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3. Galbraith's and Mintzberg's Technostructure

3.a Galbraith's Technostructure

Here is how Galbraith describes his new concept, the Technostructure:

"It embraces all who bring specialized knowledge, talent or experience to group decision-making. This, not the management, is the guiding intelligence - the brain - of the enterprise. There is no name for all who participate in group decision-making or the organization which they form. I propose to call this organization the Technostructure." [Note 9]

Figure 1: The Technostructure's influence

Figure 1: The Technostructure's influence on all parts of the transaction

Here is an excerpt from his study of planning:

"Planning, in short, requires a great variety of information. It requires variously informed men and men who are suitably specialized in obtaining the requisite information. There must be men whose knowledge allows them to foresee need and to insure a supply of labor, materials and other production requirements; those who have knowledge to plan price strategies and see that customers are suitably persuaded to buy at these prices; those who, at higher levels of technology, are so informed that they can work effectively with the state to see that it is suitably guided; and those who can organize the flow of information that the above tasks and many others require. Thus, to the requirements of technology for specialized technical and scientific talent are added the very large further requirements of the planning that technology makes necessary." [Note 10]

There is nothing particular complex about the workforce - the complexity is in the way it is organized:

"The real accomplishment of modern science and technology consists in taking ordinary men, informing them narrowly and deeply and then, through appropriate organization, arranging to have their knowledge combined with that of other specialized but equally ordinary men." [Note 11]

The reason for the involvement of the technostructure in the workforce is that it...

"is an apparatus for group decision - for pooling and testing the information provided by numerous individuals to reach decisions that are beyond the knowledge of any one. ... If problems were susceptible to decision by individuals, no group would be involved" [Note 12]

According to the wording above, the management is not part of the technostructure. But elsewhere Galbraith mentions the management as part of the technostructure:

"... it could be that the industrial system, and its ethos, impose the greatest burden on its leaders on those who are at the center of the technostructure" [Note 13]

3.b Mintzberg's Technostructure

Figure2: Mintzberg: The various parts of the manufacturing firm

Figure 2: Mintzberg: The various parts of the manufacturing firm [Note 14]

Henry Mintzberg identified five configurations of organization:

  1. The machine bureaucracy
  2. The divisionalized form
  3. The professional bureaucracy
  4. The simple structure
  5. The adhocracy

It is Mintzberg's theory that all organizations follow the same pattern. The concept is a vertical axis with the Chief Executive Officer (Strategic Apex) commanding the Operating Core through the managers of the Middle Line. At the sides of this vertical axis are the Technostructure and the Support Staff.

In the technostructure part the analysts carry out their work of standardizing the work of others. They also apply their analytical techniques to help the organization adapt to its environment [Note 15]. In the right part of the figure the Support Staff is offering other services to the organization: Research and development, pricing, reception, etc. Here is a description of the analysts:

"The analysts ... serve the organization by affecting the work of others. These analysts are removed from the operating work flow - they may design it, plan it, change it, or train the people who do it, but they do not do it themselves. Thus the technostructure is effective only when it can use its analytical techniques to make the work of others more effective." [Note 16]

Henry Mintzberg offers a description of the differences between his and Galbraith's view of the technostructure. Compared to Mintzberg's model, Galbraith's technostructure includes both analysts and other staff:

"Such organizations are, in Galbraith's view, controlled by their "technostructures," a term he uses to designate not only their analysts (as we do), but their line managers and other staff specialists as well." [Note 17]

Figure 3: Galbraith's approach shown in Mintzberg's scheme

Figure 3: Galbraith's approach shown in Mintzberg's scheme

Discussion

Galbraith and Mintzberg have a common basis in the general structure of the manufacturing firm and the North American market. However, they made their contributions in the 1960's and 1980's, and there have been a lot of changes in the world economy since then. Many new factors must now be considered:

  1. Production outsourced: Many companies expand their relationship with their customers, but outsource their manufacturing to other parts of the world. This leads to greater co-operation with both contractors and customers.
  2. Technological development: Information technology add to structural change because, as a general rule, the new technology offers improved economy of scale
  3. Hi-tech weapons for the US Government, or a general rule? The technostructure's influence is obvious in the weapons industry, but I consider the pattern of the technostructure to be widely extended.

