) Your university is probably an M-form organization. Its president administers
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) Your university is probably an M-form organization. Its president administers schools, for example, a college of business and a college of liberal arts. The college of business Each of these in turn has a dean who is responsible for faculty departments such as economics and finance. Why is an M-form more likely than a U-form to be an efficient way of organizing a university and to organize the schools within it? In most universities faculty with specialized interests will often attempt to break off from existing departments and form ones devoted to their own specialties. Do you expect that this will produce an inefficiently large number of departments? Why do you expect that pressure by employees to form fragmented departments will be a smaller problem in for-profit corporations than in nonprofit or governmental universitiesExplanation / Answer
It is important to note that the communication problem is endogenous, depending on how tasks and decision-making power are assigned within an organization. That is, the organizational form matters. We de?ne an M-form (multi-divisional form) organization as one that consists of “self-contained units” where complementary tasks are grouped together. In contrast, a U-form (unitary form) organization is decomposed into “specialized units” where similar tasks are grouped together. Because the M-form and the U-form organizations assign tasks di?erently, the communication problems they face are di?erent. In our model, a simple trade-o? emerges between better coordination and less economies of scale in the M-form compared to the U-form. In the self-contained units of the M-form, local managers can more easily solve the coordination problem by making good use of local information, but then the advantages of specialization are not fully appropriated and there is duplication of local coordination. In the U-form organization, coordination of specialized units is centralized by top managers so that economies of scale are obtained, but the coordination problem is harder to solve, as the top managers have to rely on imperfect information about attribute shocks transmitted by local managers. Obviously, the M-form is better than the U-form in promoting innovation or reform if the quality of communication is low and the value of scale economies is not high. Therefore, in addition to the common two alternatives of “no change” and “full scale change,” the M-form organization has an additional alternative of “change with experimentation.” In this sense, the M-form is a more ?exible organizational form, which can promote more innovation or reform. In contrast, the U-form is more rigid, and if a change occurs, it happens in a comprehensive way. This rigidity tends to be deleterious for innovation or reform. The ?exibility of the M-form can lead to a higher propensity to innovation or reform, an important dynamic advantage compared to the U-form. We use the example of agricultural reforms to illustrate the relevance of our theory in understanding the reform experiences of China and the Soviet Union in the 1980s as well as Russia in the 1990s. There is a striking di?erence between the organization of the Soviet planning administration on one hand, and that of the Chinese planning administration, on the other hand (Qian and Xu, 1993). The Soviet economy was organized into many specialized or functional ministries (e.g., Ministry of Cereal and Grain Production, Ministry of Tractors and Farm Machinery, Ministry of Fertilizer Production, etc.). This corresponds to a U-form organization (also known as “branch organization”). In contrast, the Chinese economy has been organized mainly on a geographical basis. This corresponds to an M-form organization (also known as “regional organization”). According to our theory, the Chinese economy with its M-form structure is prone to reform via regional experimentation. On the other hand, when reform comes in the Soviet U-form economy, it is comprehensive and coordinated from the center, and thus more di?cult to do. While the contrast between “big-bang” approach in Eastern Europe and Russia and the “experimental” approach in China has been well recognized in the literature (e.g., McMillan and Naughton, 1992; Dewatripont and Roland, 1997; Sachs and Woo, 2000), our paper goes one step further to investigate the deeper reasons of how the pre-reform organizational di?erences have led di?erent countries to pursue di?erent strategies. It also accounts for the numerous coordination failures of comprehensive reforms in the Soviet Union. The intellectual fragmentation of the university was driven very much by the rapid evolution of the scientific method in the late 19th century, as specialization and new disciplines were necessary to cope with the explosion of knowledge. Academic disciplines began to dominate the university, developing curriculum, marshaling resources, administering programs, and doling out rewards. Both the organization and the resource flows of the university became increasingly decentralized to adapt to the ever more splintered disciplinary structure. The increasingly narrow focus of scholarship created diverse faculty subcultures throughout the university–humanities, the natural and social sciences, professional schools–widening still further the gap among the disciplines and shifting faculty loyalties away from their institutions and toward small peer communities that became increasingly global in extent. Decentralization has also been driven by the rapidly changing nature of how universities are financed. In earlier times, the responsibility for generating the resources necessary to support the activities of the university was highly centralized. Public institutions were primarily supported by state appropriations, while private institutions were supported by private giving and student fees. Since these resources usually increased from year to year, institutions relied on incremental budgeting, in which the central administration simply determined how much additional funding to provide academic units each year. In today’s brave new world of limited resources, battered by seriously strained state budgets and turbulent financial markets, the resources supporting most public and private universities are no longer collected centrally through appropriations or gifts. Rather they are generated locally at the level of academic units and even individual faculty members, competing in the marketplace for students (and hence tuition dollars), research grants and contracts (which flow to principal investigators), gifts (which are given to particular programs or purposes), and other auxiliary activities (clinical care, executive management education, distance learning, and entertainment–e.g., football). Little wonder that most universities are moving toward highly distributed budget models, in which authority and accountability for revenue generation and cost containment are delegated to individual academic and administrative units, further decentralizing the university. (Duderstadt and Womack, 2003). The growing pressures on faculty not only to achieve excellence in teaching and research but also to generate the resources necessary to support their activities are immense. Today’s faculty members are valuable and mobile commodities in a highly competitive marketplace that enables them to jump from institution to institution in search of an optimal environment to conduct their research, teaching, and other professional activities. They are well aware that their careers–their compensation, promotion, and tenure–are determined more by their research productivity, publications, grantsmanship, and peer respect, than by other university activities such as undergraduate teaching and public service. This reward climate helps to tip the scales away from teaching and public service, especially when quantitative measures of research productivity or grantsmanship replace more balanced judgments of the quality of research and professional work. Little wonder that faculty loyalties have shifted from their institutions to their disciplinary communities. Faculty careers have become nomadic, driven by the marketplace, hopping from institution to institution in sea. As one junior faculty member exclaimed in a burst of frustration: “The contemporary university has become only a holding company for research entrepreneurs!” The academic organization of the university is sometimes characterized as a creative anarchy. Faculty members possess two perquisites that are extraordinary in contemporary society: academic freedom, which allows faculty members to study, teach, or say essentially anything they wish; and tenure, which implies lifetime employment and security. Faculty members do what they want to do, and there is precious little administrators can do to steer them in directions where they do not wish to go. More abstractly, the modern university has become a highly adaptable knowledge conglomerate, both because of the diversity of the needs of contemporary society and because of the varied interest, efforts, and freedom of its faculty. It is characterized by a transactional culture, in which everything is up for negotiation. The university administration manages the modern university as a federation. It sets some general ground rules and regulations, acts as an arbiter, raises money for the enterprise, and tries—with limited success—to keep activities roughly coordinated. Although this frequently resembles organizational chaos to outsiders, in reality the entrepreneurial university has developed an array of structures to enable it to better interact with society and pursue attractive opportunities. Yet, while this organization has proven remarkably adaptive and resilient, particularly during periods of social change, it all too frequently tends to drift without the engagement or commitment of its faculty, students, and staff to institution-wide priorities. For example, many contend that today’s university has diluted its core mission of learning, particularly undergraduate education, with a host of entrepreneurial activities. It has become so complex that few, whether on or beyond our campuses, can comprehend its reality. Even in the face of serious constraints on resources that no longer allow it to be all things to all people, the university continues to have great difficulty in allowing obsolete activities to disappear. It has become sufficiently encumbered with processes, policies, procedures, and past practices so that its best and most creative people are frequently disengaged from institution-wide priorities.
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