A Three‐Dimensional Model of Changing Internal Structure in the Firm

Abstract

Abstract Looks at the limits of hierarchy in the internal structure of a firm and suggests an explanation as to why the concept of a simple hierarchy has been so readily accepted and is so seemingly successful. The authors argue that the historically successful hierarchy has actually hidden a different underlying structure that is only now being revealed. Hierarchy ensures relative efficiency in a known, stable situation, but these are hardly the salient characteristics of the modern competitive environment, and firms are found to experiment with ways to deal with these new pressures in changes that range from ad hoc measures to radical structural transformations. The fundamental trade‐off here is one of (flexible) efficiency today and of positioning for tomorrow; one‐dimensional hierarchy could achieve that yesterday. The authors conclude that, in effect, there are, and always have been, three structural dimensions at play, namely position, action, and knowledge; these dimensions have coincided (or misalignments have not been apparent) in the past, but that is seen to be less and less the case nowadays, and nowhere is this more apparent than in the modern multinational corporation; this theoretically and historically derived three‐structural‐dimensions model is tried out on an illustrative firm case (Oticon A/S in Denmark).

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