Innovative Organiztional Structures and Performance

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Journal of Organizational Change ManagementInnovative organizational structures and performance: A case study of structural

transformation to groovy community centersEmmanuel Ogbonna and Lloyd C. Harris

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To cite this document:Emmanuel Ogbonna and Lloyd C. Harris, (2003),"Innovative organizational structures and performance",Journal of Organizational Change Management, Vol. 16 Iss 5 pp. 512 - 533Permanent link to this document:http://dx.doi.org/10.1108/09534810310494919

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Innovative organizational

structures and performanceA case study of structural transformationto groovy community centers

Emmanuel Ogbonna and Lloyd C. HarrisCardiff Business School, Cardiff University, Cardiff, UK

Keywords Organizational structures, Organizational change, Organizational design,Business performance, Innovation

AbstractAlthough there has been substantial academic and practitioner interest into innovativestructural arrangements, the study of structural transformation and the structural practices ofsmall to medium-sized organizations in traditional industries has been relatively ignored. Thisarticle presents empirical evidence of a company that changed its organizational structure from atraditional bureaucracy to a structure that was fundamentally different from those of other firmswithin its industry. The changed structure was characterized by many novel attributes such asdevolved responsibility, empowerment, community orientation and a lack of hierarchy. Althoughthere was some evidence to suggest that the structure had positive performance implications, the

study also finds that the content, context and process of change were influenced by a dominantmanaging director such that the outcomes masked underlying political issues. The article concludesby discussing the theoretical and practical implications of the findings.

Introduction

The generation of an organizational structure that is capable of coping with theneeds of modern businesses has been one of the most problematic issues facingorganizations and their managers (see Miles et al., 1997; Black and Edwards,2000). In this context, it is arguable that organizational structural change hasbeen one of the most topical issues in management and organizational studiesover the last two decades (for example Stebbins et al., 1998; Volberda, 1998;Hinkin and Tracey, 1999; Pettigrew et al., 2000; Black and Edwards, 2000).

Interestingly, while there has been a spate of interest into the general area oforganizational structures, recent studies into innovative structures have tendedto focus on:

. a limited range of structural forms and those frequently adopted by largeinternational organizations (for example Bartlett and Ghoshal, 1993;Pettigrewet al., 2000); or

. the complex structural configurations of high technology-drivencompanies in hypercompetitive environments (for example, Bahrami,1992; Miles et al., 1997; Black and Edwards, 2000).

The Emerald Research Register for this journal is available at The current issue and full text archive of this journal is available at

http://www.emeraldinsight.com/researchregister http://www.emeraldinsight.com/0953-4814.htm

This study was supported by the British Academy, grant number SG 31428.

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Received 15 March 2001Revised 13 January 2002Accepted 13 June 2002

Journal of Organizational Change

Management

Vol. 16 No. 5, 2003

pp. 512-533

q MCB UP Limited

0953-4814

DOI 10.1108/09534810310494919


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Inexplicably, the innovative structural practices of small to medium-sizedorganizations operating in non-technological sectors and within single nationalgeographical boundaries have been relatively ignored.

The rationale for this study is grounded in two inter-linked issues. First, thestudy is designed to redress the paucity of empirical research into themanagement of structural change in smaller firms in traditional sectors. Inparticular, the study aims to explore and describe innovative structuralpractices in smaller organizations in a non-technologically-driven sector.Second, the study is a response to recent calls for greater understanding andanalysis of apparently novel managerial practices in order to bridge thesubstantial gap that exists between theory and practice on the adoption anddiffusion of innovative ways of structuring and managing organizations (seeRomme, 1997; Lillrank and Holopainen, 1998; Pettigrewet al., 2000; Black andEdwards, 2000).

The article begins by providing an outline of research into the structuring oforganizations. Thereafter the methodology adopted for the study is reviewed,followed by the presentation of the findings of the study and a discussion of theinsights uncovered. The article concludes with a discussion of the implicationsof the findings.

Innovative forms of organizing: a brief overviewEarly studies of organizational structures, collectively described as classicalorganizational theory, posited the structuring of organization as a search foridealism (see for example Weber, 1947) or efficient structural principles (seefor example Fayol, 1949), with scientific characteristics (see Taylor, 1947).Later research from the contingency perspective argued that the key tounderstanding structure lay in identifying organizational attributes andaligning them to contextual factors (see Woodward, 1965; Pugh et al., 1969;Lawrence and Lorsch, 1969). However, these two broad views have been widelycriticized for treating organizations as though they are detached from thepeople who manage them (see Child, 1972; Wood, 1979), and for ignoring theevolutionary nature of organizations (McKelvey and Aldrich, 1983; Hannanand Freeman, 1989).

Recent research interest has moved away from the evaluation of the meritsand problems of traditional forms of organizing to the investigation of new

ways of structuring organizations. Interestingly, while many structuralconfigurations that are described as innovative lack a concrete theoreticalbase (see Snow, 1997), managers frequently perceive such structures as solvingtheir organizational problems (Miles and Snow, 1992; Pettigrewet al., 2000). Assuch, research into innovative organizational structures is driven more bypractice than by theory (Miles and Snow, 1992) while the developed theories arelargely framed around the structures that are viewed as successful (see Snow,1997).

