The Design of
Effective Top Management Style
Pradip N. Khandwalla
The performance of eight commonly utilized styles of top
management are evaluated in various environmental situations. The eight styles are: entrepreneurial, professional
management, professional bureaucratic, professional entrepreneurial, conservative traditional, colleaguial, bureaucratic, and middle-of-the-road. Utilizing data from the
author's study of over a hundred Canadian corporations,
the paper deals with four organizational decision situations: 1) What top management style to choose if
information about the environment is not available, 2) what
environment to get into if the style of top management is
not yet decided upon, 3) what environment to pick if the
top management style is decided upon, and 4) what top
management style to pick if the environment is decided
upon. The implications of the results for Indian management are described. The various paths by which an
organization can move from an undesirable style to a
desirable style are indicated, and some suggestions are
made on the way the change strategy could be implemented.
Pradip N. Khandwalla is Associate Professor of
Management at McQill University, and he is presently a
visiting professor in the Organizational Behaviour area
at the Indian Institute of Management, Ahmedabad. His
book, THE DESIGN OF ORGANISATIONS, is being
published by Harcourt, Brace, Jovanovich. In addition,
he has various articles and presentations before academic
societies to his credit.
Vikalpa, Vol.1, No.2, April 1976
The beliefs and philosophy of an organization's
key decision makers — top management —
concerning the management of the organization are of strategic importance. What the top
management strives for (or against) may, for
practical purposes, be regarded as the goals
of the organization. Since the activities of the
organization are the means by which organizational goals are attained, what the top
management seeks to achieve becomes the
basis for the design of the organization's structure, technology, and workflow.
Contemporary organization theory has
been moving in the direction of a contingency
orientation. The basic notion is that differences
in the task environments of organizations tend
to (perhaps, should) get translated into differences in the structures of organizations. The
tendency is to suggest that organizations operating in a particular type of environment will all
tend to have a particular type of structure. For
instance, Tom Burns and G. M. Stalker (1961)
have suggested that firms in a dynamic environment have an organic, loose, informal structure
with a strong emphasis on authority based on
situational expertise, while those in stable
environments have a mechanistic, bureaucratic
structure.
John Child has properly criticized this
mechanical view of organizational adaptation.
He has stressed the role of strategic choices
in shaping the responses of the organization
to the environment. The style of top management is a crucial choice, one that has farreaching and long-term effects on the whole
organization. For example, faced with a hostile
environment, the key decision makers may
choose a professional style of management with
a strong belief in planning, optimization tech41
niques, research, participative management, etc.
Or, they may, instead, choose an entrepreneurial
style, characterized by a belief in risky, bold
moves, aggressive stance towards rivals, and
a great deal of administrative flexibility. If the
top management is professionally oriented, the
structure of the organization will tend to be
characterized by many staff units, decentralization, a good deal of formalized relationships,
and sophisticated control systems. If the top
management is entrepreneurially oriented, the
structure may be much less characterized by
sophisticated staff units and, instead of decentralization, there may be a fair degree of concentration of authority at top levels with only
routine decisions delegated to lower management levels. Besides this, it may manifest many
of the characteristics of an organic flexible
administration described by Burns and Stalker.
Thus, the same environment may elicit different
structural responses due to the mediating choice
of a top management style, ideology, or
orientation. The argument is visually represented
in Figure 1.
Figure 1 The Role of Strategic
Choice in Organizational Design
The properties of the task environment
styles and strategies
~~i
i
Style A
Organizational
Structure 'A'
r~
Style_B
Organizational
Structure 'B'
This paper aims to :
1. Identify some dimensions of top
management style that the extant literature
suggests are key dimensions.
2. Identify some commonly utilized styles
of top management. Each style is a particular
combination of the dimensions of top manage
ment style.
3. Specify important dimensions of the
external environment of organizations.
4. With the help of data from the author's
study of over 200 Canadian firms, discuss
issues such as which management styles are
generally most effective, which operating envi
ronments are likely to yield best results, which
styles are likely to yield the best results in a
given operating environment, and which envi
ronments are likely to be most suitable given
the operating style of top management.
5. Draw some implications of the results
for Indian management.
6. Discuss how an organization can move
from an ineffective to an effective style.
42
I Feasible top management
Style C
Organizational
Structure 'C'
Dimensions of Top Management Style
Management style is the operating set of
beliefs and norms relating to management held
by the organization's key decision makers. A
complete consensus on beliefs is unlikely in
all but the smallest organizations. However,
through the social interaction at work induced
by having to face up to organization-wide
problems, challenges, and opportunities, some
kind of consensus on basic beliefs about what
is good or bad management practice is likely
to emerge within the ranks of the top management. These beliefs or management style, when
translated into action, constitute the organization's strategy for survival and growth and
thus shape the structure and functioning of
the organization.
