DIVISIONALIZATION, DECENTRALIZATION AND PERFORMANCE OF LARGE UNITED KINGDOM COMPANIES ¹

Abstract

Questionnaire survey data from 144 large U.K. firms are used to describe and discuss the nature of organization design in major companies. It was found that the majority of firms were multidivisional. However a considerable variation in internal operating procedures was found which emphasized that many multidivisional companies do not behave in the way that the strategy/structure literature predicts. Empirical testing of the relation between structure and financial performance also emphasizes that divisionalization is not necessarily the key to a superior profit performance. Rather it would appear that organizational procedures need to be reconsidered in the light of recent divisional structures established in many companies. It is argued that a powerful divisional head office may weaken overall performance and that instead greater attention should be paid to the opportunity to decentralize operating decisions to the individual business units within each division.

Marketing program standardization: A cross-country exploration

“…Hall and Saias (1980) predict that when important decisions are made by top management (i.e., head office managers), those who have the best knowledge of the market (i.e., subsidiary managers) cannot decide or act. Inevitably, many errors are made and centralizing such decisions is expected to lead to a decline of performance in the subsidiary market (Hill & Pickering, 1986). Indeed, with centralized decision making, there are extensive information flows to the head or regional office managers, which may limit these managers' time and objectivity, making it more likely for them to overlook opportunities in the subsidiary's market (Williamson, 1975).…”

The Adoption of the Multidivisional Form of Organization: A Contingency Model*

“…I ignore these difficult to measure distinctions because I am interested in modeling the adoption of the multidivisional structure, not in the factors that influence the implementation of various types of multidivisional forms (Hill and Pickering, 1986) . Seven previous works were used to validate the classifications (Armour and Teece, 1978;Chandler, 1962;Harris, 1983;Palmer, et al (1987); Rumelt, 1974;Teece, 1981).…”

Explaining corporate success: The structure and performance of British firms, 1950–84

“…4. Ex ante share price declines were associated with divisionalisation (see, for example, Hill & Pickering, 1986;Thompson, 1983). 5.…”