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Richard Dunford
Macquarie University, Sydney, Australia
A ‘new organizational forms’ literature has emerged over the last two decades.
The literature argues that in a business environment that is dynamic,
fast changing and competitive, the traditional bureaucracy is inflexible and
Correspondence to: Professor Ian Palmer, Dean’s Unit, University of Technology, Sydney,
PO Box 123, Broadway, NSW, Australia 2007; fax: +612 9514.3513; e-mail:
Ian.Palmer@uts.edu.au
Asia Pacific Journal of Human Resources. Published by Sage Publications (Los Angeles, London, New Delhi and
Singapore; www.sagepublications.com) on behalf of the Australian Human Resources Institute. Copyright © 2007
Australian Human Resources Institute. Volume 45(1): 24–43. [1038-4111] DOI: 10.1177/1038411107073597.
unresponsive (Daft and Lewin 1993; Child and McGrath 2001). As a result,
bureaucracies need to be replaced by ‘new organizational forms’ that allow for
speed, flexibility and innovation (Child and Rodrigues 2003; Nadler and
Tushman 1999; Volberda 1996).
Various labels describe these ‘new organizational forms’: post-bureau-
cratic (Hill, Martin and Harris 2000; Thompson 1993); intelligent (Pinchot and
Pinchot 1994; Quinn 1992); boundaryless (Ashkenas et al. 1995; Cross, Yan and
Louis 2000); self-managing (Purser and Cabana 1998); centerless (Pasternack
and Viscio 1998); virtual (Davidow and Malone 1992; DeSanctis and Monge
1999); cellular (Miles, Snow, Mathews, Miles and Coleman 1997); knowledge
(Oliver and Montgomery 2000); horizontal (Castells 1996; Quinn, Anderson
and Finkelstein 1996), modular (Galunic and Eisenhardt 2001); and lateral
(Joyce, McGee and Slocum 1997).
The literature, however, has its shortcomings. Although a number of
‘new’ forms practices have been described, the literature has been criticized for
lacking empirical and theoretical coherence. Empirical work has been frag-
mented and diverse and there is no unifying theory to interpret empirical
findings (Pettigrew et al. 2003). The literature relies largely on single case
studies in atypical or exceptional circumstances to assert ‘new’ forms (Ogbonna
and Harris 2003; Whittington and Pettigrew 1999).
Of particular importance is disagreement in the literature about the
compatibility of ‘old’ and ‘new’ organizational practices. Originally, researchers
assumed that ‘old’ practices, such as centralization and formalization, were
discordant with a more dynamic workplace. ‘New’ organizational practices,
such as flexible work-groups, delayering and collaborative networks, would
replace ‘old’ practices after a period of transition. More recently, researchers
have argued that instead of replacing ‘old’ with ‘new’, the two are compatible
and can co-exist. But no longitudinal, empirical studies have been undertaken
to assess the validity of either argument. In this paper, we address the compat-
ibility issue.
The original view in the ‘new organizational forms’ literature regarded ‘new’
organizational practices as being incompatible with ‘old’ forms (Fulk and
DeSanctis 1995). This assumption of incompatibility was based on the view
that new organizational forms practices are designed for flexibility, whereas
traditional practices are designed for stability (Dess et al. 1995). So due to
radical changes in the business environment, new organizational forms
represent a fundamental shift in organization structure, processes and decision-
making (Bartlett and Ghoshal 1993). This shift is facilitated by the use of infor-
mation technology, enabling an evolution of organizational forms from a
traditional bureaucracy to ‘new’ networked and virtual forms of organizing
(Dibrell and Miller 2002). In these new organizational forms work is argued
to be structured increasingly along horizontal not vertical lines (Barley 1996).
As such, the transition from rigid organizations to flexible organizations
includes reduced formalization and specialization and a looser organizational
form (Volberda 1996). Although there may be a transition period between ‘old’
and ‘new’ forms, ‘new’ forms will eventually replace traditional ways of organ-
izing (Miles et al. 1997).