Some interesting work has been done
concerning management beliefs. McGregor's
Theory X and Theory Y, Likert's authoritative,
benevolent authoritative, consultative, and participative styles, the organic and mechanistic
styles of Burns and Stalker, Braybrooke and
Vikalpa
Lindblom's "muddling through" and rational
comprehensive styles, and Mintzberg's adaptive,
planning, and entrepreneurial modes represent
some of the more important contributions to
the literature. None of these "styles" is really
a style, for each one leaves out important
dimensions identified by some other researcher.
For example, the mechanistic and organic styles
described by Burns and Stalker ignore the
dimensions of technocratic values and degree
of risk taking. Likert's and McGregor's ideas
embrace participation and organizational flexibility but they also ignore technocracy and risk
taking. Mintzberg's three modes do not take
into account participation and orientation to
organizational flexibility, and so on. However,
taken as a whole, the work of these pioneers
suggests at least four important ingredients of
every management style.
Risk taking: Managements vary in the
degree of their orientation to risk taking. Some
managements prefer high risk high return
investments; others, low risk low return investments. The dimension of risk taking measures
the degree to which management aggressively
interacts with the external environment. As
operationally defined in the present study, risk
taking has the ingredients shown in Figure 2.
Figure 2
Ingredients of Risk Taking
Safe investments; adaptive decision
making; marketing of "true and
tried" products; heavy reliance on
internally generated funds; a philosophy of cooperative co-existence
with rivals
Low _____ Risk Taking _____ High
Orientation
Technocracy : Managements vary in the
degree of their commitment to planning and
technocracy (i.e., reliance on the advice of
technically qualified persons). Some managements swear by long range planning, market
research, optimization techniques, and the like.
Others rely rather on experience, intuition, and
Risky investments; entrepreneurship;
emphasis on innovations; largely
external financing of investment;
"undo-the-competitors" philosophy
seat-of-the-pants judgements, dismissing technocracy as a lot of nonsense. As operationally
defined, technocracy has the ingredients shown
in Figure 3. High levels of technocracy represent rationalism - in responding to operating
problems, the famed "systems" mode of managing organizations.
Figure 3
Ingredients of Technocracy
A short planning and decision
making horizon; heavy reliance on
management training through
apprenticeship and "learning by
hard knocks"; reliance on personnel
with experience and common sense;
little importance attached to formal
planning, market research, forecasting,
operations research, etc.
Low Technocratic
Orientation
Structuring: Some managements have
a passion for structuring clearly the various
managerial activities, roles, and relationships in
the organization. Others believe equally strongly
in flexibility, informality, open communications,
Vol.1, No.2, April 1976
High
Emphasis on long range planning
and forecasting; emphasis on market
and operations research; emphasis
on technically trained experts in
decision making; emphasis on formal
management training; emphasis on
profit maximization through careful
planning and research
authority vested in the situational experts, etc.
The former have a mechanistic orientation, for
they like to turn the organization into a smoothly
running machine. The latter have an organic
orientation, and prefer a more informal, plastic
43
organization. In contrast to risk taking and
optimization, which are orientations of management mainly towards the external environment
structuring is an internal, administrative dimen-
sion. As operationally defined in the present
study, structuring has the elements shown in
Figure 4.
Figure 4 Elements of the
Structuring Orientation
Open channels of information and
communication; freedom to managers
in operating styles; situations!
experts make the decisions; free
adaptation to changing circumstances;
emphasis on getting things done no
matter how; loose, informal control;
personnel permitted to adapt freely
to situational requirements.
Low
Structuring
Orientation
Participation : Another key administrativedimension is the degree of commitment to
participative management and humane relationships at work. Some managements see the
organization's human resources as crucial in
the organization's fight for survival and growth.
Building up morale and a climate of collaboration through team management and group
decision making are seen as indispensable. On
the other hand, other managements may view
the organization's human resources as of
High
Structured channels of information
and communication; insistence on all
managers having a uniform operating
style; line managers make the decision; adherence to "true and tried"
management principles; emphasis on
following the formally laid down
procedures; tight formal control of
operations; personnel expected to
adhere to formal job descriptions.
marginal value, or they may view participative
management as a waste of time. Although
management literature has considered authoritarian management to be opposed to the participative, this need not be so (Rush). Managements that do not believe in participative
management may hold authoritarian values, or
they may believe simply in individual rather
than group decision making. As operationally
defined in this study, participation has the
elements shown in Figure 5.
