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THE EFFECTS OF DIFFERENT ORGANIZATIONAL ENVIRO**IENTS UPON INOIW—ETCIW
JAN 77 L J BOURGcOIS. 0 W MCALLISTER N000lU— 76—C—01 93
UNCLASSIF I ED TR—77—7

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 79
00 DECISION MAKING
RESEARCH
DEPARTMENT OF PSYCHOLOGY
DEPARTMENT OF MANAGEMENT AND ORGANIZATION
JNIVERSITY OF WASHINGTO N, SEATFLE, WASHINGTON

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DECISION MAKING RESEARCH

DEPARTMENT OF PSYCHOLOGY
UNIVERSITY OF WASHINGTON
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SEATTLE , WASHINGTON iU~T11ICMIM

By
OIK1IIUr$ON ~AVA ~L*ItuTT ~~~

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VIM. AVAIL . 3iid ;~ f £ C AI.
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THE EFFECTS OF DIFFERENT

ORGANIZATIONAL ENVIRONMENTS UPON
INDIVIDUALS ’ DECISIONS ABOUT
ORGAN IZATIONAL DESIGN
L. Jay Bourgeois , III ,
Dan i el W. McAl l i ster , and
Terence R. Mitchel l
University of Washington
Seattl e , Washington
Technical Report 77-7
January 1977

F
Offi ce of Naval Research Contract N00014-76-C-0193
(Terence R. Mitchell and Lee Roy Beach , Inves tig a tors)
REPROD UCTION IN WHOLE OR I N PART IS PERMITTED FOR ANY
PURPOSE OF THE UNITED STATES GOVERNMENT
DISTRIBUTION OF THiS DOCUMENT IS UNLIMITED L)L~

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R ~~DADTI r~n r I I u~~ kI 1’A ’TIflIi
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~~~~~~~~~~ Technical Rep~~t,,
f !The Effects of Di fferent Organizati onal
Env i ronments upon Indi v id ua l s ’ Decisions about
‘ .~ __________________________
~~ Organizational Design , S. PERFORM ING ORG. REPORT NUMB ER

I ~~~~~~~~~~~~~~~~~~~~~~ ~~.
S. CONTRACT OR GRANT NUMB ER(S)
.

L. Jay -Bourgeois, III A / I 1N00014-76-C-0l93

Daniel W. McAllister ..

~ rence R , Mitchell
.

Je
• .

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9 AND ADDRESS 10. PROG RAM ELEMENT. PROJECT , TASK
~~~~~~~~~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ A R E A & WORK UNIT NUMBERS
Decision Making Research
Department of Psychology NI-25
Univers ity of Washington , Seattle, WA 98195
II . CO N T R O L L I N G O F F I C E NAME AND ADDRESS
Organizational Effecti veness Research Programs ‘ fJanu~~ 1977
Office of Naval Research (Code 452) .

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IS. SUPPLEMENTARY NOTES

II. KEY WO RDS (Contin u. on r

.v.
r. I n.c..s ~~~ ~~ d id.ntSfy by block rna,b.r)
. aid.I

Environment-Organization Contingency Theories Decision Task

Mechanistic Organization Structures Turbulent Env i ronment
Organi c Or gan i za ti on Structures
S ta b le Env i ronment
20. A B S T R A C T (Contlnu. on rev.,., aid. if nsc ...~~y w d id.ntity by block ns tb. r)

‘>A seri es of three studies were carri ed out in which the manipulation of
external envi ronments in an experi mental setting resulted in subjects
choosing organization designs contrary to what would be prescribed by
current contingency theory. Implications for the directiona lity of
organizati on -environment relationships are also discussed .

DD 1473 EOITIOW OF I NOV $S I$ OBSOL IT I UNCLASSI FIED

~~~~~ S/ N O I 0 2 ~ O 1 4~ 66 0 1
SECURITY cl.ASSIrICA T ION OF T1411 PAGE (VAin Data lnti.sd )