More recently, however, another view has emerged to counteract this
argument. Not all researchers agree that ‘new’ forms necessitate a dismantling
of ‘old’ forms. Instead, and in what we label as the compatibility argument, it
is claimed that ‘old’ and ‘new’ practices can co-exist. Virtual organizations,
built around horizontal relationships, can exhibit considerable hierarchical
tendencies (Ahuja and Carley 1999). Organizations such as a country fire
department can combine both bureaucracy and flexibility (Bigley and Roberts
2001), a feminist bureaucracy can embrace hierarchical power and egalitari-
anism (Ashcraft 2001), and transnational organizations may retain hierarchical
governance as an overriding feature (Gooderham and Ulset 2002).
Organizations, therefore, are viewed as dualistic entities (Pettigrew and Fenton
2000), which combine traditional or hierarchical practices with new more
flexible, market-based practices (Holland and Lockett 1997; Tushman and
O’Reilly 1997). So the new model for organizing resembles a dialectic (Child
and McGrath 2001), one in which the core design challenge is for new orga-
nizational forms to cope with apparent paradoxes such as efficiency and inno-
vation; global operating control and local responsiveness; and centralized vision
and decentralized autonomy.
Development of hypotheses
Although some writers suggest that hypercompetition has not increased in the
1990s compared to the 1970s (Macnamara, Vaaler, and Devers 2003), others
accept that it has and that ‘new’ organizational practices are needed to cope
with the dynamic business environment (Child and Rodrigues 2003; Nadler
and Tushman 1999; Volberda 1996). Both the compatibility and incompati-
bility arguments accept this latter assumption and, in line with it, Palmer and
Dunford (2002) found that greater use of ‘new’ organizational practices was
associated with more dynamic business environments. As such, we propose the
following:
Hypothesis 1: The more dynamic the business environment the greater the
use of new organizational form practices.
Method
tions. Further, the position was likely to exist in the majority of organizations,
thus increasing the likely response rate. In addition, and unlike CEOs, human
resource managers were deemed more accessible and willing to complete a
survey. Organizations were sourced from Dun and Bradstreet’s Business who’s
who database. Ten days after the initial mail out a second reminder letter and
survey was sent to all organizations that had not responded. As an incentive
to complete and return the survey, respondents were offered an executive
summary of the findings.
Of the original database of 1997 organizations, we identified 58 cases
where organizations were included twice and 186 were returned to sender.
This left a total set of 1753. Of these, we received 395 responses with a response
rate of 22.5%. This compares well with other recently published organizational
surveys, including: a 21% response rate (Jiang, Klein, and Pick 2003, 106); a
13% response rate (Nahm et al. 2003, 224); a 17% response rate (Schulz 2001,
666); a 27.1% response rate (Guthrie 2001, 182); a 20% response rate (Dooley,
Fryxell and Judge 2000, 1242); and a 13% response rate (Whittington and
Pettigrew 1999, 590).
Responding organizations were spread across all industries, with manu-
facturing being the best represented: agriculture/forestry/fishing (0.5%);
mining (4.2%); construction (7.1%); manufacturing (28%); transport/commu-
nications/utilities (9%); wholesale trade (15.1%); retail trade (6.6%); services
(18.3%); finance/insurance/real estate (9.8%); and public administration and
other (1.3%). The human resource managers who answered the survey had
been with their organization for an average of 5½ years. The majority were
male (59%) and over 40 years of age (66%).
Measures
was calculated as the mean score across the six characteristics with 1 = not
dynamic, and 5 = dynamic.
Formalization
There is no measure of formalization used uniformly across the literature.
Although many researchers have used a simple two-item scale to measure
formalization (Gresov and Stephens 1993; Oldham and Hackman 1981; Van
de Ven and Walker 1984; Wallace 1995), we used a six-item scale adapted from
the US National Organizations Survey (Marsden, Cook, and Knoke 1994).
Our reasoning is that this scale suits the human resources managers whom we
intended to survey as the focus of the scale is on formalization of human
resource issues and these are issues that they should be able to comment on in
a knowledgeable way. Respondents were asked: ‘Do each of the following
documents exist in your organization?’ (rules and procedures manuals;
Centralization
There is no measure of centralization used uniformly across the literature. We
used a scale based on work from the Aston group (Pughet al. 1968 1969), as
adapted for the US National Organizations Survey (Marsden, Cook, and
Knoke 1994). As with the rationale outlined above in relation to the formal-
ization scale our reasoning for adopting this particular centralization scale is
that it suits the human resources managers whom we intended to survey as its
focus is on centralization of human resource decisions and these are decisions
on which they should be able to comment in a knowledgeable way.