Figure 5 Elements of the
Participative Dimension
Responsible executives make
decisions using available information;
little importance accorded by top
management to participative
decision making at middle and
senior management levels and to
management by objectives; little
human relations training for
managers; little use of behavioural
science techniques; those affected
by organizational changes seldom
involved in the process of change.
44
Low
Participative
Orientation
High
Group, consensus based decision
making at top levels of management;
great strategic importance accorded
by top management to participative
decision making at middle and
senior management levels and to
management by objectives; extensive
use of human relations training for
managers to secure better
collaboration and to ease any
opposition to organizational changes;
the use of benavioural science
techniques like the Managerial Grid
and sensitivity training; full
involvement of those affected by
organizational changes in the
process of change.
Vikalpa
Styles of Management
A style of management is a particular
combination of the dimensions of management
philosophy. Many commonly utilized top management styles are described below :
1. Entrepreneurial Style: The entrepre
neurial style is characterized by bold, risky,
aggressive decision making, an emphasis on
administrative flexibility, reliance on intuitive
judgements rather than those based on the
advice of formally trained experts, and not too
strong a belief in participatory decision making.
Since the practitioners of this style are in the
habit of seizing opportunities before all the
facts about them are known, they put a pre
mium on managerial flexibility so that the
organization rapidly adapts to the evolving
situation. They are not very comfortable with
technocratic and participative modes of deci
sion making because they find them cumber
some and time consuming.
2.
Professional Management Style :
The professional management style is charac
terized by a heavy reliance on long-range
planning, modern management techniques like
market research and operations research, parti
cipative, humane management, a fair degree of
emphasis on structuring managerial and staff
roles, activities, and relationships, and a fair
degree of risk taking, aggressive market beha
viour. Management is seen as a science rather
than as an art, and efficiency and growth are
strongly emphasized. Although in America this
style is used by only a small minority of organi
zations, these are some of the best known corpo
rations and therefore, overseas, it has become
known as the American style of management.
3.
Bureaucratic Management Style :
The characteristic features of this style are
a firm faith in the careful and formal structuring
of managerial roles, activities, and relationships,
a fair degree of conservatism in decision mak
ing, a reliance more on seat-of-the-pants judge
ments than on careful studies of problem areas
by technocrats, and an aversion to participative
team decision making. The style has been,
perhaps unfairly, strongly associated only with
Vol.1. No.2, April 1976
the management of government departments
and agencies.
4. Conservative-Traditional Style : The
conservative-traditional style puts a low value
on risk taking and also fairly low values on
structuring of roles, activities, and relationships,
technocracy and planning, and participa
tion. The traditionalism of this style is mani
fested in the adherence to seat-of-the-pants
methods of decision making, traditional rather
than novel products or services, the avoidance
of participative modes of administration, and a
loose informal structure reminiscent of family
operated enterprises. This style has been preva
lent among older, family dominated organiza
tions.
5. Professional-Bureaucratic Style : This
is the style of the modernized bureaucracy. It
retains the strong conservatism and commit
ment to the structuring of activities, etc., of the
bureaucracy but it is also characterized by an
equally strong commitment to technocracy,
planning, and participation. The style at the
defence department of the U.S. under Mr.
McNamara was quite possibly an example of this.
6. Professional - Entrepreneurial Style :
This is a combination of managerial profes
sionalism and entrepreneurship. The style
is characterized by a strong commitment to
technocracy and planning, and fairly high levels
of participation, risk taking, and administrative
flexibility and looseness. Among U.S. corpora
tions, the management of Boise Cascade is
perhaps a good example of this style. In Canada,
Steinberg's is an example.
7. Colleaguial Style : The chief charac
teristics of this style are a strong commit
ment to participation, a fairly strong commit
ment to open channels of communication,
administrative flexibility, and authority wielded
by the situational expert rather than the formally
responsible executive, and fairly low commit
ment to technocracy and planning, risk taking,
and administrative structuring. The style is
commonly found in research-type organizations
in which colleagueship, a loose, flexible
administration, and joint decision making are
strongly stressed.
45
8. Middle - of - the - Road Style : The
middle-of-the-road style tries to steer clear
of extremes. It is neither conservative nor risk
taking, neither oriented to technocracy and
planning nor to seat-of-the-pants judgements,
neither committed to mechanistic nor to organic
management and not very participative. It is
the style of those who wish to live by the
golden mean. Often it is the style of those
who are scared of the new and the risky but
are equally afraid of the obsolescence of the
time-worn methods of running the organization.
