Dr. Fromm's book, the
, ,rrr,rtt()n analysis OUrS):
' I lt, tt't:cttti'ae or delensiae type. "In the r.eceptive orienta-
', " I l,, rsorr leels'the source of all good'to be outside, and he
r , ,r', tlrrrr tlte only way to get what he wants . . . is to receive it
' ,,, rlr.rt orrtside source" (Fromm, p. 62). This type tends to
, ,r, lrr,rvily on the organization ideas of his most influential
| ' , r , .rrrrl thc people most affected by them. He likes to pass on
s ,rr,rl,rlity to others. His organization structure is character-
I l,r ,lr.lr.ii-ation.
t,.,rrr rrlrrl lor Himself, copyright
1947 by Erich Fromm, and reprinted by
,,1 l{inchart & Company, Inc., Publishers, New York, 1947, pp.50-117,
l,'l l,llNNtNl.,{Ntrl)t\tt()t,lNl. t|lt (,Ail,\N\,tu,.{Nl/.\tlrr.J
,nrllr()riti.s lr,rlrl, il tlr,r1i;rrrrz,rri,rr;rl Pl,rrr rs r, lrr.:rr((,1)l(.(1, l\,1
lr;r\'(' l(, lltl\(' s()ilr( lr( ( ()uul ol llrr. l)(,rs()n:rllty ol llrr. l,ily ttt:trt (nr
ilr('D) ilt Ilrr. r rlrrrlr:ury.
'l'lris is olrvitltts wltt'tt rvc look al sornc ol llrt. glr';rl irrrlrrslr i,rl
ol'gar)izati()ns ol ()rlr tirnc. ()rrt: r'orrl<l lrar<lly <l<:uy, lirr. t:x;urr;rlr'.
that the onc-man organint.iorr which fittccl IIcnry lior<I, Sr.. rlirl
not fit his grandson, Flenry Ford II. The I'ormer b,irt uP rrrr.
business from scratch and was familiar with its many aspccrs. rt.
had his finger in every pie, often sraying ar rhe plant day ;rrrrl
night. He boasted that his corporarion had "no organizariorr, rr,,
specific duties attached to any position, no line of succession .r
of authorit|, very few titles and no conferences." He made marry
personal decisions and for a long rime delegated relatively lirrlr..
There was a strict functional control from Ford headquarr..r's,
with little freedom permitted lower down the management eclrr.
lons. Henry Ford believed in keeping free from anyone else's irr
fluence and concentrated the production of all his needs in vertir.ll
fashion in one place, River Rouge, as far as possible. At the enrl,
the operations of his company became so widespread and hir
physical capacity declined so thar adequate controls in some funr'
tions became impossible. with Henry Ford II there came a corr,
plete change in the organizational structure. His own knowleclgr,
of the business could not equal that of his grandfarher to srarr
with. The extenr of decision-making and the sum o[ unsolvcrr
problems had increased to such an extent that delegation becamr.
imperative.
Henry Ford II is an advocate of human engineering and. conr.
posite decision-making. He believes in the utilization of highly
specialized and able talent, in a more precise formulation of ;r
complex set of relationships, and an extensive delegation of rJc
cision-making. Accordingly, an executive vice president was ap-
pointed with great policy-making and administrative powers. A
group of top functional specialists headed up large stafis of sales,
finance, engineering, personnel, and organization experts. Variorrs
manufacturing divisions were set up on a semi-autonomous basis,
Again contrast such personalities as W. C. Durant and Alfretl
P. Sloan, Jr. at the General Motors Corporation, the one a great
promoter, the other a great organizer. Or contrast the heads ol'
, , , r, i l r',r. ltl',1,r)N\lllll ll \' 5l'f
|,r,, r'rt,.rn/,rtr()ns, ('\('rr r\url' ,r lriglrly (('tllutliz('(l t:ottl.r<ll, wit.lt
l, ,1,, Ir l' \'Vrxrrt ;rt Sr':rrs, l{oclnrcli :trrtl (1r., :r highly dcccntral-
,l rrr,l lllxilrlt'org;rrriz;rtiott. As (icttt:t'rtl W<nd describes his
| 'rr ',1 r rlrv: "\Vlrilt' syst('nrs :rtt: itttlxrrl:llIt, our main reliance
.,,,r r1,]r.,y., 1,,' l)ul ()n nr('u lilllrt:r tlratt olr systcms. If we devise
, ,lrl/rrr,rt(' :r syst('rn ol r'lrt'r:ks arttl balanccs it will only be a
,,ir, I r,l trrrrl lx'lolt'tlrt'scll-rcliattcc, and initiative of our man-
, ,,, r\rll lrc rlt'stroyt'<l lrrrl olrr organization will gradually be
,',' rr, rl rrrto ;r llrgt: lrrtt't:nttt:t'ar;y." Many other great business
r ,,1, r r,rrlrl lrc rn('lrti()nc(l whose very names are associated with
,, r,,il r ly;r|s ol otgattiz;rtiOtt.
