Reorganization: Contingent Effects of Changes in the CEO and Structural Complexity

ABSTRACT I employed structural contingency theory, neglected in recent organizational studies, to examine two variables, structural complexity and changes in the chief executive officer in their relationship with an important form of change, administrative reorganization. I found that changes in the CEO and structural complexity significantly influence administrative reorganization. Findings also indicated that organizational size is positively related to reorganization. However, environmental munificence, organizational age, and changes in organizational size did not influence reorganization. I argued for the importance of attending to both internal and external pressures for organizational change. INTRODUCTION Causes of organizational change have been the subject of interest to many researchers (Bartlett, Ghoshal, & Birkinshaw, 2004; Baker & Cullen, 1993; Haveman, 1993; Chandler, 1962; Hoskisson & Galbraith, 1985; Modarres & Fowler, 2005). Despite the difficulties in its implementation, change seems relatively common and tends to be an integral part of structural redesign, formation of political alliances and shifts in the bases of power (Hall, 2002; Eisenhardt & Bourgeois, 1 988), changes in the strategic directions and organizational objectives (e.g., Hoskisson, Hitt & Ireland, 2008), and dynamism in the marketplace (Schilling & Steensma, 2001). Organizations capability to adapt to changing conditions tend to vary. An important area of change concerns with reorganization of administrative framework (e.g., Baker & Cullen, 1 993). A number of previous researchers have held to the view that organizational success tends to be contingent on timely reorganization of the administrative framework in response to internal and external environmental conditions (Oliver, 1988; Porter, 1991). Other researchers have argued that established organizations tend to become inert and rarely reorganize (Hannan & Freeman, 1984; 1989). In this view, in the long term adaptation in response to internal and external forces tend to be improbable. Primarily, due to, idiosyncrasies in investment in organization-specific skills, and complexity of the structural arrangements tend to prolong if not inhibit comprehensive reorganization. Moreover, the executives within structurally complex and bureaucratic organizations tend to be constrained by complex interrelated functions and inertia forces; hence, lack capabilities to institute change (e.g., Haveman, 1993). The other stream of research views organizations as flexible and adaptive to evolving market conditions, and top administrators as capable of implementing change. For example, strategic contingency theorists have drawn attention to the importance of strategic choice in implementation of change under various environmental conditions (e.g., Chandler, 1962; Tushman & Romanelli, 1990). A number of structural contingency theorists (e.g., Blau, 1970; Chandler, 1962; Galbraith, 1973) have argued that internal contextual factors significantly influence organizational structure and change (see Scott, 1 992, pp. 226-283 for an extensive review of this literature). Despite this rich heritage of theory and research, there has been a virtual absence of theoretical or empirical work from a structural contingency perspective in the past 15-20 years, prompting Pfeffer (1997: 162) in a recent essay on new directions for organization research to ask the question: "What has happened to structural contingency theory? " In the current research I return to the structural contingency perspective and examine two critical variables omitted in past research, structural complexity and changes in the chief executive officer, in their relationship with an important form of change, administrative reorganization. THEORY AND HYPOTHESES Changes in CEO and Reorganization Previous researchers have considered CEOs as symbolic figures in the organizations with marginal impact on change in organizations. …