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In a recent article published as part of the INNFORM program, Pettigrewet al. (2000) conclude that both European and Japanese organizations areincreasingly adopting innovative structural practices, although there weresignificant differences in the rate of change in the two regions. Other studies ofinnovative forms of organizing tend to focus on providing descriptive accountsof change efforts designed to achieve particular types of structures (forexample Romme, 1997; Black and Edwards, 2000). Of this genre, by far themost common form studied is the network. While this label is ascribed toalmost every organizational transformation (see Charan, 1991; Grabher andStark, 1997), a degree of conceptual clarity on network structures is providedby researchers who present network structures as flexible organizationalarrangements which are created and coordinated by market mechanisms (seeMiles and Snow, 1992; Hanssen-Bauer and Snow, 1996; Achrol, 1997) and othertheorists who generate interesting insights into intra-organizational networks

(see Quinn et al., 1996; Miles et al., 1997).A consistent issue in the literature to date is that the capacity to respond

quickly to environmental pressures is a major structural predictor of businesssuccess (see Snow, 1997; Pettigrew et al., 2000). However, the critical quality ofsuch quick responses are frequently attributed not to technical optimization,but to the ability of an organization to harness its human resources throughstructural transformations (for instance Mintzberget al., 1998; Whittington andMayer, 1999). In this regard, research studies into the so-called highperformance work organizations reveal that such organizations increasinglyadopt a range of innovative human resource practices which have variouslybeen described as process innovation (Pettigrew et al., 2000), workplace

innovations (Ichniowski et al., 1996) or the new management model (Bacon et al.,1996).

An examination of the literature finds that there are two importantexplanations to the emergence of new forms of organizing. First, there are thetheoretical explanations that are derived from the literature on organizationalstructure and design. For example, as discussed earlier, contingency theoristssee the design of organization as a necessary managerial response to variouscontextual factors including size, environment and technology (see Lawrenceand Lorsch, 1969; Pugh et al., 1969; Woodward, 1965). More recent theoreticalexplanations can be derived from the work of institutional theorists (see

Di Maggio and Powell, 1983; Baum and Oliver, 1991; Roberts and Greenwood,1997). Such researchers have argued that organizations secure their legitimacyand or resources by conforming to institutionally prescribed logic and businessrecipes, a phenomenon that is described as institutional isomorphism byDi Maggio and Powell (1983).

Second, there are the range of practical factors which have been seen asdriving the new innovative forms of organizing (for example, Ezzamel et al.,1996; Ichniowski et al., 1996). Pettigrew et al. (2000) argue that the

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intensification of changes to economic, technological, informational andpolitical factors are forcing managers to seek new ways of organizing andresponding to the challenges they face. Similarly, other researchers identifyincreasing globalization as a key factor wherein managers resort to aping thesuccessful practices of companies in other parts of the world in an effort togenerate superior performance (see Hanssen-Bauer and Snow, 1996).

Possibly the strongest indication that innovative organizational forms arelinked to performance is derived from the argument of researchers that manyinnovative organizational structures have the advantage of correcting theinherent weaknesses of traditional organizational forms (see Bahrami, 1992;Pettigrewet al. 2000).

However, in the absence of comprehensive empirical evidence linkinginnovative organizational structures directly to performance, indirect evidencecan be derived from studies that have linked innovative work organizations to

businesses success. In this regard, there has been extensive interest in theperformance implications of what has been popularly described as highperformance work organizations (see Whitfield and Poole, 1997; Osterman,2000). For example, Ichniowskiet al.(1996) demonstrate that steel mills whichadopted innovative work practices (combined with appropriate humanresource management (HRM) policies) achieved better results thanorganizations adopting traditional systems. Similar conclusions have beenreached by other researchers (see Batt, 1995; Batt and Applebaum, 1995;MacDuffieet al., 1996).

Overall, the review of the literature on innovative organizational formsshows that this topic has attracted widespread interest over the last few years.

Academics and practitioners appear to agree that the increasingly turbulentbusiness environment requires organizations to adopt innovative ways oforganizing their activities in order to maintain an advantage in the marketplace. However, the links between innovative structures and performanceremains under-studied. Similarly, many studies of innovative structures arebased on the activities of large international companies in a handful of businesssectors.

Research design and methodsGiven recent calls for greater understanding of the dynamics of new

organizational structures (Biemans, 1996) and the recent prompting for moresystematic theory development in the area (Snow, 1997), it is useful to broadeninvestigations of innovative forms of organizing.

The choice of research method reflects the nature of the phenomenon underinvestigation in that insights were sought into interpretations and perceptionsof change as well as more objective data regarding performance outcomes.As the literature review demonstrates, there is little conceptual agreement onwhat constitutes an innovative structure (see Miles et al., 1997).


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Consequently, research on innovative organizational forms is heavily informedby practice (see Pettigrew et al., 2000). This indicates that empiricalinvestigations in this area should place a high premium on the researchersdescriptions and accounts of intricate structural arrangements. In this regard,the need for both depth and rich understanding resulted in the adoption of anin-depth case study approach (see Dyer and Wilkins, 1991). The researchdesign is partly exploratory (in order to expose issues and describe concepts see Ghauri et al. (1995) and partly descriptive (to describe organizationalcharacteristics and activities).