l'illrrrtrrrr;rlr'ly, w(] (::rnlr()t attctllpt to analyze in so short a sPace
rr,, ,rl,.r r ol llt:r'sorrality on organization (or, what is equally
,,,,1,,,r r,rrrr, tlrc lt:vcrsr:). Wc rtrust confine ourselves to some asPects
r t,' r',',rr.rlity ;rs it :rll't'r:ts organization, as follows: (l) Types of
r,,, ,(,, rrr.rlir.rs; (2) rlrc values of the chief executive; (3) the
,,,,1,rr r ,,1 tlrc cxt:r:rrtivt:'s cnvironment; and (a) the impact of the
,,, 1,'lrr,r l or glrttizlttion.
, Itl,,r rtl l)tcision-Malters
Ir rrr,r1, lrt'possible to "type" the chiet executive so as to deduce
,r, lrl,l ol olganization structure which he is in fact (not on
| 't,' rr lrl.r'ly to have. The following "types" are taken from the
,,1 ,,1 rlr<' lrsy<:hologist Erich Fromm.5 Obviously, there are no
| ,"' ryl)( s, lrrrt they are intermixed, with characteristics of certain
',1,,, l,r'rLrrrriuating. Dr. Fromm's five "orientations" and their
,rr1,r l orr tlrt: (:ompany's organization structure may be summar-
, ,,1 r, l.llorvs (the quotations are from Dr. Fromm's book, the
,, rr,r,rtr,rrr :utalysis ours):
, Iltr' tttepliae or delensiae type, "In the r'eceptive orienta-
,,,,, r l, rsorr feels'the source of all good'to be outside, and he
| 1,, r,', tlr;rt tlrc only way to get what he wants . . . is to receive it
r, rrr rlr,rt orrtside source" (Fromm, p. 62). This type tends to
,. lrr.rvily on the ,organization ideas of his most influential
, I r . . ,lrrl the people most afiected by them. He likes to pass on
g,,,rr',rlrrliry to others. His organization structure is character-
.l 1,1 rlt'lr.g:rtion.
r,,,rrr rlarr lor Himself, copyright 1947 by Erich Fromm, and reprinted by
, ' ,,',,,,1 t{irrchart & Company, Inc., Publishers, New York, 1947, pp.50-117,

lr(l t,tANNtN(, ANtr l)l \tt(rt,tNr, tilt (r)\il,\t!\
'l'ltr't'tltlrt1l11l11r1'ttt
lt. tttt,t',tt t.tirtt, I t'/rr'. I lts l),t\t( l)t(.lnls(.is "tll
lct'ling llr:rl llrc s()ul( (' ol ;tll tioorl is orrtsirlt."