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 Two issues are examined In this paper. One Is the notion that ~~~
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ment—organizatlon contingency theories are not only counter-intuiti ve but In

fact require organizational participants to respond in a manner quite c,pposite
to their natural inclinations. The second question addressed is the direc—
tionality of ‘ causati on ” between organization structure and perceived
environments .
Much of the Organization Theory literature from the post-human-relati ons
era concentrates on defining which organizational structures , management
styles , etc. are most appropriate (effecti ve ) for di fferent technologies
and/or envi ronmental contingencies . The technology-based works of Woodward
• (10) and Perrow (8) yielded imperatives for organization structures, given
certain technologies . Other pioneers (1 , 7, 9) extended the contingency idea
to include an environmental perspecti ve . These latter theorists emphasize
that organizati ons must adapt to external forces in order to maintain viability .
Thus , many schools of administration are currently engaged in instructing our
future leaders that, althoug h many organizational forms are currently in use,
the most effective fi rms tend to use organic styles In turbulent, dynamic
envi ronments and tend to use mechanistic styles. in more stable , predictable
c i rcums tances.
However , many of today ’s managers and certainly those managers surveyed
in the early research works have not been exposed to contingency theory ideas .
Obviously some decision makers are able to respond appropriately to turbulent
or stable envi ronments wi thout such training, otherwise the original relation-
ships would not have been found. It occurs to us , h owever , that intuitivel y,
most managers would respond to turbulent envi ronments in a manner opposite to
that which is predi c ted to lead to greater effecti veness. Managers may res pond
to increased environmental turbulence by an Increase in controls and structure ,

~~~~
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possibly followed by a relaxation of efforts once the “danger TM has passed .

Our reasoning is that turbulence causes uncertainty which leads to attempts
to reduce that uncertainty . One way to reduce uncertainty is to structure
the organizati onal setting.
So we hypothesized that, contrary to the rational process envisioned by
contingency theorists, most managers might react to stable or turbulent
envi ronments in a manner quite contrary to that prescribed as most effective.
That is , we wou ld ex pec t mana gers w ho encoun ter turbul ent and th rea ten i ng
b us i ness envi ronments to react by “pulling in the reins,” resorting to a
mechanistic structure and style in order to gain control over the situation ,
rather than to face the perceived risks inherent in delegation and “loose”
•
• structure . Conversely, we hypothesized that a more stable and supportive
env i ronment wou ld resu lt i n a manager ’s “loosen i ng up” In to a more organic
style.
In addi tion , we hypothesized that given a stable environment which
subsequently becomes turbulent, decision makers would tend to shift from an
organic to a mechanistic structure , Cr , that given a turbulent environment
fol l owed by a s ta b le one , decision makers will shift from a mechanistic to an
organic structure.
T h e second i ssue t.
~ the question of the directionality of envi ronment-
or gan i za ti on rela ti onsh ip s. A~ indicated by -iuber , O’Connell and Cuninings (6),
most of the contingency conclusions are drawn from correlation studies ,
requiring cautious Interp retation ~f causation . So, while field studies such
as Duncan ’s (4 , 5) imply causal 1;nkages from organizational environments to
perceived envi ronmental uncertainty and from uncertainty to organization
s tructure , there are few exper i mental stud i es tha t show c han ges i n s truc ture

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as a result of changes In the environment , and , in fac t, Huber et al. (6)

found that changes in structure led to changes in perceived envi ronmental
uncertainty--the reverse of what is usually predicted. In the following
three experimental studies , we examined the effects of different organizational
environments upon decisions about organizational structure . Since we experi-
mentally manipulated the perceptions of the external organizational environment
we c an ma ke some i n fer
ences a bo ut w h e ther d ifferences i n env i ronment ac tual ly
cause di fferences in organizational structure .

Genera l Procedure

All three studies used a fai rly similar paradigm : An exercise was designed
in which descriptions (scenarios) of two organizational environments , one H
stable and one turbulent, were presented to our experimental subjects. The
respondent was instructed to assume the role of President of a newly-created
autonomous product division of a large fi rm , to assess the division ’s env i ron-
ment (as presented in the scenario), and to “organize his/her division for
action ” by making some decisions about the organizati on ’s structure . All
three studies used the same stimulus material ; however, the nature of the