The key form of data gathering was in-depth semi structured interviews. Atotal of 50 such interviews were conducted with employees at all levels(including head office directors and managers and other employees at differentlevels of the organizational hierarchy). Each interview lasted between one hourand 90 minutes. Data were also generated from a vast array of company

archival information that included commercial reports, internal memoranda,minutes of board meetings and strategy documents. In addition, theresearchers used non-participant observation data collection techniquesincluding work shadowing, attendance at training sessions, attendance atmanagement meetings, and formal and informal visits to the companysoutlets. Observing the current practices of the firm contributed to thedevelopment of a broader understanding of the culture and climate of the firm.Similarly to the work of Dawson (1994, 1997; (see also Pettigrew, 1997)), suchstrategies not only facilitated the validation of the accounts of the interviewees,but also helped to highlight alternative interpretations thereby revealing theissue of polyvocality in change (see Buchanan, 2001). All interviews were

audio-tape recorded and transcribed verbatim.The analysis adopted a discovery-oriented approach that was akin to

grounded theory (see Strauss and Corbin, 1990). Specifically, open codingwas used to identify and determine the properties and dimensions of conceptsin the data, axial coding was employed to link the core categories together,and, finally, selective coding was used to integrate and refine theory.

The Zenith Group: groovy community centersTo frame future discussions, it is useful to define the notion of groovy

community center[1]. This term was first used by one of the senior managersduring the initial phase of data collection to describe the work atmosphere thatemerged from the structural transformation. By the end of the data gathering, itbecame clear that groovy community center was used throughout thecompany to denote a trendy, innovative and creative work environmentwherein individual outlets are empowered to tailor their activities towardsatisfying the needs of their targeted community. Interestingly, this view ofgroovy community center was promoted not only to the internal employees,

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but also to external customers to the extent that it has become a definingcharacteristic of the climate of the organization.

Prior to the presentation of the findings, it is useful to provide a briefbackground information on the case company. Zenith Ltd (a pseudonym) wasestablished by Mr Zenith in the early 1980s to compete in the growingpub/wine bar market in the UK during that period. The company started withfour outlets but grew to the point where a bigger firm in the hospitalityindustry (Bonds Inns plc) acquired it. Bonds Inns plc operated a chain of pubs,taverns and wine bars and was relatively successful in the 1970s and 1980s.

Linked to this acquisition was the appointment of a new general manager(Ms Jameson) to spearhead the activities of Zenith Ltd in 1992. Zenith grew tobecome the most successful trading format under the Bond Inns portfolio.However, while Zenith was relatively successful, archival information showsthat some executives believed that this brand was not performing to its full

potential. However, the performance of Zenith was put in a positive light by therelative under-performance of many of the other brands owned by Bonds Inn.These two factors were instrumental to the decision of the board of directors ofBond Inns to focus a larger part of its resources on developing the Zenith brandalthough the other businesses remained part of the group.

In 1997, Ms Jameson was appointed to the board of directors of Bonds Innsplc. Her central task was to take the group forward in a market that was largelydominated by large breweries with extensive market power. The elevation ofMs Jameson to the board of directors provided her with a suitably influentialforum which she vociferously used to expound the virtues of radicallyoverhauling the activities of Bonds Inns plc. In 1998, Bonds Inns plc was

renamed The Zenith Group plc and Ms Jameson was appointed the managingdirector of the group. A strategic decision was also made to reposition the otherbrands within the portfolio of Bonds Inns and to sell those that did not fit withthe Zenith brand. At the end of this process, The Zenith Group was left withonly 11 outlets.

The rationale for adopting a new organizational structureIn order to illustrate the extent of structural change, it is first worthwhileproviding an overview of the old structure. Archive material and discussions

with long serving organizational members show that Bonds Inns plc could becategorized as a highly bureaucratic, overly centralized and stronglyhierarchical organization wherein any form of dissent was viewed asdysfunctional. Indeed, certain top managers were far from content with theappropriateness of the structure and practices at that time. The comments ofthe present managing director of The Zenith Group (who joined Bond Inns as amanager in 1992) help to explain the perceived weaknesses of the previousstructure:


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When I arrived, I noticed that everybody went about their business in suits with big fatbriefcases. It was a very formal place and the culture was very much control-orientated. Youhad a large head office which was full of people writing letters to managers telling them whatthey have not done. Letters would be written to managers telling them that if they dont get

their wage percentage down next week they will be fired! (managing director, eight yearsservice).

Other managers who experienced work under the old structure made similarobservations. For example:

It was really a traditional company. I thought that a lot of the things they did wereabsolute rubbish. The senior people were a bunch of stuffy old farts that didnt knowanything. They just relied on their tried and tested system . . . (regional manager, tenyears service).

However, this is not to suggest that all employees disliked the old structure.Indeed, analysis of the interview data found some competing anecdotal

evidence that suggests that particularly older employees found the traditionalstructure a comfortable and predictable working environment. In this regard,one managers comment which equated the old structure with discipline andconsistency was particularly instructive.