"lltlit::trvrty ltotrt otlrt'ts lry lor<r'()t.( ullnilt,l" (lirorrrrrr, p. (i,l).'l lr,
orBal)izittion strrr<:trrrc is lrrrilt llorrr i<lcas l-;rkt'rr Ilorrr ()tllcls, lt\( rl
to marliPlrlatc othcrs lor pclsorral cncls. M;rrripulatiol) is :lc(()nt
plished partly by a highly forrnalized ancl centrally contr'()ll(,rl
structure, partly by setting subordinates against one anothcr altrl
in this way combatting any potential threat. Whcnever neccsslr),,
management is exercised by veto.
c. The hoarding type. "This orientation makes people h:rvr'
little faith in anything new they might get from the outside wor'lrl
. . . They have surrounded themselves, as it we.re, by a protectivr'
wall, and their main aim is to bring as much as possible into this
fortified position and to let as little as possible out of it" (Fromrrr,
p. 65). Organization structuring becomes a means of strengthcrr
ing one's position. It is designed very economically, but what
there is tends to be exact. Everyone knows where his place is anrl
is assumed to be very self-reliant.
d. The marketing type. "The experience of oneself as a corn
modity and of one's value as exchange value" (Fromm, p. 68) . . .
"Those qualities are developed which can best be sold".g[Fromnr,
p.77). . . "He who wants to get ahead has to fit into large organi
zations, and his ability to play the expected role is one of his main
assets" (Fromm, page B2). The organization structure is designerl
to be salable and acceptable to the people who matter (not neces-
sarily those afiected). It must look good to those Persons whost'
judgment this type values most. The actual organizational rela-
tionships may be quite different and much less satisfactory thart
they appear on paper and in conversation.
e. The productiue type. "Productiveness is man's ability to
use his powers and realize the potentialities inherent in him"
(Fromm, page B4). The organizatton structure is likely to be onc
which aids others in developing themselves to the maximum ol'
their abilities, while integrating them successfully with the com-
pany's objectives.
It should be borne in rnind that Fromm's typology has short-
comings fior application to the analysis of organization, and that
it was not intended for this purpose. The tyPes themselves arc
,rrl \llNl, ltt\l'l)N\llttlll\ 57
(rtt(.\Nt/\ttl,l
,,1 lrrr,.rtl :tttrl trr:ty ('tl((,tttl)itsti lt rottsirlt't;tlrlt' tttttrllr<:t- ol'vltt'ia-
,,,,r, r,rr lr ol rvlrir lr tttity lrc ol sigrrilir:ltttt' lot lltc llat.urc o[ thc
lrrrt ()n(' nutlt
r1. nr/.rlr()u slltl( ltttr'. 'l'lrt' lypt's ltt't: itllt'r-tttixt:tl in rcal life and
, , ulror, prrtrlit l lrorv llrr.y Will tttltt:t. itr vari<lrts SituatiOnS. More-
of
' I tl,,'Lrrvtlysis tIrt's It.,l l;tkt: itttg accotlnt tfic interactions
tl t!r,rrllitit.s or srrggt.st lrow tltc
rtrr r lrr passivc or active resistanCe
I ,,rlrr r*'',,,,,y rrro<lily llt(: tyl)c ancl its behavior. Nor does the
,,, rl1.,rr t;rkr: ittl<l it(:(r()llttl. tlrc wfiole array of traditional and
,rr,rrrulr,rrr:tl l':tt:lpt's atlrl tlrcir irnpact on the structure. Therefore,
ulr,,rrlrl r'('g;tr(l tll(lsc tyPCS as over-all categories, which are
ily loost:, att<I, itt rrsing them, strive to avoid over-general-
: ,,,,,;,,,:
t tt, l trlrrr'.s ol t.he Ohicl Executiae
lr ril,r\ lrr'P<lssilrlc to tlccluce the kind of organization an exec-
r', lil.r'ly to nct:<l by studying his personal values. On the
, , , ,,1 tlrc strr<lics ol thc psychologist Eduard Spranger,6 we may
, ,,il ,rrrrrt'llrinQ alrottt thc personalities of men by examining
r,', r,rlut s. Slrlangt:r dcvelops the following tyPes (note that he
,, tlr:rt ;rltnost all persons are mixtures of these six types'
,r,,,,r,1r tlr<' rlt'grce varics greatly; the organizational inferences
,,rrr,,):
, I lr,' t't'orrortt,ic-itrtcrested in what is useful and practical' Re'
,,ur('s tfuat the orgalization structure be utilitarian, adjusted
r,, tlrr' objectives and Purposes of the enterprise.
t, I ltr tr/.rt,ltetic--his highest values lie in harmony, individuality,
;,,,rrrP :rtttl power. FIe may have a highly centralized
structure,
r lr 1,.nrt rather than workable.