I have some objections to Mintzberg's concept of the technostructure:

  1. Accidental grouping of staff personnel: Any firm may contain support staff, but the classification of legal counsel, public relations, industrial relation, R&D, and pricing belonging to the Support Staff rather than the Technostructure is difficult to understand. Mintzberg is aware of the affiliation, as seen in his writings on members of the legal department: "As for the analysts of the technostructure, they are professionals, in that their work requires considerable knowledge and skill." [Note 18]
  2. Stressing standardization: Since the elaboration of his theory much of the standardization has been moved out of most companies. Everybody is using IT systems with identical user interfaces, and many external consultants are traveling between companies introducing identical management methods and information systems. Mintzberg mentioned planning as part of the tasks of the technostructure but, in Figure 2, we see that he has placed certain kinds of planning such as Pricing and Research & Development with the Support Staff.
  3. Outsourcing the operating core: Many companies now try to get more value creation by expanding their relationship with the customer, but no longer handle production by themselves. In this way, one may say that the companies are outsourcing their operating core. Other companies choose not to sell any products, but instead to sell services with a high content of knowledge. Such firms may consist of staff personnel only. This means that some parts of Mintzberg's Structure in Fives are amputated, while other parts are enlarged beyond recognition.

I have some objections to Galbraith's writing as well. I find that his text is not as structured as Mintzberg's. It's entertaining and understandable, but not as easy to find the exact scriptural passage.

Compared to Mintzberg I prefer Galbraith's definition of the technostructure because:

  1. Galbraith regards all planners as members of the technostructure
  2. He puts weight on the task of planning rather than standardization
  3. The model is better prepared for an outsourced production

This leads to the first part of my definition of the technostructure:

The technostructure in an organization is composed of:

  1. The salaried employees working on planning and marketing
  2. The professional staff involved with complex, individual judgments, and
  3. The management

3.c Delegation of Power

As professional workers, members of the technostructure perform work that requires a high degree of skill or knowledge. Such work has several qualities, among others

  • The work appears interesting and attractive in itself
  • The professional worker accumulate critical knowledge and skills
  • Part of the work employs a considerable amount of individual judgment
  • The complexity of the work rules out a close administrative control

The organization surrenders parts of its power to the professional employees. Alone or in small groups, the professional workers are given considerable discretion in their work and will collect a good deal of power. The experts draw power away from the formal authority. [Note 19] In Galbraith's words:

"Some power will then pass to the person or persons who have this information. If this knowledge is highly particular to themselves then their power becomes very great." [Note 20]

One of the roles that collect informal power is the liaison person who is the link between departments or between the firm and a customer. Mintzberg notes:

"the formal power of these people is often low, but their centrality in workflows usually ensures them considerable informal or political power." [Note 21] p. 185

The work of the experts is often a journey of developments involving new tasks, new IT systems, etc. The organization tries to formalize the newly explored changes. It tries to reduce the expertise to easily learned steps so that anyone can do it (in a new IT system, for example). The expert loses power when his changes are set in motion. Mintzberg comments:

".. the more success the professional support staffer has in helping the organization cope with his specialized kind of change, the more routine that change becomes to the organization, and the less need it has for his particular expertise." [Note 22]

3.d Influence in the Organization

The owners of an organization have a legitimate influence in the firm but they are not always as powerful as they are supposed to. It depends on whether the owners are involved or not. Mintzberg proposes:

"... the more involved the owners, and the more concentrated their ownership, the greater their power" [Note 23]

In small-size business where there are no salaried employees, and the management is performed by the owner, the organizations' goals are dominated by the manager-owner.