Interestingly, the previous structure of Bonds Inn plc was consistent withthe prevailing structure of other companies in the industry (a point whichsupports the institutional perspective forwarded by researchers such asDi Maggio and Powell, 1983; Baum and Oliver, 1991; Roberts and Greenwood,1997). However, the present managing director argued that the old structurestifled creativity. Indeed, she attributed the relatively poor performance ofBond Inns plc to the old organizational structure:

You are never going to become a prosperous organization if you have people who spend alltheir time complying to rules and regulations. You will also find that all the creative peoplewill feel frustrated in this type of organization and some of them will leave the company(managing director, eight years service).

In some respects, it would appear that in order to seize the political initiativeand promote the idealized structure, Ms Jameson and her trusted associates(the dominant management team) were attempting to manipulate theorganizational discourse and direct sense making by employing positivesymbolism expressed through the use of the terms creativity andprosperity in relation to the espoused change.

Following the appointment of Ms Jameson as director of the Bond Group in1997, she embarked on a campaign to persuade her fellow board members thatthe existing structure was not suited to the future direction of the organization.However, not every manager agreed with the rationale for change or indeedeven cooperated with the change effort. Of particular significance is that thesmall numbers of managers who were labeled resistant to change byexecutives viewed Ms Jameson as nothing more than an astute instrumentalmanipulator. As one manager notes:

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Ever since she came here she has been trying to re-write all the rule books . . . She hassurrounded herself with some cronies who never stop praising her . . .They are like robots. . .Ms Jameson this and that, they never question her. They think she is god. . .Well, I disagree(outlet manager, eight years service).

Overall, while there were some dissenting voices, there was general agreementamong many of the interviewees that the old structure of The Zenith Groupwas inappropriate and dysfunctional. This concern was presented by themanagement as the rationale for the adoption of a new organizational structure.

The development of a new organizational structureThe evidence from the case study suggests that a number of factors wereinstrumental to the success of Ms Jameson in overcoming (or suppressing) anentrenched system and adopting a different way of operating. Perhaps the mostimportant factors were her leadership skills and managerial abilities which

enabled her to spearhead the companys revival following the economicrecession of the late 1980s and early 1990s. Linked to this was her politicalskills (or what a few people in the company refer to manipulative skills)which greatly aided her in her efforts to persuade people to support her vision.As mentioned previously, her success in increasing the profitability of ZenithLtd helped her to persuade the board of directors to rename the holdingcompany from Bond Inns plc to The Zenith Group plc. As the head of the newgroup, she was able to develop a considerable power capacity, and one that sheused tactically to influence the direction of the company. For example:

It was very difficult to change anything. . .I had to threaten to resign each time so that I canbe given the freedom I wanted to change things. I didnt always get all the things I wanted

and we had to negotiate all the time. . .

If I want to do X and Y they will say why dont you doX and we see how it goes (managing director, eight years service).

Nevertheless, it was interesting to note that many managers conceded thatluck played some part in the success of Ms Jameson in transforming theorganization. Indeed, Ms Jameson accepted the extent of her good fortune in herrole as the general manager of Zenith. Information from the company reportsindicate that under Ms Jamesons leadership, Zenith was transformed into themost popular and fashionable eating and drinking places in the South East.Indeed, Ms Jameson believed that her success in transforming Zenith led to anescalation of commitment to undertake further changes when she was

appointed the managing director of The Zenith Group.By the time she was appointed managing director of The Zenith Group plc in1998, Ms Jameson had come to the conclusion that a widespread restructuringof the entire organization was not only desirable, but also critical to thelong-term survival of the organization. Minutes of board meetings held in June1998 indicate that she was able to elicit the support of two of the other threedirectors in this regard. The third director disagreed with both the rationale forthe structural change and the approach to change. The minutes of the board


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meeting held in December 1998 show that the director was particularly criticalof Ms Jamesons informal management style which he saw as leading to a lackof discipline amongst the rank and file. This director left the company inFebruary 1999 by what was described in the company newsletter as a mutualagreement.

The above discussion highlights a range of interesting issues regardingboth the change program at Zenith and the leadership style of Ms Jameson.In particular, the accounts of the disillusioned director revealed througharchival search suggests that there was (single definitive view of both thechange process and Ms Jamesons role in the process. Similarly, although itwas impossible to ascertain fully the reasons and manner of the departureof this director, the official explanation from the company (leaving bymutual agreement) suggests that he may have been forced out of thecompany probably because his potential for insurrection was perceived to

be potentially disruptive or damaging to the change process. Thisinterpretation suggests that Ms Jameson is a complex personality whoappears to shift from being caring to exhibiting authoritarian andbullish behavior, thereby indicating that a control-oriented leadershipperspective dominated management dialogue at Zenith (see Watson, 1995).

Although the remaining directors agreed, were persuaded or weresufficiently manipulated to argue that The Zenith Group needed a newstructure, there was (consensus regarding the type of structure that wasrequired. As one director explained:

We were sold the idea of a new structure by [Ms Jameson] but she was not quite clear

as to what this structure would be. We just liked the relaxed atmosphere and thesuperior financial performance of the bars she was responsible for before her promotion

to group managing director . . . (head office director, six years service).