. t ltr llttrretical-is chiefly interested in the discovery of truth
l,,r ils own sake, is interested in diversity and rationality' This
rr.r Y t t:sult in brilliantly conceived and original structures,
,,', r Iy r;rtional for irrational people'
.t I ltr' s11s1isl-.l6ve of people; other persons are ends; he is kind,
rrrrlr:rlltctic, and unselfish. The organization is highly infor-
,,,r1, lrrtilt around and adapted to personalities.
t ltr' lt,ilitical-is interested primarily in personal Power, influ-
' ,, , . r'(:r'rown. Requires that the structure be highly
controlled
r,, rrlllin Power,
! (Types of Men), Haale a/d S-aale, Germany, -(1928)' ^See also
, ,, ",t'lt)ttn(n,
\\ 'rlllxrri and Philip E. Vernon, A Study ol Yalues, 1931, pp' 8-fl'
 l,ll l,t \lt.ltt'it. \t.tr ()lt.\Nt/\lltrN
trt \llrrt.t:tt, tilt rrr\lt.\L\
l. I lt, tr'lrt,,rrttrt lrr,, lrr;,1r,,,t \.tlul l\ lltr. ;,rr.rtr.,,l :,1)rt tlu;ll ;rttrl :rlr
solrrlt ll :,,rlr:lytrr1, t..,;,r.rir.rrr(.: lt(. ts ,rrrr.lrr ,rrrrl looli., lot r.x1rr.
ri( il((' llrrorrl,ll st ll rllrri:rl ;rrrrl rrrr.rlirrri()n. r'rris rrr;ry r'(:sulr i1
sllu( lur'c lorrrrrlt'rl l:rrgt,ly ()n l)('r's()n;rl :rrrrl irlr';rlisti<.
lrr.irrr i1rlt.r.
we find that li'orrrl,'s tyl)('s l('llrc t() a lx:rson's ltcltutior l.irrlr(,1
than to the specilic goais ro lvlri<:lr hc aspilcs. spr.anucr, on tlr(.
other hand, focuses on the llatrrrc ancl quality o[ goals sougllt iln(l
analyzes major inreresrs. Among other iyporogies which migl,r t,,'
used in explaining ltrimary motiuations is w. I. Thomas' brr:irli
down of characteristics in terms of recognition, response, secur.ity
and new experience. of course, there is considerable intermixt.rr*.
among the three typologies, and they. overlap. For exampl.,
spranger's theoretical man rnight be diiuen by one or anorrr(.r,
motive and at the same time m[.ht be receptive, hoarcling or
exploitative in his orienrarion.
For the purpose of organization analysis, spranger's personality
types, like Fromm's, are essentially subjective and" take little ar.
count of the group in which they operate. Furrhermore, it is difli
cult in practice to find out the personal values of a chief executivr.
even though we may attempt to draw some conclusions from thr.
goals which the executive consistently seeks. Therefore, thcsr,
typologies are represented here chiefly because they,rke pioneul
attempts to trace the impact of personality on others. They merir
our attention because they may eventually be used to gain furthur
insight into executive behavior and its effects on organization.
3. Impact of the Executiae's Enuironment
The executive is obviously influenced by his environment, pasr
and present, in his views on organization.
one such influence is his earry t'ormal training. A university
education, courses at a good school ,of business, rigorous schooring
in technical subject matter and management skills, a keen interesr
in current management thinking and writing all these may r(:.
- -
sult in a highly professional interesr in organizational strucruring-.
His previous ex'perience in other organizations and exchang.
of experience with other executives will also affect his views orr
organization. For example, a man "brought up,, in a highty decen.
tralized and successful organization is likely to perpetuate this
,, .rt,r. llt,,l,t)N\llill,ltt lr!)