"Decisions concerning production being ... simple, the whole process is well within the intellectual competence of a dominant stockholder." [Note 24]

Large enterprises may be owned by a pension fund or by a corporation quoted on the stock exchange. In such circumstances the single owners can rarely exercise any influence. Instead, they are reduced to the role of detached suppliers of capital in a purely economic relationship with the enterprise. [Note 25] Galbraith comments:

"With growing size and complexity of operation, smaller or more passive owners tend to lose their power of decision. ... Those who are not active in the management of the enterprise have less and less knowledge of what is happening." [Note 26]

In large-size business the owners cannot keep all power by themselves, and the technostructure and the management is inevitably taking a share of the power. Galbraith:

"With the rise of the modern corporation, the emergence of the organization required by modern technology and planning and the divorce of the owner of the capital from control of the enterprise, the entrepreneur no longer exists as an individual person in the mature industrial enterprise." [Note 27]

The Technostructure: If an organization mostly employs salaried employees of the technostructure, it is likely that the technostructure wants to manage by itself, and with good cause. In Galbraith's words, the technostructure requires

"... a high measure of autonomy. It is vulnerable to any intervention by external authority for, given the nature of the group decision-making and the problems being solved, such external authority will always be incompletely informed and hence arbitrary." [Note 28]

The autonomy is protected by the complexity of modern technological and planning decisions. The technostructure may even use this complexity in an internal political game to promote a technocratic system, not because it is good for the organization, but because it extends the power of the technostructure. [Note 29]

The Line Managers: It is important for the line manager that the whole organization grows, but more important is the growth of one's own unit. Mintzberg quotes Parkinson in saying

"An official wants to multiply subordinates, not rivals" [Note 30]

The Senior Management: The Chief Executive Officer and other senior managers have a certain influence. Mintzberg uses as an example the situation when an organization suddenly has an unexpected surplus. Influencers demand a share of the surplus in accordance with the power they have. If senior managers want to enlarge their share, they must take care not to show their takings too openly to other, more distant influencers:

"Thus, business corporations that find themselves with large profits seek all kinds of ways to announce only moderate ones, so as not to whet the appetites of unions and tax collectors, not to mention shareholders. They invest in research and in advertising, buy a new corporate jet, redo the executive dining room." [Note 31]

3.e Whose Goals are Dominating?

The entrepreneur-owner wants profit, a good salary for himself, and to exercise power. In the literature there are many references to Henry Ford's fight to keep in control what he once had founded:

"Through the twenties, thirties and into the forties, Henry Ford, aging and autocratic, became increasingly resentful of the organization without which his company could not be run ... The result for the company was near disaster. Cars were either obsolescent or technically eccentric. Planning, particularly market control, was highly exiguous. ... In the thirties, the company lost money in large amounts. ... [Ford] was defeated despite his complete ownership of the company. On his death, the technostructure was reconstituted by Ernest Breech." [Note 32]

The stockowner wants profit, but not necessarily to gain the profit in this company. He may as well sell the stocks and invest elsewhere, as Mintzberg explains:

"Thus, when funds are to be invested, while the manager asks only "Now or later?", the shareholder adds "Here or elsewhere?"" [Note 33]

Goals of the technostructure: If the salaried employees in the organization mostly belong to the technostructure, it is likely that they use their influence to manage by themselves, as we saw above.

Mintzberg states that the technostructure's goals are:

  1. Protection and autonomy of the group
  2. Enhancement of the prestige and resources of their professional excellence, and
  3. Support of the organization's mission, if client-professional relationships are close and personal [Note 34]

In the citations below, Galbraith explains his version of the goals of the technostructure as:

  1. Protection and autonomy of the technostructure
  2. To minimize the risk of loss and avoid laying off members of the technostructure
  3. To maximize the growth of the firm

In section 3.f below I combine these goals.

