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Alfred D. Chandler Jr.
Born
in 1918, Alfred Chandler made exhaustive researches of the North
American companies in activity in the period between 1850 and 1920,
which were the base of the most part of his work and originated a new
way to see management – contingency approach. After taking his degree in
Harvard, he became an historian at MIT. Later, was a History professor
at Johns Hopkins University and after 1971, Economical History professor
at Harvard University.
Chandler was the first
theorist to defend the creation of a strategic plan before the
elaboration of an organizational structure, being, the strategy should
precede the structure. Also
theorized the
decentralization concept in big companies, popular in the 60´s and 70´s,
defending that the advantage of multidivisional companies was in fact
that theses allowed that the top executives became to have more everyday
responsibilities, gaining time to dedicate to other tasks and starting
to assume the compromise of a long term plan.
Also defended the need
to coordinate the strategic planning of the head-offices with the
business’
units policies.
Investigation
studies
From
his
studies, performed in four big North American organizations (namely
Du-Pont, General Motors, Standard oil Co. and Sears Roebuck & Co.),
about organizational strategy and structure, Alfred Chandler Jr.
concludes that “the organizational structure of big American companies
was gradually determines by its market strategy” and summarizes:
1st
Resources accumulation and productive capacity expansion (end of 19th
century): the quick urban growth and the proliferation of railways a
little around the world lead to the marked growth of the iron and steel.
In this period, companies adopted strategies of productive capacity
expansion through the accumulation of resources and vertical
integration
through the acquirement of raw materials’ suppliers, in order to take
advantage of the benefits’ scale economies, and neglecting many times
the channel distribution development.
2nd
Rationalization of the resources use: the productive capacity growth
strategy and vertical
integration lead
to the sharp expansion of the company’s size and, consequently, to the
need of the cumulative resources organization. On the other hand, the
productive capacity excess, notorious during the great depression in the
30´s, originated the need of costs contention through the creation of
functional structures with authority and communication lines perfectly
defined.
3rd Growth
continuation: the rationalization of the productive resources use made
possible a costs reduction and,
consequently, an
efficiency raise. However, the markets increasingly overrun and the
progressive raise of the competitive levels forced the companies to
diversify their business and search for new products and new markets.
One of the direct consequences of this diversity was the forthcoming of
research and development departments and industrial engineering and
design.
4th
Rationalization of the resources in expansion use: the increasing
products and operations complexity lead to the creation of new
organizational structures, namely the multi departmentalized divisional
structure. This new organizational structure consisted in the creation
of independent and integrated divisions, supported by the operations’
decentralization and
administrative control
centralization, forced the companies to place a bigger emphasis on the
long term planning, goals definition and performance evaluation of each
division.
In summary, Alfred Chandler Jr.s’ studies
conclude that the environmental changes take the companies to adapt
their strategies and to change organizational structures as a way to
allow its fulfillment.
Translated from Portuguese
by Susana Saraiva, Portuguese-English and English-Portuguese translation
specialist. Contact: spams@sapo.pt.
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