Consistent with the contention of a number of theorists (see for example Milesand Snow, 1992), it appears that the new structure at The Zenith Groupemerged after experimentation and a series of small-scale trial and errors. Forexample, in early 1998, the directors and senior head office managersundertook a number of consultation exercises with managers and shopfloorworkers at all of the companys outlets. However, this process was moread hocthan prescribed:

We spoke to as many people as we could just to gauge the strength of the force tochange. We had a vision of what we wanted but we didnt have a clear feel for how wewere going to achieve this. At that point, it didnt seem to matter. All we wanted was to

make sure that people were behind us (managing director, eight years service).

The comments of one assistant manager provide some support not only for thefear and discomfort that some employees experienced with the change process,but also their anxiety with the apparent lack of direction and articulation of thelikely future shape of the organization by the top management:

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The meetings we had with people from head office were very informal. We were told that thestructure had to change but (one quite knew what the new structure would be like. All theykept saying was that they wanted more openness and flexibility. It was really scary for thoseof us who were used to a structured way of life (assistant outlet manager, four years service).

However, the analysis of the interview and archival data reveals anoverwhelming desire by Ms Jameson and many employees in The ZenithGroup to be different from the rest of the industry. Although there were somecompeting accounts of both the rationale for change and the direction of thechange, Ms Jamesons perspective on the change and her approach appeared toexert a particularly strong influence on the structure that emerged.

Organizational structure at The Zenith GroupManagement at The Zenith Group claim that the changed organizationalstructure is distinguished by a number of characteristics including lack of

formalization, decentralized decision making, lack of hierarchical arrangementand a high degree of empowerment. The structure described is best portrayedas organic with conventional hierarchical charts discarded in favor of awheel structure somewhat akin to the structure and cultures described byHandy (1985) and Harrison (1972). Management typically claim that thisstructure has flexible functional boundaries with tasks and activities looselyconnected into broad and general remits of responsibility.

Discussions with both head office and branch managers at The ZenithGroup uncovered a generally consistent account of the new organizationalstructure and what it symbolized. As the managing director observes:

We describe our structure as a bicycle wheel where we have the principal people in the

business, the customers and the outlets, in the center. The rest of the people are reallyproviding a service to the center. Making the center work is all we are about (managingdirector, eight years service).

Another manager provides an equally eloquent description of the functioningof the structure:

I call it the wheel of fortune, other people just call it the bike or a wheel. We have the pubs inthe center, they are the cash. And then from the pubs we have the spokes and on those spokesyou have the different functions where the head office fits in . . . (head office manager, 18months service).

These views reflect the ways in which the language of senior management

focus on metaphor and discourse that emphasizes not only a preference todiscard the old for the new, but also a value that promotes the merits ofnon-traditional approaches and even trendy structural designs.

The uncovering of such general support among managers of all types maybe explained in a variety of ways. First, and possibly least likely, is that agenuine consensus regarding the nature of change has emerged amongmanagers indicating a surprisingly consistent change process. Second, thisfinding may suggest that the training and education programs that


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complemented the change process successfully indoctrinated managers (seeCasey, 1999) to the extent that a single dominant narrative emerged (and wasprobably intentionally reinforced by top management). Third, it could be thatcompeting interpretations and narratives regarding change have either beensuppressed or that top management promoted cultural norms are precludingmanagers from communicating alternative interpretations to researchers (seeBuchanan, 2001). Such issues are important and will be explored later in thispaper.

Although there was general agreement among managers regarding thenature of the changed structure (although not necessarily about the change),typically frontline employees perceived the new structure somewhat differentlyto the way in which it was understood by management. Many branch frontlineemployees were confused about the division of responsibility and whilst eachrecognized and identified with the Wheel structure, in some cases their

interpretation was orthogonal to the Ms Jamesons espoused view. Forexample:

There are certain people who have certain jobs. It seems to be as soon as you get settled

to learn who to speak to in Head Office someone decides to change everything aroundagain. I cant keep up with all the changes (head chef, four years service).

The uncovering of views regarding the changed structure that weredifferent to those of management may well reflect hierarchical culturaldynamics, in that the hierarchical position of frontline staff has previouslybeen linked to a fragmented cultural perspective. Further, as Dawson(1994) has argued, there are frequently differences between senior

management interpretations of change and those of shopfloor employees.However, an equally valid explanation may well be that frontline workers(perhaps not constrained by career aspirations) felt more willing tocommunicate their views regarding the changed structure and less boundby the culture and control of management. In this sense, the fragmentedviews of frontline workers may well reflect a competing but equally validnarrative of the change program at Zenith Group plc (see Dawson, 1997;Buchanan, 2001).

Whatever the nature of the developed structure, the changed structure hasmany unusual attributes. Consistent with existing theory on new forms oforganizing, the new organizational structure was designed to improve thecompetitiveness of the company (see Bahrami, 1992; Miles et al., 1997;Pettigrewet al., 2000). However, the organizational structure adopted by TheZenith Group contrasts with the existing industry and sector recipes (seeDi Maggio and Powell, 1983; Baum and Oliver, 1991; Roberts and Greenwood,1997). In this sense, the structure is described in this article as innovative.The remainder of the Findings section is dedicated to discussing theperformance implications of the new structure.