Besides describing the goals of the technostructure, Galbraith here explains how the technostructure captures the firm and exchanges the goals of the formal owners with the goals of the technostructure. It is done in at way so that the technostructure's goals are accepted as common goals for the whole society:

"Specifically, industrial planning requires that prices be under control. ... But this control, naturally enough, is so exercised that it serves the goals of the technostructure. These, we have seen, are first, to minimize the risk of loss, and therewith of damage to the autonomy of the technostructure, and secondly, to maximize the growth of the firm. Prices are so managed as to serve these goals. Price competition with its attendant dangers must be prevented. Prices must be low enough to facilitate the recruitment of customers and the expansion of sales and at the same time high enough to provide earnings to finance growth and keep the stockholders content. These prices are readily reconciled with accepted social goals or what society has been persuaded to accept as goals." [Note 35]

He states that one of the main goals of the technostructure is to keep the technostructure growing because it is so sad to say goodbye to ones friends:

"With the rise of the technostructure, any contraction of output becomes much more painful and damaging. Costs can no longer be reduced simply by laying off blue collar workers. A substantial share of total costs are now accounted for by the technostructure. If this remains intact, the firm will have a burdensome overhead in the form of a partially employed organization. ...

"Moreover, decisions for curtailment are made within the technostructure itself. They involve its own members. They do not have the agreeable impersonality which is associated with firing someone at a greater distance, or of a different social class. All of these unpleasant contingencies are avoided by expansion. Their avoidance may even justify comparatively unremunerative expansion." [Note 36]

The autonomy is protected by technology and planning:

"The complexity of modern technological and planning decisions also protects the technostructure from outside interference. ... By taking decisions away from individuals and locating them deeply within the technostructure, technology and planning thus remove them from the influence of outsiders." [Note 37]

The autonomy is threatened if the firm is showing losses:

"There remains one final source of danger to the autonomy of the technostructure. That arises with a failure of earnings. ... If a new plant is needed or working capital must be replenished, there will have to be appeal to bankers or other outsiders. This will be under circumstances, i.e., the fact that the firm is showing losses, when the right of such outsiders to inquire and to intervene will have to be conceded. They cannot be told to mind their own business." [Note 38]

As time goes by, the organization will turn into a mature organization, and Galbraith notes that the goals of the technostructure will be mirrored in the goals of the organization. The reason for this involvement is that

"... the corporation also accommodates itself admirably to the needs of the technostructure." [Note 39]

This may be the fate of any organization with a certain share of technostructure, regardless of who is the formal owner.

Please note that the idea of common goals for the technostructure does not mean that the members of the technostructure agree in all matters. On the contrary, one may expect disagreement and alliances within the technostructure both inside and outside the organization.

Goals of the senior management: Mintzberg mentions that there are two principal goals for the Chief Executive Officer:

"This leaves us with two principle goals of the CEO - survival and growth of the organization. The two may complement each other: in many circumstances growth is necessary for survival. But they may also contradict: growth can be risky, threatening survival. And so the behaviors of CEOs can range from the conservative, survival-obsessed to the entrepreneurial, growth-obsessed." [Note 40]

Galbraith mentions that the salary is not the most important. Access to corporate jets and other scarce resources may be more attractive:

"As one moves into and up through the technostructure, men increasingly exercise the option of more work and more income. And some pride themselves on an unlimited and competitive commitment to toil - one that, regularly, outruns even the most imaginative possibilities for the acquisition and use of goods and services." [Note 41]

3.f A Technostructure Synthesis

This leads to a completed definition of the technostructure, its goals and influence (including the three lines from the end of section 3.b):

Figure 4: The three parts of the technostructure

Figure 4: The three parts of the technostructure

The technostructure in an organization is composed of:

  1. The salaried employees working on planning and marketing
  2. The professional staff involved with complex, individual judgments
  3. The management

The technostructure's goals:

  1. Protection and autonomy of the technostructure
  2. To minimize the risk and maximize the growth of the organization
  3. Enhancement of the technostructure's prestige and resources
  4. The top management stresses survival and growth of the organization

The influence of the technostructure on the goals of an organization depends of the technostructure's relative strength to this organization

Reservations: As mentioned in section 1.c there may be a problem in the points of view of the authors. Galbraith describes organizations from an external, political-economical point of view while Mintzberg views organizations from within.


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