decision task and the sample population varied between studies.
The development of the scenarios needs to be descri bed ~n some detail.
A two-page description of the fi rm was developed. Information was given about
each of the fi ve external envi ronmental components and factors provided by
Duncan (4) as determinants of stabil ity or turbulence . T hese componen ts are
the cus tomers , the suppliers , the competitors , the social -political condition ,
and the technological requi rements . The descriptions of the environment were

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identical in all respects except for the words describing each environmental
factor. That is , eac h fac tor w a s presen te d , but their opposite extremes were
represen ted i n the two scenar ios. For examp le , the stable fi rm was described
as having inelasti c demand and was faced wi th 10 technolog ical innovations
per year (compared to a histori cal norm of 50 in the industry). The turbulent
environment was described as having elasti c demand and was faced with 150 tech-
nological innovati ons per year.
The scenarios were pre-tested by asking a sample of doctoral students
(from fields other than Administrative Theory)to read one or both of the
scenarios and supply an adjective or two to descri be them . We used these
adjecti ves to create seven point bipolar scales (sample i tems : stable-turbule nt,
Threatening-supporti ve , controllable -uncontrollable). These i tems were adminis-
tered to 24 judges, of whom half were randomly assi gned to rate Scenario S
(stable) wi th the remainder assigned to Scenario T (turbulent). The scale
scores were sumed and a t-test showed the scenarios were judged as signifi-
cantly different (t 7, p < .001)in the directi on predicted. The stable
scenario was seen as signifi cantly more stable , supporti ve , controllable, etc .
than the turbulent scenar i o. Thus we can feel fairly confident that the
experimental stimulus was a valid representation of the two di fferent types of
environment that we wished to present.

Study I

Dec i s i on Tas k
An instrument for assessing organization structure decisions was designed
by operationali zing various organic-mechanistic descriptions from the Burn s

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and Stalker study (1). Five-point, Llkert-type scales were used to measure

responses to seven i tems describing the organization ’s structure . The scal e

i tems include d :
(1) Very few wri tten rul es vs. Policy manual with clear rules.
(2) Copies of all coninunication between managers are sent to you vs. Almost
no wr itten comuni ca ti on.
(3) Lower-level employees comunicate through channels vs. All employees are
free to comunicate across organizational lines at any time .
(
4) Lower level employees are free to use their own initiative vs. All
orders come from you.
(5) Each managerial level is distinctly superior to the next level vs.
Managers and followers have only slight rank differences.
( 6) Jobs are clear ly di st i nc t and duti es should no t cross dep ar tmenta l
l ines vs. Jobs are not clearly specified and may be performed by many
departments.
(7) A flat, wide organization structure vs. a tall , narrow or gan i za tion struc ture .
A sum of these seven i tems is used as our overall estimate of the degree to
which a mechanistic or organic structure was preferred.

Subjects
The par ti c i pants were 47 college s tudents enrolle d i n two Or gan i za ti on
Behavior classes at the University of Washington , mos t o f w hom were Bus i ness
Administration juniors and seniors. There was no control over whether they
had had previous exposure to Contingency Theories (taught in a separate
Organizational Theory course).

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Proced ure
Half the subjects were assigned randomly to scenario S and half to T,
after which they were asked to respond to the organization structure instru-
ment. The exercise was then re-run with the scenarios switched . The materials
were completed in class.

Resu lt s
The vari ous ana ly ses exam i ned mean ’response scores (high er scores
indicate a more mechanistic orientation , lower scores more organ i c) on our
organ i zati on structure items. The fi rst compari son was between agg regate ‘H
scores on Scenarios S and T (i.e., total mean scores for each scenario
whether administered fi rst or last); this comparison tested our hypothesis
that turbulent envi ronments would yield higher mechanistic scores than stable
ones. The second and third compari sons tested means between receiving S first
and I second, and vice-versa ; these tested for shifts in organization style in
response to envi ronmental shifts . The results of the t-tests are shown in Tabl e 1.

Insert Table 1 abou t here

The data support the hypothesis that stable envi ronments yield signifi-
can tl y l ess “mechanistic ” (or more “organ i c ”) scores than turbulent envi ron-
ments (Test No. 1). Our hypothesis that Stable-to-Turbulent changes will
yield a shift from organic to mechanistic styles was also supported (Test No. 2).
Our third hypothesis was not supported; i.e., Turbulent-to—Stable environmental
changes did not result In a “loosening up ” of structure (Test No. 3).