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The performance of the new structureThe diverse nature of the activities of Bond Inns plc makes it difficult toprovide comprehensive and comparable data on performance before and afterthe structural changes. However, in order to aid the evaluation of the wheelstructure adopted by Zenith Group, it is worthwhile supplying somecomparative information on performance pre-and post-structural changes.Table I provides some quantitative measures of performance over a five-yearperiod.

Interestingly, although many of the performance indicators examined werefavorable to Ms Jameson, data analysis suggests that the generation,evaluation and selective dissemination of these indicators were central to thechange strategy of Ms Jameson. The judicious dissemination of performancestatistics was used politically to prove the veracity of the change objectiveand to encourage recalcitrant individuals to become more involved. Anecdotal

evidence indicates that those resistant to change unsuccessfully attempted touse alternative performance indicators to counter the performance claims of Ms

Jameson. As one manager argues:

Mr Martins [the director that left the company] once tried to convince us [outlet managers]that we were better off under the old system . . .This wasnt very successful as people couldsee that that they had better career prospects here and that they generally had money in theirpockets at the end of the day (outlet manager, four years service).

The above comment highlight an interesting issue in the management ofcomplex organizational change in that opposing managers frequently invokecontradictory performance indicators to support their positions. This raises thequestion of whether it is ever possible to uncover a true version of change(Dawson, 1994, p. 4) and whether truly objective indicators of performancecould ever be achieved in politicized contexts wherein the dominant groupsattempt (directly or indirectly) to suppress any information or opinions that areinconsistent with the prevailing orthodoxy (see Buchanan and Boddy, 1992;Dawson, 1994, 1997; Buchanan, 2001).

However, although a wide variety of performance indicators were employedby both Ms Jameson and her detractors, the turnover statistics (which workedin Ms Jamesons favor) appeared to be viewed as especially pertinent by thepowerful board of directors. As Table I demonstrates, The Zenith Group

1995 1996 1997 1998 1999

Turnover (000s) 14,608 19,488 23,803 22,660 26,351Turnover per employee 41 39 40 41 42Gross profit (%) 56 55 56 62 70Net operating profit (%) 5 3 4 6 11

Source:Compiled from annual reports and various internal documents

Table I.Performance figures for

The Zenith Group plc(1995-1999)


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achieved a remarkable increase in the turnover per employee during the 1999financial year. Similarly, although there was a 16 percent increase in turnoverbetween 1998 and 1999, this was not matched by a corresponding increase in

staff costs indicating a greater level of staff efficiency. It is also significant thatthe company enjoyed an 8 percent increase in gross profit and a 5 percentincrease in net profit between 1998 and 1999.

Although the evidence above suggests that the performance of The ZenithGroup plc has improved in recent years, it is important to note that the researchdesign adopted for this study precludes definitive claims of causality regardingwhether the structural transformation alone accounted for the performanceimprovements. Similarly, it is acknowledged that, like all measures ofperformance, some of those presented by the organization (and reported in thispaper) may be misleading. For example, a comparative analysis of outletgrowth since restructuring is potentially misleading since Bond Inns plc traded

under different brands which have now been integrated. This said, it is worthnoting that The Zenith Group is considered highly profitable not only byinternal management with vested interest, but also by independent investmentanalysts who frequently recommend the companys shares as prudentlong-term investment. Indeed, a recent profile of the company in a populartrade magazine commented positively on the transformation of The ZenithGroup and praised the management for making Zenith one of the mostdesirable brands in the sector.

Although there is some quantitative evidence to suggest that thecompany has been especially successful over the last two years, the

qualitative evidence of the performance of the new structure is also worthyof discussion (see the discussion of the merits of such subjective measuresof performance by Venkatraman and Ramanujam (1986)). For example,there was a widespread belief in the company that the new structurefacilitated greater levels of flexibility, teamwork and community-focusedresponsiveness throughout the organization (perceived limitations of thestructure are discussed later). The comments of many head office managersconfirm this point. For example:

I think we have succeeded in having a fluid organization. We are very quick to adapt to

changes in the environment. . .It is very different from any other organization I have worked

for (head office manager, six years service).

Similarly, several employees pointed to the high level of decentralization anddevolution in the new structure which they perceive to have facilitated moredevolved responsibilities and involvement in decision making:

They [the HQ] dont really impose things. Take this place for example. Were the test pilot for

the area we try everything new out for a few months if we like it everybody else gets the

opportunity to have it . . . if we hate it phhhuttttt . . . it just dies here (outlet manager, two

years service).

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The point is [The Zenith Group] isnt about you will or else. Its about whatd think? doyou want to try?. Just a different approach altogether (shopfloor worker, 15 months service).