, ,,1 rrr,ut,tlllnl('nl. Ilc rrr,ry ,rlso lrllrr r. r.nrplr;rsis orr lltr. 1r;nlrr
,i, ,r rr,rl.r'trrlrrl lun( lt()n irr rvlrrr lr lrt. spr.r llrlizr.rl, :rttrl llris rrr:ry
rt r ',rlrr r lrnrr liotts. l,'ot r.r:ttrrlrlr., :ut (,x(.( ulivr, wlto (iutt(. ltl)
,,, 'r,,lr',,t1('\ tnltyslrr,rrrl lr rrr:rir)r l)lul ol lris lirrrt:orr tlris lrrrrr'liorr,
1.,, rlt, r lrc lr:rs tis(,n l() tlrr. grlr.sitlt'rrr:y. lirrrtlrr.r'rrrort., ltr. rrr:ry
,,, r,ll r rlllittli :tplrtoltr lt" itt(o ol lrt'r' urirtrirgt'llcnl llllrcliorrs, Il<'
,\ ,,\r Ir rlr;iltrl llrr.rlr'glrtriz;rliorr llt.r'lrrrsc lrt:1rt'o]t.t:l.s:t lltvor':tlllr'
| ,r rrll lr|rrrl iil tlrr'1xrsl to(, IlrI irr tltc lutllt(]. ()D llrt:()llrt'r'
r .r,l r lnr nt('r lrt orlttr'liott cxr'r'ttt ivt: ttrty lrt: lot-l (:()llsol'vat ivc itt
;,,rr,lrrr1l tlrr. org:rrriz:tl iorr.
Irrrrlly, tlrc r lrir'l's ('x('(:ulivt' t:xlttt'it:tt,t;c irt li.s otutt t:ortt,ltrtny
rll lrr lrrlilrly sigrrilir:;rtrt.'l'lrc ot'gattizational wcakttcssr:s It'orn
l,l, lr lr' ,rrrrl lris rrssocirtlt's nriglrt Ir:tvc sttlfct'c<l are likcly t<r
r,,,lrr ,r lrorr's slr:rlc ol llrt' rrllt:tttiotr whcn hc is itr a posit.iott lo
,llrrr tlrlrrr. l,'rrtllrctrrtolr', tlr<: r:ircttrnstances unclct' wlrit:lt lrt'
lril llllr grll.srrl('rrl :rrc likcly to lllay a part, at lcast in lris Iirst.
l, lr llr' r'rtcrrt lo wlrirlr t.lrc chief executivc iutil.atcs Iris lllr'
,lr r r rr,,rlrrr:rust' lrt: tlrorrglrt it. wise to do so and because ]rc lt:trl
rrrrhlr, lu':r rrrir.ior ittllrtt:ttce in his structuring of the ()rgilll-
rrr.,ry
lf {tlrrr l',rr t'x:rrrrplt:, il lrc wits brought in specifically to ovcrlritttl
llr lrlr,rrrrr,rtiorr slrllclllro, lris attitudes would be quite diffcrcut
lhur tl lr( \v('l('l lurrrily slr(:ccssor stili dominated by the fortrtt:r
hr lrl ,,1 tlrl r otttlratty.
I lt,t1,',, I ttl th.tt lrt.[ornr,al Organizati,on
l'lrr,rlly, tlrcrt: is [hc irttpar:t of informal pressures within tlrtr
llllrilrt/,rtriln. It is wcll known that an organization is made up ol
filtrrll ttroul)s ()r' "societies," formed by friendship, proxinrity,
lf;t "t rr,rr li, sirrrilarity of .objectives, etc. These individual struc-
llilm rr,,,y rrot r:oincide with the groupings which have been sct
llfr l,,rrrr,rlly.. 'l'lrc imposition of a formal structure and fonnal
llrdll, li .l rorr)nrunications even the mere possibility of a
tlrrll', nr tlrt' srnall group -
and informal relationships rlay
f t{rr lr nl}\('t productivity and cooperation. The irrationality of
lltl,,ur, rl l,rorrp arrangements may be superior to the rationality
Irl l,rrn,rl orlllrnization structuring for efficiency and morale.