~~~~~~~~~~~~~~~~~ .
~~~~~ t
.
~~
~~~~~~~~~~~~~~~~~~~
 Table 1
The Di fferences i n Organ i zati on Structure Scores as a Resu lt of
the Manipulation of Environment: Study 1

Stable (X.~a Turbulen t (

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b
1. S ,2 vs. ~1, 14.2 16.9 46 2.40**
1

2. 9~ 12 14.3 18.0 25 2.15*

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3. I ÷ S2 16.0 14.1 21 1.89

1

*p < 0 5
**p < O l

aHigh er scores i n di cate a more “mechan i sti c” response. The possible

range on this scale was 7 to 35.

b Subscript refers to order of presentation . Thus :
“S 1 ” indicates that
the Stable environment was perceived fi rst, then responded to; “S1 2 1’ indicates
the aggregate score of responses to Stable , whether received before or after
Turbulent; and S1 1 indi cates that after responding to the Stable envi ronment,
2
the Turbulent envi ronment was administe red to the respondents.

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Study 2

Decision Task
The organization structure i tems from the first study were refined and
expanded to ten i tems, each with a seven-point scale. The three new i tems
were: (1) decision authority based on expertise vs. decision authority based
on managerial position , (2) emphasis on accomplishing the task vs. emphasis on
maintaining integrity of the system , and (3) major strategic decisions to be
made by the president vs. major strategic decisions to be made by a representative
group. A manipul ation check was also added by i n c l u d i n g two i tems asking
respondents to indi cate how they perceived the envi ronment descri bed in each
situation presented (e.g., ranging from “certain ” to “ uncertain ” and “predictable ”
to “unpredictabl e” on seven-point scales). A sum of these two items served as
the manipulation check.

Subjects
The participants were 49 junior and senior Business Administration
students enrolled in two Organization Theory classes at the University of
Washington . The main distinction between this sample and that of Study 1 was
that these students had no prior exposure to contingency thoery . The Organization
Theory course provides students with their fi rst exposure to contingency
theory and the experiment was conducted early in the quarter before the H
presentation of this material .

Procedure
The procedure was identical to that in Study 1 , except that (1) the
test was administered near the beginning of the quarter , and (2) the extended
organization structure i tems and the manipulation check were included.
 -8-

Results
The f i r s t data to observe , the manipulation check i tems , are p resen ted i n
Table 2. One can see that both in aggregate and in terms of changes determined
by the order of presentati on the stable scenario was judged as sign i ficantly
more stable than the turbulent scenario. We can feel fairly confi dent that
the subjects perceived the scenarios in the manner we intended.
The same analyses were run as in the first study . As in Study 1, the
data support the hypothesis that Stable-to-Turbulent envi ronmental changes
will result in a “mechanistic shift” (Test No. 2). However , the aggregate
differences in structure scores between Scenarios S and I were not significant
(Test Ho. 1). Finally, and as in Study 1 , no “loosening up ” was found in the
change from Turbulence to Stability (Test No. 3).

Insert Tab l e 2 abou t here

Study 3

Decision Task
To increase the realism of the task , an in-basket exercise was constructed
in which each of the ten organizational structure dimensions from the instru-
ment used in Study 2 was developed into a one-page decision problem . After
reading either the turbulent or stable scenario each subject received 10 i tems
describing some behavioral incident that occurred wi thin the firm . For
example, one i tem had a manager requesting information about how clearly rules
and procedures should be written up and distri buted. The subjects ’ task for
each decision probl em involved reading the one-page incident and choosing an
organic or mechanisti c structure on a four-point multiple -choice scale. In

