Divisional control

Abstract

Chapter 3 has already considered both how an increase in an organisation’s size may lead to problems if a centralised and unitary control structure is maintained and how divisional structures were developed to balance the problems of allowing sufficient specialisation and yet providing an integration of the tasks carried out. That chapter further stated that divisional structures may lead to suboptimal decisions being taken by divisional management. The work of Williamson (1970, 1975) was used to support the notion of multidivisional (M-form organisations) as a medium for control to cope with the growing complexity of larger organisations and particularly those operating in ‘diverse’ product markets. M-form organisations are argued to integrate the concept of markets and hierarchies within one organisation, at divisional level through the market considering day-to-day activities, and at the group or head office level, through hierarchies setting strategies for the divisions. Put more distinctly, strategic decisions are vested in top management whereas operating decisions are the prerogative of divisional managers (Ezzamel, 1992, p. 5).