Respondents were asked: ‘In practice, who makes the final decision in your
workplace about each of the following areas?’ (performance evaluation; work
scheduling/overtime; which employees to hire; staff promotions; use of subcon-
tractors/temporary staff; discharges/layoffs; wage/salary levels; and number of
employees). Responses were coded: 1= someone external to your workplace
(e.g. corporate HQ); 2 = someone external to your workplace AND the head
of your workplace; 3 = the head of your workplace; 4 = the head of your
workplace AND someone below them; 5 = someone below the head of your
workplace. Responses were reverse-scored. The centralization scale was the
mean response across the eight decision areas with 1 = low centralization, and
5 = high centralization.
Controls
There were four control variables in the study. Revenue was the indicator of
size and was measured in A$m. As a further check on size, we included total
number of full-time employees. To account for variation in the use of practices
in older, compared to newer organizations, age of organization was the third
control variable. This was calculated as the difference between the time period
of the survey and the organization’s year of founding. The fourth control
variable was industry. Dummy variables were created to represent the
following industry categories: agriculture/forestry/fishing; mining; construc-
tion; manufacturing; transport/communications/utilities; wholesale trade; retail
trade; services; finance/insurance/real estate; and public administration.
Results
Descriptive statistics for the main variables of the study are shown in table 1.
Here are displayed the means, standard deviations and intercorrelations for
the four scales, New organizational practices, Environmental dynamism,
Formalization, and Centralization, as well as the control variables, Revenue,
Number of employees, Age of organization, and the set of dummy variables
coding the organization’s industry. The Cronbach alpha reliability estimates
for the four scales are also shown in table 1. The Centralization scale produced
a high reliability co-efficient of 0.90, while the New organizational practices
and Formalization scales yielded lower, though adequate, reliabilities just
above 0.70. The Environmental dynamism scale, however, gave a somewhat
lower reliability estimate of 0.64, and the removal of items from this scale did
not lead to an increase in the scale’s reliability. The original scale was therefore
retained for further data analysis, although its lower reliability should be kept
in mind when interpreting the results.
Regarding the overall level of use of the new organizational practices, the
results indicate a moderate general level of adoption. On a five-point scale,
ranging from 1 = not used at all, to 5 = used to a large extent, the mean scale
score is 2.62 (s.d. = 0.71), a value that falls just below the scale mid-point of 3.
We compared this result to that obtained in the earlier study by Palmer and
Dunford (2002). They found a slightly higher mean score for the use of new
organizational practices, 2.71 (s.d. = 0.78). We conducted a t-test comparison
of these two means and found no significant difference between the studies in
the use of new organizational practices at the 0.05 level (t-value = 1.96, d.f =
1055).
The three hypotheses of the study relate to the associations between the
New organizational practices scale and the three other scales listed in this table.
Hypothesis 1 states that ‘the more dynamic the business environment the
greater the use of new organizational form practices’. The positive and statis-
tically significant correlation of 0.26 (p < 0.01) shown in table 1 between the
New organizational practices and Environmental dynamism scales indicates
that this hypothesis is supported by the results of the study.
Hypotheses 2 and 3 state that use of new organizational form practices is
not associated with lower levels of formalization or centralization, respectively.
Both of these hypotheses are supported by the correlations shown in Table 1.
Negative correlations were not found between the New Organizational
Practices scale and either of the formalization and centralization scales. For
formalization, a statistically significant and positive correlation with New
Organizational Practices was found (r = 0.26, p < 0.01), while for centraliza-
tion there exists a near-zero, but positive, correlation of 0.08 with use of New
organizational practices.
The same conclusions regarding the hypotheses can be drawn from the
regression analyses, in which the relevant relationships are investigated after
Variable M SD 1 2 3 4 5 6 7 8 9 10 11 12 13
30/01/2007
8. Mining i .04 .20 –.04 –.10* –.10* .04 –.02 –.02 –.08
Asia Pacific Journal of Human Resources
9. Construction .07 .26 .03 –.15** –.10* .00 –.01 –.02 –.02 –.06
10. Transport .09 .29 .02 –.05 .03 –.11* –.01 –.02 –.07 –.07 –.09*
11. Wholesale .15 .36 –.10* .04 –.04 –.09 –.05 –.06 –.01 –.09 –.12* –.14**
2007 45(1)
12. Retail .07 .25 –.23** –.03 .03 .00 .11 .16** –.08 –.06 –.08 –.09 –.11*
13. Service .19 .39 .07 .08 .03 .02 –.02 .00 –.03 –.10* –.13** –.15** –.20** .13**
14. Finance .10 .30 .06 –.08 .02 –.01 .10* .01 .02 –.07 –.09* –.11* –.14** –.09* –.16**
* p < 0.05 ** p < 0.01.