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 Table 2
The Di fferences in Organizati on Structure Scores as a Result
of the M a n i p u l a t i o n of E n v i r o n m e nt : Study 2

Organization Structure a Manipulation Check b

Stable ( ) Turbulent (X) n t Stable (

fl Turbulent () ri t
~ ~
1. S 1 2 vs. T 41.8 41.4 48 .24 4.9 10.5 48 8.57***
12

2. T 42.8 45.9 22 1.63* 6.6 10.4 22 3.6O***

l ~~ 2
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~ ~ 41.0 37.8 26 1.27 3.4 10.6 26 9.86***

< .05
< .01
***p < .001

d Higher scores indi cate more “mechanistic ”

response. The possibl e range on this
scale was 10 to 70.
bHigher scores indicate perception of greater
uncertainty . Possible range of
scores was 2 to 14.

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~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ -a’.

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—9-

contrast to the questionnaires used in the fi rst two studies , which required
about 15 minutes to answer , the in-basket activity required about one hour to
complete . Again , a sum of the 10 scales was used as the cri terion.

Subjects

The participants were 43 practicing managers from the Seattle metropol i tan
area who were enrolled in an off-campus evening MBA program . While this
sample provides more “external validi ty” to our findings it was impossible to
control for their previous exposure to contingency i deas.

• Proced ure
Due to the complexity of the In-basket task and the time invol ved to
perform it, the subj ects were not asked to “ shift” scenarios . Therefore ,
this study was used primari ly to test initial reactions of managers to either
a stable or a turbulent environment. Half the subjects were assigned randomly
• to S and half to T without either group ’s knowledge th a t there ex i sted more
than one version of the scenario.

Results
The hypothesis that managers would respond “mechanistically ” in a turbulent
env i ronmen t an d “organically ” in a stable one was supported by the data . The
mean score for the turbulent scenario was 27.0 and for the stable scenari o it
was 25.4. This difference is signifi cant (t = 1,65, p < .05) and in the
direction predi cted.

Di scuss i on an d Conclus i on

It was hypothesized tha t env i ronmen ta l sta tes (stability and turbulence)

4 would infl uence decision makers ’ organization design choices in a manner

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
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contrary to that prescribed by current contingency theory. More specificall y,

we predicted that individuals would respond “organ icall y” in a stable envi ron-
ment and “mechanisti cally ” in a turbulent one . In addition , we predicted that
responses would “shift” from organic to mechanisti c when stable environments
were replaced by turbulent ones and , conversely, would “loosen up ” when
turbulence was followed by stability .
The three studies reported here support the fi rst two hypotheses , but not
the third . That is , individuals did , In genera l , resp ond more organ i cal ly to
stable and more mechanistically to turbulent envi ronments; they did shift to
a more mechanistic mode when turbulence followed stability ; but they did not
shift to a more organic mode when the environment became more stable. The
support for our fi rst hypothesis was strengthened considerably in our third
study where practicing managers , performing a more complex task , confi rmed the
response inclinations found among Our fi rst two samples of college students .
The lack of support for our third hypothesis might be explained by man ’s
quest for the reduction of uncertainty (9). That is , mechanisti c organizati ons
place contro l of the organization in the hands of the chief administrator ,
and control over information and organizational activities reduces the adminis-
trator ’ s uncertainty . Thus , our subjects generally responded by wishing to
increase control over a changing situation , regardless of whether this change
was from turbulent to stable or the reverse.
The support for our fi rst two hypotheses raises an interesting Issue with
regard to the directionality of causation . Considering the present study and
Huber et al . ’ s (6) together , there is a compelling argument for reciprocal
causati on between environmental uncertainty and organizati on structure . An
interesting question for future research would be concerned with discovering