I rrr rlr,,(' r'(':lsons organization planning should take account of
lltl,,rr,, rl ,r1',:rrrization arrangements. This can be done by super-
I l;0 t,t,ANNtNr; ANt) t)t,\,t, I ot'tNr. 't nt.. (:r)t\l',\N\ r)I(; \Nl/A'u()N rr , ll"l0ll'lllllll\
(rl

ittrposittg ()n llr(' lorrrr;rl ()lli;uli./.ltliorr r lurrl llrr. irrlonnitl ()r' (.xist
irrg rt'lrrliotrslrips.'l'lrt: <:lurlt slrorvrr;rs I,'igrrrt: ? is ol ir)tct'(:st:ls:llr
cxiuul)lc ()l ()r)c su(:ll at.tclulrt.? 'l'lrc lornral orgalrization relatior)
ships arc drawn in solicl lincs. 'l-hc chcckcd lincs show the twrr
persons with whom most tin)c is spent. The arrow points in tht:
direction of the person named. For instance, the formal relation-
ships of Executive 5 are with Executive 2, 51 and 52. Actually,
he spends most time with Executives I and 2. This, it should bc
noted, may be quite consistent with the formal relationships of
line command, but other important relationships are revealed by
the informal lines.
In some companies the informal organization is so difierent
from the formal organization as conventionally established that
it is not published or is discarded after it has served its purpose.
Many companies are so small that th'e organizati,on structure is
known to everyone and consequently need not be written up. In
this connection, the president of a medium-size company remark-
II

ed, "In an organization of this size where all executives have daily i
.l
intimate contact with each other and their associates, this kind t,'
of material (organization chart, manuals, etc.) has not been "

necessary." IIG. 2. INFORMAL ORGANIZAT]ON SUPERIMPOSED

ON IHE TORMAI ORGANIZATION
Executives often do not speak in organizational terms: 6hey
do not say "I am from the Manufacturing Department," but "I nurtured. Overly precise organization structuring
tr, r , ,l rvottld be
am fi:om Mr. Blank's office." Many report that they have been Sir
r,ny lrc t't:onomically wasteful, as the following observation by
successful for many years without "an iron-bound organization
t ., ,rll rcy I{eyworth, Chairman, Unilever, Ltd'' suggests:
chart." Their views are well summed up by A. S. Armstrong,,
or
Executive Vice President, The Cleveland Twist Drill Co., when Wc do not spend much time drawing up functional charts
and
he wrote to the AMA survey: "This is a rather difficult matter r, r iting clefinitions o[ duties' We believe that-undue.precision

to put on paper, for ours is a pretty closely knit and informal ,lr.lirrition can be-and often is-the enemy of flexibility, liveliness
,rrrrt cffectiveness. I may perhaps be permitted to illustrate
this
organization which does not spell out such relationships in great just r:ead
detail. By and large, one grows up with the company and after rlittr a personal reminiscence ol 21 yt"" ago' I,had a
impressed with
1,,,,,k on'organization and methods and been greatly
a while he gravitates into a certain area of responsibility, and
rvlr;rt seem€d to be the secret o[ efihcient working' to
define exactly
finally he learns by instinct where he fits in and what is expected rrtr;rt. cverybody was doing. So I started out one weekend
to define
of him." ,ry ()wn joU and those of"my two chief assistants' When I finished
Many feel that a formally established strucrure may eventually rlrclr: was one obvious and simple conclusion-I was overworked
result in an overly rationalized, bureaucratic relationship which 11, tlr('l)oint o[ breakdown, and so were the
two others' The remedy
may stifle the very initiative which managemenr originally be- ',, r'rrrt'tl clear; we must have at least two competent people more in
? From Carroll L. Shartle, "Leadership and Executive Performance," PrnsoNNu, ,)ul l{roup to help carry our intolerable load' But I was lucky be'
March, 1949, p. 377. ,.,,,r,,, b"iore f had a chance to te,|l my chief of my weekend's con-
 (rll t,t ,\NNtN(;,,\Nt) til\'t,t()t,tN(,,t llt,a:r)t\l|,\N\ r,trr,\Nt./,t.ll(rN
rlrrri,rrrr, ,r rrrrlr iolr rrnll(.(l ul):urrt I rr:rrr r()
H() r() l!r.isr()1.'l'lr:rr
rrrr';rrrr sirtirrlq irr:r r':rilw:ry rlrrirr lirr.lorrr.lrorrr.s:rrrrl l;xrrrrlcrlrl
()v('r'rlrc Plolrlcrrr:rg:rirr. lly rlrc tirrrc I goI r-o l]ristol I wis not so
sul'c'I zrra.l ovcrworkcd, bcr::rrrsc wheu I wrote clown how I actual]y
spent my time not morc than two-thirds was taken up performing
the duties r had listed; the other third was speni doing tasks
for people in other departments. Then I realized that theri werc
people in other deparrmenrs helping me with my tasks. So I did
not tell my chief that I needed two more subordinates.