a
Correlations are calculated with pairwise deletion; b Cronbach’s alphas appear on the diagonal for multiple-item measures; c 1 = not used at all; 5 = used to a large extent; d 1 = not dynamic;
5 = very dynamic; e 0 = low; 1 = high; f 1 = low; 5 = high; g $ x1 000 000; h Measured in years; i For dummy variables 8 to 14, coded as 0 = not those industries; 1 = those industries.
Model 1 Model 2
Variable β t β t
Control variables
Revenue 0.30 2.92** 0.26 2.70**
Number of employees –0.19 –1.90 –0.17 1.78
Age of org. 0.00 –0.05 –0.04 –0.82
Mining –0.07 –1.29 –0.02 –0.36
Construction –0.02 –0.33 0.05 0.94
Transport –0.03 –0.44 0.00 0.04
Wholesale –0.14 –2.40* –0.11 –1.97*
Retail –0.26 –4.57** –0.24 –4.49**
Service 0.00 –0.05 0.01 0.10
Finance –0.02 –0.35 0.02 0.33
Main variables
Envir. dynamism 0.22 4.31**
Formalization 0.22 4.30**
Centralization 0.05 1.06
R2 0.10 0.21
F 3.87** 6.85**
df 10, 340 13, 337
∆ R2 0.11**
F 15.14
df 3, 337
a
* p < 0.05 ** p < 0.01; Linear regression with pairwise deletion of missing data
Limitations
The objective of the study was to assess the emerging compatibility argument
in the ‘new organizational forms’ literature. Originally, the ‘new organiza-
strategy (Smith David et al. 2002), sector (Schmid 2002) and customer orien-
tation (Lin and Germain 2004) may be necessary when making organizational
design decisions. Instead of substitution, managers should focus on what mix
of ‘old’ and ‘new’ practices are needed to enhance organizational performance.
The results of this study, in combination with the earlier one reported by
Palmer and Dunford (2002), suggest that centralization and formalization
remain relevant in a dynamic business environment. Further research is
required to explore the benefits and drawbacks of centralizing and formal-
izing some practices over others, and how centralization and formalization
complement ‘new’ organizational practices to ensure both flexibility and
control. Future research is required to understand how formalization and
customization, or superior customer service, interact to enhance organizational
effectiveness. The ‘new organizational forms’ literature, when emphasizing
radical replacement rather than integration of ‘old’ and ‘new’ practices, may be
missing the key dynamic – what is ‘novel’ about ‘new’ organizational practices
is not the ‘new’ practices themselves, but the way they interact with traditional
organizational practices.
Richard Dunford (PhD, ANU) is professor of management in the Macquarie Graduate School of
Management, Macquarie University, Sydney. He has held academic positions at a number of universities
in Australia and New Zealand. His main areas of research are the development of new forms of
organisation and the characteristics of high-performing organisations and his work has been published
in leading international journals. He has also held positions in both business and government and has
worked as a consultant in strategy, change and executive development for a broad range of
organisations.
Ian Palmer (PhD, Monash) is a professor of management and associate dean, research in the Faculty
of Business, University of Technology, Sydney. He teaches, researches and consults on organization
change, design and analysis. His publications appear in a wide range of journals. He has held visiting
positions at Cornell University (1993) and the University of Virginia (1997, 2000) and is currently chair
of BARDsNET (Business Academic Research Directors Network).
Jodie Benveniste is a research associate at the University of Technology Sydney, Faculty of Business.
Her research work encompasses new organizational forms, and organizations entering highly
competitive environments. She is also the author of two books – one on corporate sustainability,
and the other on work–family balance.
John Crawford (PhD, UNSW) is a senior lecturer in the School of Management at the University of
Technology, Sydney, and has taught organizational behaviour and research methods. His thesis was a
study of mental abilities and human performance, and his research interests are in the general area of
organizational behaviour, and include leadership, teamwork, and business ethics.
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