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 — 11 —

the degree to which uncertainty causes structural changes as opposed to

structural differences causing uncertainty .
While these studies tapped individuals ’ predispositions to act rather than
tapping actual structuring behavior , they pose an Interesting question to
contingency theorists . If, in fact, managers tend to prefer mechanistic modes
of organizing in conditions of environmental turbulence and uncertainty and ,
in fact , become more di sposed in this direction as the environment increases
in turbulence , what role should administrative scientists play in attempting
to improve the effective performance of organizations? We can suggest two
possibilities. Fi rst, increasing attention should be paid to facilitati ng
management’s ability to enact “organ i c ” states at appropriate times. This
theme is developed in Dewar ~n d Dun can ’ s (3)d i scussi ons of us i n g organ i c
modes for “brainstorming ” for i nnovation and shifting back to a mechanistic
mode for implementation . This suggestion contrasts wi th the usual OD approach
of advocating longer lasting organic behavioral modes which might run contrary
to managerial predisposition .
The other possibility is for contingency theorists to recognize the role
of managerial choice in not seeking a “goodness of fit” between organizations
and their envi ronments (2). That is , once a certain minimum level of organi-
zati onal performance has been achieved, managerial values and inclinations
may indicate a stronger imperative to organize in a particular way than would
be indicated by either technological or environmental contingencies. We must
somehow deal with these “irrational” decisions In our future explanati ons of
the relati onship between organizational envi ronments and structures.

.
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References

1. Burns , T. and G. Stalker. The Management of Innovation (London: Tavistock,

1961).
2. ChIld , J. “Organization Structure , Envi ronment and Performance: The
Role of Strategic Choice ,” Sociology, Vol. 6, No. 1 (1972), 2-22.
3. Dewar , R. D. and R. Duncan . “Implicati ons for Organizational Design of
Structural A lt erati on as a Conseq uence of Growth an d Innova ti on.”
(Thi rty-Sixth Annual Academy of Management Meetings , 1976).
4. Duncan , R. B. “Characteristics of Organizational Envi ronments and
Percei ved Env i ronmen ta l Uncerta i n ty,” Administrative Science Quarterly,
Vol. 17 (1972), 313-327.
5. Duncan , R. B. “Multiple Decision-Making Structures in Adapting to
Environmental Uncertainty : The Impact on Organizational Effectiveness,”
Human Relations, Vol . 26 (1972), 273-291.
6. Huber , G. P., M. J. O’Connell , and L. 1. Cununings . “Percei ved Env i ronmental
Uncertainty : Effects on Information and Structure,” Academy of Management
Journal, Vol. 18 (1975), 725-740 .
7. Lawrence , P. and J. Lorsch . Q~~an i zati on and Env i ronment (Bos ton:
Harvard Business School Di vision of Research, 1967).
8. Perrow , C. “A Framework for the Comparative Analysis of Organizati ons ,”
American Sociological Review, Vol 32 (1967), 194—208.
9. Thompson , J. D. Organ izations in Action (New York : McGraw-Hill , 1967).
1 0. Woodward , J. Industrial Organization: Theory and Practice (London :
Oxford Uni versity Press, 1965).
 — 13-

Footno te

• 1 lhis research was partially supported by the

Office of Naval Research
Contract N000l4-76-C-0193 (Terence R. Mi tchell and Lee Roy Beach , Principal
Inves ti gators).

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‘ —‘.-

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Arlington , VA 22209

Dr. George Moeller , Hea d Techn ical Di rector Dr. Bruce M. Ross
Human Factors Engineering Br. U.S. Army Human Engineering Labs Catholic University
Submarine Med. Research Lab. Abe rdeen Proving Ground Department of Psychology
Naval Sub ma ri ne Base Aberdeen , MD 21 005 Washington , DC 20064
Groton , CT 06340

Bu reau of Naval Personnel U.S. Mr Force Office of Dr. Robert R. Mackie

Special Assistant for Scie ntific Research Human Factors Research , Inc.
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PERS-OR Boilin g Air Force Base 6780 Cortona Drive
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Human Factors Engineering Br. Human En gineering Division Oceanauti cs , Inc.
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 Of fice of Naval Research Dr. Davis B. Bobrow Lt. Col. Henry 1. Taylor USAF
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U .S . Nava l Research Lab. Duke Univers i ty Office of the Chief of
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B ui ld ing 5 Un i versit y of Cal i forn i a 0P987P10 , Office of the Chief

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Research Psychologist Code 434
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f Social Science Research Inst.
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