Although many employees discussed the positive aspects of the new structure,

it is important to note that an alternative interpretation of these events could bethat performance improvements may have arisen from the self-control whichresulted from the new organizational culture that followed the structuraltransformation. In this regard, there is substantial evidence in the literaturewhich suggests that self-discipline is a more effective form of control thanexternally imposed control (see Ogbonna and Wilkinson, 1990; Sewell andWilkinson, 1992; Oglensky, 1995; Casey, 1999). In The Zenith Group, manyemployees who reported that they felt more empowered under the newstructure also indicated that they were under a self imposed pressure toperform at consistently high levels. Such views highlight a paradox instructural change. That is, whilst the new structure appears to empower

people, it also makes individual conduct more critical to organizationalperformance. This paradox has been recognized previously in studies ofmanagement attempts to empower employees (see Harley, 1999; Sewell, 2001).One managers comments illustrate this:

Managing other people is easy its a matter of experience. Now, managing yourself issomething different altogether. At The Zenith Group its not about the head office checking upon you all the time but its more down to you as the manager. I mean, were given the power tomake the decisions not just a set of procedures to follow. Thats okay most of the time but itdoes mean that you end up making the choice and living with the consequences. If youscrew up, you cant blame head office but head office can sure as hell blame you (outletmanager, six years service).

Interestingly, those judged to be consistent poor performers are encouraged toleave the organization. As one manager notes:

I think were as forgiving of failure as anybody else. I mean if people screw up and things gowrong, its not about giving you a b*********g but about trying to help you turn thingsaround. Im not saying theyll let it go on for ever you get a fair run at it but if you keep onletting em down youre out.

Later:

I guess 10 percent move on and I guess they get rid of about another 5-10 percent a year(outlet manager, three years service).

Although the change in The Zenith Group was pervasive and affected bothemployees and managers, subsequent analysis suggests that managersconsidered themselves to be more affected by the change than frontlineemployees. The veracity of such a view is debatable indeed structural changewas not only limited to management, but also profoundly affected the workinglives of frontline staff. However, given the alterations to levels of managerialresponsibility and ways of working, it was not surprising to find evidence ofstress more commonly among supervisors and managers.


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Discussion and implicationsThe structural change process and resulting organization that emerged at TheZenith Group plc is interesting for a number of reasons. Of particularsignificance is that this structure is different and appears to be pivoted on thedesire to differentiate the company from its competitors. In this regard, thestructure is inconsistent with contemporary literature on industry recipes andinstitutional isomorphism (see Baum and Oliver, 1991; Roberts and Greenwood,1997). Thus, although many companies in the sector adopt conventionalhierarchical organizational structures, The Zenith Group transformed theirorganization into a structure that was fundamentally different in shape, scopeand boundaries. The adoption of such an innovative structure and thesubsequent performance successes linked to such a radically differentapproach by The Zenith Group may suggest either that:

. the traditional sector recipes have become out-dated or superseded by

environmental events; or. the company has identified and developed a new superior recipe for

success in the industry.

This indicates that the notion of industry recipes is temporal and/orenvironmentally contingent. However, these findings may also suggest thattraditional conceptions of sector and industry (and thus sector/industry recipesfor success) are invalid under many environmental conditions, particularlythose which are rapidly changing and subject to intense competition (Hamel,1996). Indeed, it could be argued that the recent trend towards the developmentof innovative organizational structures (see Miles and Snow, 1997; Hustad,

1999; Eisenbach et al., 1999; Pettigrew et al., 2000) is tangible evidence of adesire to avoid traditional structural formulae which could even be recipes forstrategic inertia and stagnation (see for example Huffet al., 1992).

Furthermore, such was the unusualness of the transformed organization thatsuch a structure has not been identified nor discussed in the literature oninnovative organizational forms or change management (see for exampleBartlett and Ghoshal, 1993; Romme, 1997; Miles and Snow, 1997; Lillrank andHolopainen, 1998), although some similarities exist with the views of Handy(1985) and Harrison (1972). However, general parallels may be found betweenthe wheel structure of The Zenith Group and existing theory through the

flexibility and horizontal information flow of network structures (see Biemans,1996; Quinnet al., 1996) and some correspondence to teamworking in so-calledcellular organizations (Miles and Snow, 1997). Nevertheless, the changeprocess, the overall structural design, the degree of power and responsibilitydevolution, the extent of frontline empowerment and horizontally andvertically-blurred functional and task boundaries constitute a significantdeviation with the majority of earlier conceptualizations (for instance Achrol,1997; Whittington et al., 1999; Black and Edwards, 2000) and all of the

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traditional designs propounded in popular pedagogical texts (for exampleRobbins, 1987; Mullins, 1999). This indicates that not only is existingknowledge incomplete, but also that, recently, insufficient research has beendevoted to the study of innovative organizational structure formation andchange. The finding of such a strange structure in a traditional industry mayimply that many different forms of innovative structure are yet undescribedand unstudied by theorists but are obviously well-known by the participatingpractitioners. This may indicate that the current focus on deductive theorydevelopment is leading to ungrounded and incomplete conceptualizations. Thissupports the argument of Biemans (1996) who extols the virtue of studyingnovel organizational practices to aid theory development.

The rationale for the study (in part) stemmed from the inattention ofexisting research to the issues of structural transformation and changewithin smaller firms in traditional industries. The exploration of these

issues within this context revealed an innovative and unusual form ofstructure that contrasts with those models or ideal types typicallyforwarded based on research into transnational organizations. Thishighlights the merit of exploring these phenomena in multiple contexts.The findings of the study clearly indicate that innovation in change andstructure is not limited to large firms but extends to the arguably moreflexible and more responsive smaller organizations. Although research intostructural configurations in hypercompetitive environments suggests thatintense competition is related to structural innovation and change (seeMiles et al., 1997; Black and Edwards, 2000), the results of this studysuggest that this is not universal. In the current study, changes that couldbe described as innovative occurred despite a relatively stable environmentand in a traditional industry. This suggests that a re-evaluation of suchtheories may prove fruitful.

