Divisionalization in the UK: Diversity,Size and the Devolution of Bargaining

Abstract

Business historians and theorists of organization have portrayed the divisionalized (M-form) organization as a response to the problems posed by diversity and, to a lesser extent, size. Assuming a drift towards optimal forms of organization, this implies that there should be a cross-sectional association between diversity, size and the incidence of the divisionalized form. This paper presents data from a survey of large UK companies which is only partly consistent with these expectations. The more diverse companies tend to be organised either in the divisionalized or the holding company form, whilst there is no size effect in the sense that divisionalized companies tend to be larger than the rest. There are size effects, however, on particular aspects of divisionalization. First, companies with levels of organization intermediate between their business units and headquarters tend to be larger than those which do not. Second, amongst companies without intermediate levels, size is associated with the reporting against target of profitability at business-unit level. This suggests that the introduction of intermediate levels or profitability targets might be alternatives in the earlier stages of company growth.

With the exception of earlier work by Marginson (1985, 1988), the possible relevance of the divisionalized structure to the control of labour has been ignored. Marginson found some evidence that the M-form organization was associated with a raising of the bargaining level to that of the division as a response to the plantlevel trade union strength during the 1960s and 1970s. In the present era of comparative trade-union weakness, this paper argues that the divisionalized structure offers a means of maintaining outline control of a devolved bargaining process which is able to adapt to local contingencies. Partly consistent with this expectation, our data show that the M-form company is associated with a devolution of pay bargaining to the level of the individual establishment, although this is also true of the H-form. Consistent with the argument from trade-union weakness, this is a relatively recent development. In M-form and H-form companies, devolved bargaining tends to be accompanied by genuine managerial autonomy on pay issues. In other forms of organization, establishment-level bargaining occurs within the framework of tight headquarters control, so that the devolution is more apparent than real.