Sunday, August 27, 2006

Bureaucracy and Innovation

Over time, small, agile and successful companies grow and become large corporations, where, very often, bureaucracy becomes the organizational form. Thompson (1965) argues that bureaucratic organizational form is appropriate for improving productive efficiency, however, it results in low innovativeness. Thompson suggests changes that can improve innovativeness of organizations with bureaucratic form.

- Increased professionalismIncentive systems should be modified towards 'professional image' rewards (esteem of knowledgeable peers, professional growth). Also, to be able to innovate, employees need considerable, but not complete autonomy and self-direction and a large voice in deciding at what they will work. To stimulate creativity, certain level of problem uncertainty and high level of personal security is needed (otherwise the first possible solution that comes across is many times accepted).

- Untidy organizational structurePractical overlapping of duties / responsibilities and integrative grouping of employees, where various professionals are interdependently engaged upon an integrative tasks with a common goal, will necessitate a good deal of communication and collaborative work, which is exactly what is needed for innovation to appear.

- Project organization of work, rotation of assignmentsWith project organization, there is a chance to switch organizational structure and leadership style according to a kind of problem needed to be solved. This is line with contingency theory which argues that there is no best organization, leadership or decision-making style as they all depend upon various internal and external factors that company is faced with (c.f. (Fiedler, Chemers & Mahar, 1976; Galbraith, 1973)).

- Free communication, decentralization of powerWith growth of professionalism and project organization of work, decentralization of power and ‘freedom of speech’ will surface. Professionals will move from project to project, decreasing the power of department (and consequently, power of hierarchical superior). Thompson (1965) suggests that dispersion of power and free communication are important, as concentrated power often prevents imaginative solutions of problems.

To sum up, interpersonal communication, multiple group membership and interunit projects result in diversity of knowledge (input, diffusion), extradepartmental ties and interests, devaluation of authority and positional status, and recognized official sharing of power and influence. Such changes will result in stimulated creativity and increased level of integrative collaboration in innovative ‘bureaucratic’ organization of the future.

Fiedler, F. E., Chemers, M. M., & Mahar, L. (1976). Improving leadership effectiveness : the leader match concept. New York ; London: Wiley.
Galbraith, J. R. (1973). Designing complex organizations. Reading, Massachusetts, etc.: Addison-Wesley Publishing Co.
Thompson, V. A. (1965). Bureaucracy and Innovation. Administrative Science Quarterly, 10(1), 1-20.

[Summary Posted by: Pete]

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