Implications can also be derived from the process through which The ZenithGroup plc achieved its new wheel structure. The success of the structuralchange pivoted on a range of contingencies. These included:

. a transformational (or politically astute) managing director whosucceeded in promoting the idea that the old structure was inadequateto meet the needs of the organization;

. the acceptance by the dominant majority that change was required;

. the widely-held trust and belief in the skills of the managing director;

. the commitment and support of top management;

. the acceptance of the need for experimentation (and thus successful trialand occasional error); and finally

. the use of internal marketing (Gummesson, 1987) to sell the idea of changeand to promote the change itself.


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Although many of the these variables have been identified in past studies oforganizational change (see for example Quinn, 1980; Mabey and Mallory, 1995;Romme, 1997; Westwood and Kirkbride, 1998), the current study identifiessome novel variables and furthermore suggests that the factors are temporaland interrelated.

Although a number of novel factors are identified in the study, the findingthat internal marketing activities were undertaken and played such animportant role is an issue that deserves further note. A review of changeliterature finds that the role of internal marketing has been surprisinglyneglected in the HRM-dominated literature on organizational transformationand change. In this regard, the findings of this study highlight the value ofembracing a broad array of perspectives and literatures in the examination ofchange. Indeed, the findings indicate that the incorporation of theories andinsights from alternative literatures can aid in the development of a greater

understanding of the phenomena of change and transformation.Significant implications are also derived from the role of leadership and the

political processes that characterize structural transformations. In the currentcase, the evidence from the interviews generally portray the managing directoras a having qualities which are commonly described as transformational in theleadership literature (Eisenbach et al., 1999; Hinkin and Tracey, 1999) andemploying participative styles of management. However, interestingly, morecritical examination of the evidence (including the analysis of archival data)suggests that such a single view of change may mask important politicalissues and processes which were not readily reported by the interviewees. Inparticular, the finding that some managers had different and frequently

competing interpretations of both the rationale, approach and outcomes ofchange was instructive. Indeed, the unearthing of archival data which suggestthat the one director who was critical of the change was labeled resistant andwas encouraged to leave the company highlights the extent to which themanaging director and her supporting board of directors were willing to go toensure that a single view of change prevailed. Quite what impact the treatmentof this director may have had on the views and responses of the remaining(perhaps career conscious) managers who were generally positive about thechange is clearly a matter worthy of further research attention.

Furthermore, although evidence was found to indicate that the changed

structure had positive performance consequences for the company andindividuals within the firms, evidence was also uncovered of a range of morenegative impacts of the change which were under-played by many seniormanagers. The findings indicate that some employees perceived the structuralchanges as directly causing negative effects on their working lives. Forexample, the devolved nature of the new structure was perceived by some asplacing a significantly greater (and stressful) burden of self-control. Similarly,some anecdotal evidence suggests that employees who were unable to cope

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with an unstructured work environment were excluded or as Willmott (1993)will put it excommunicated. These have clear implications for labor processdebates. In particular, the uncovered innovative structure appeared to facilitatethe exclusion of recalcitrant individuals and seemingly aided in generatingunresisting employee capitulation to management desires. Whether this was anintentional consequence or incidental by-product of the change is somethingthat clearly requires additional study.

The findings of this article also suggest important implications forpractitioners. Indeed, it would appear that some transforming organizationalstructure might have direct financial performance consequences as well as lesstangible (but equally important) employee motivational and commitmentimpacts. Thus, executives desiring improved performance may well find itworthwhile to investigate and implement novel organizational designs. This isnot to suggest that all changes will improve performance. However, the

judicious innovation to shake tired industry recipes and break the boundariesof outdated sector recipes is likely to prove advantageous.

Note

1. The term groovy community center was used by many of the employees and managers

interviewed to describe the transformed structure of the case study organization.

Interviewees used this term to characterize a trendy, innovative work organization wherein

individual outlets were empowered to tailor their activities to meet the specific needs of their

targeted communities. In this sense, the term was used to convey a structural form without

the formalization and hierarchies which are common in the industry.

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Further reading

Buchanan, D.A. (1997), The limitations and opportunities of business process re-engineering in

a politicized organizational climate,Human Relations, Vol. 50 No. 1, pp. 51-72.

Martin, J. and Meyerson, D. (1988), Organizational culture and the denial, channeling and

acknowledgement of ambiguity, in Pondy, L., Boland, R. and Thomas, H. (Eds),

Managing Ambiguity and Change, Wiley, New York, NY, pp. 93-125.

Morgan, G. and Sturdy, A. (2000), Beyond Organizational Change, Macmillan, London.

Prahalad, C.K. and Hamal, G. (1990), The core competence of the corporation,Harvard BusinessReview, Vol. 68 No. 3, pp. 79-92.

Yin, R. (1994), Case Study Research: Design and Methods, Sage, London.


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