Finally, many companies deliberately build their organization
structure, partially or wholly, around personalities. They believe
that this will aid in maximizing the porenrialities of their gifted
executives. As the Du Pont Company puts it; .,Don,t mistake an
organization chart for an organization. After all, it,s the people
who go into the jobs that make it r,vork or fail." Going further,
it is felt that the integration of executives with one another and
the personal development of their subord.inates should be encour-
aged informally rather than by a formal structure. As one assist-
ant to the president of a large company expressed this point:
\Me are traditionally opposed
to the use of organization charts.
our
is that no two individuals handle a given job in the
reason
same manner. In our view, it is unrealistic to create a well-fuftned
spot on an organization chart, simply because the individual placed
in that spot probably would not funcrion in accordance wiih the
specifications, or if he did so function he would not be effective.
Moreover, we are committed importantly to the proposition that
business cannot be conducted effectively through the lines of au-
thority, but must be conducted via lines of communication. As
an illustration, our factory and branch house managers deal directly
with each other rather than through the general office, and. gen_
erally throughout rhe organization individuals within a factory
or a branch house communicate directly with inclividuals in the
various central olfice departments, and
in the factories and. branch
houses, without going through managers.
Informal relationships can be recognized to sorne extent by a
study of "reference groups" and their inter-relati,onships. Refer-
ence groups are a kind of "inner circle" with which individuals
seek association and approval for reasons of prestige, ego satis-
faction, power, respectability, etc. They arc gro.ps or individuals
l.l I I r. \ I lNt; tal.lsl'()Nslltll ll \' (;:l
,
rrlr.rrr ( \((lrlivcs sltivc lo ittt;rrcss, tvlrotrr llrly :trlrrtirc ot' lc;tt,
rr lrorn tlrcy rvislr to cottsttll ot lo llt' ( ()ltsultcrl lry. 'l'lrrts tlrcit'
rr l.rtrorrslrip rvitlr tlrt'rrrcrrrlrcrs ol tlrc "ittrrt'r'r'ilclt:" trtrty 1>lay:t
rr rl,!i rolc irr tlrt'il lr:r1r1rilt('ss ()n tlrt: jolr. l,'olrrr:tl organizlttion
,,,, ,1,\,rrrrrr:lr lo r'<ltttrilrrttc lotvut'<l clcatitrg or'<lcstroyirtg that
lr r;,; rittcss.
l',rr' lorrrurl orgarrizati<ln slrtr<:tul'ing aflects thc sottrccs of power
,rr rlrc r orrrp;rny. lly slrrrllling jobs and job responsibilities it afiects
nlu\, l)l'('stigc, tcclrni<:al r:ornpetence, and important lines o[
' "nrnuni(:ation. Forrnal organization may be opposed in an in-
lrrr rr;rl lushion through deliberate "misunderstanding" and fal-
-
,rlrr.rriorr; refusal to act in the spirit, if not the letter, of organiza-
l,rr 1111111gss; and reluctance to yield to authority as it is estab-
lr,,lrlrl in the formal organization.
l'r'rlrirps most important of all, formal organization structuring
rrr\r uot destroy spontaneity or discourage original thinking. A
r,,'url lt'st of the new structure is whether executives whose respon-
rrl,rlitics are of a creative nature are better or worse off than
l,r l,rt'. I{ow much time is now required to introduce new ideas
,lr,l lo change existing methods?
'l'lrt' advantages of formal organization structuring must be
,,rrllrrlly balanced against the possible loss of advantages obtained
t lrr, rrrg-h the informal organization.
CONCLUSION
'l'lre influence of personality on the organization structure is
,,lrviorrs. It varies in importance from one company to another,
lrrrt it, is a factor that cannot be overlooked. Neither should it be
, r;rggerated, however, and used to justify any form of organiza-
r r, What is obviously needed is a judicious compromise
rn or fancy.
lrlr\V(:er the canons of organizltion and the needs of personality.
I lris may be provided by isolating the two from one another
rrritially. First, the ideal formal organization structure may be
,lr;rrvn up. Next, an inventory of personnel may be made, empha-
,rzirrg especially the informal and group contributions made by
tlrc r:xecutives. Finally, the formal organization structure may be
rrr,rrlified in the light of personality, so as to make possible the
 (il"l
lr'l t,t ANNTN(; ANn t)t \,t, I ()t,tN(; .t.lil,t (.()t\tt.AN\. (),.(;,\Nt/A I t{)\ ,, r, \ llr,r. lrl',1'()N.'lltll ll\

,.il(';ll('sl 8l()tvlll ol llrt' irrrlivirlrr:rl ;rrrrt lris rrr:rxirrrrrrrr rorrlr.ilrrrtiorr ' 1,,',rlrrll ,rtrrl llrr't lt;ttt1',t s tlr'rl l:rkr' 1rl'rr C rrr tltt's:ttttt: l)cls()l)-
I0 llrc slr((('ss ol llrr: t,trrt.r'lrlist:. It. is tlrcr.r.l()1.(i (:sscnri,rl tlrat tlr. ,, ,,\r I l1n(.. 'l'o rlo so is lo tttltkt' tlrl lotttl;tl orgartizatiotl
lrcst asPcr:t.s .l lr,th llrc l,rl,al st.lctlrrc (skclcto') and thc irr ,,,,, tlrr .t nt(.:uls to lttt r.tttl :t trsclttl s('tvilllt. r:rther than an
fornral rclationships (livi,g pcrsonalities ancl their interrelati.rr lil:tsl('l'.
ships) be considered in shaping the organizarion. The criteriorr
for selecting the best features of both wil usually be ,,least cosr,,,
modified by the conditions necessary for maintaining smootlr
working relationships. This wiil probabry mean an inlreasingry
formal structure as the enterprise grows in size, with increasing
care necessary to preserve informal relationships.
This generalization may be illusrrated by rhe follorving account
of a judicious combination of formal and informal structuring.
It shows how the two can aid in establishing a position in sucrr
a way that talents are fully utilized and.shortco-1.rg, minimized.
Thomas Roy Jones, president of Daystrom, Inc. iells how thc
comptroller's job changed constantly over a period of a few years.
It remained the same on the chart and in the manuar, but its
incumbents changed and their personalities changed with the
passage of time. The first comptroller, who was given the duties
of chief accounting officer, was delegated" an incieasing number
of the problems of the chief executive. He did so well that@ventu-
ally his title was changed to rhat of assistant general manager.
His successor was unable to fulfill the responsibilities assigned to
him, and the scope of his job shrunk so much that eveniualry a
new comprroller had to be appointed. This third man was able
to fill the job of comptroller as it was originally designed, but also
filled in some related gaps in the organizarion. rt the president
had insisted on a rigid adherence to the job description on the
organization chart at the time of each of the majoi changes, he
would have failed to acquire a competent helper, suffered a
partial breakdown in his accounting division, and neglected to
develop an able accounting officer. Many other examples could be
cited, such as that of the sales manager who is a great success as
long as he is actually selling, but flounders as a general ad.min-
istrator; the comptroller who has a special ability for solving
production problems; and so on.
It is imperative that those charged with organization planning
take account of the different personarities passing through the
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