Table 1 summarizes the characteristics of the
eight styles.
Table 1 Characteristics of
Top Management Styles
1. Entrepreneurial
style
2. Professsional
management
style
3. Bureaucratic
style
4. Conservativetraditional style
5. Professionalbureaucratic style
6. Professional entre
preneurial style
7. Colleaguial
8. Middle-of-the
road style
Risk
taking
Structuring
of activities
Technocracy
and planning
Participa
tion ____
High
Low to
moderate
Moderate to
high
Low to
moderate
High
Low to
moderate
Moderate
to high
High
Low to
moderate
Low to
moderate
Low to
moderate
Low to
moderate
High
Moderate
to high
Low to
moderate
Low
Low
Low to
moderate
High
Moderate
to high
Low to
moderate
Moderate
Low to
moderate
Low to
moderate
Moderate
Dimensions of the External Environment
A number of researchers have sought to
identify major dimensions of the task environment of organizations. Burns and Stalker distinguished between stable and dynamic environments; Thompson classified environments as
either stable or shifting, and homogeneous or
heterogeneous; in an earlier work I viewed uncertainty, stressfulness, and heterogeneity as three
High
High
Low to
moderate
Moderate
Moderate
to high
High
Low to
moderate
dimensions of the environment (Khandwalla,a).
The present study uses five dimensions : dynamism, hostility, heterogeneity, restrictiveness,
and technological sophistication. These are not
either-or dimensions but continuous variables.
For example, the environment is not either hostile or benign; it can vary all the way from
extreme hostility to extreme munificence. Figure
6 shows these dimensions as operationally
defined in this study.
Figure 6 Dimensions of
the Task Environment
Vary stable, little change; very
predictable, easy to forecast the
future; very stagnant markets; no
periodic fluctuations
46
Low Dynamism High
Very dynamic, rapidly changing
technical, economic, and cultural
aspects; very unpredictable, very
difficult to forecast the future; very
rapidly expanding old markets and
rapid emergence of new ones; very
strong periodic fluctuations
Vikalpa
Very safe; rich in investment and
marketing opportunities; very
controllable and manipulatable
environment
Very homogeneous...a single, undifferentiated
market and very similar customers
Very risky; very stressful, exacting,
hostile; very dominating environment
in which the firm's initiatives do
not count for much
Low Hostility High
Very heterogeneous—a great diversity of
Low Heterogeneity High markets, types of customers, etc.
Very unrestricted, constraint-free
Very constraining, severe legal, social,
political constraints
An environment demanding little in the way of Low Restrictiveness High
technological sophistication
Technologically, very sophisticated and
Low Technological High complex
Sophistication
Method
The data were gathered from the
top executives of 103 Canadian public
companies by means of an extensively pretested questionnaire. The questionnaires were
distributed through the presidents of these
corporations. They were to be completed
anonymously. Over 95% of the respondents
designated themselves as "topmost" or "senior"
management. Informal checks in 15 firms
revealed that the questionnaires were
completed mostly at senior vice
president and presidential levels. The
president was requested to get at least two
questionnaires completed independently by
"senior experienced executives" of the firm. Two
or more questionnaires were returned from
60% of the firms. The responses of all the
executives from a firm were averaged. From
the remaining 40% of the firms, only one
questionnaire was received. The principal
characteristics of the sample are reproduced
in Table 2. All the measures employed in the
study appeared to have satisfactory reliability.1
Table 2 The Principal Characteristics
of the Sample of 103 Canadian Firms
Size of the firms
Average size
Standard deviation
Range
$ 133 millions in annual sales or revenues
$ 257 millions in annual sales or revenues
8 0.1 million to $ 1500 millions
Average age
Standard deviation
Range
49 years since founding
45 years
3 years to 302 years
Average profitability, based on a five year average
of before tax return on net worth
Standard deviation
Range
15% 12% 35% to 75%
Age of the firms
Profitability of the firms
Sales growth rate of the firms
Average 5 years growth rate
Standard deviation
Range
Industry affiliation of the firms
Manufacturing industries
Consumer non-durable goods
Consumer durable goods
Producer goods
Capital goods
Service Industries
Merchandising Finance
and investments Utilities
Miscellaneous
Vol.1, No.2, April 1976
14% 14% 12% to 100%
1 The reliabilities of the multi-item
measures were all in excess of .50, which Nunally
21%
63% considers quite satis, factory in exploratory
stages of research. Some other tests of reliability
5%
validity to the extent that they could be applied to the
26% and
variables, were also mostly satisfactory. For details, see
11% Appendix to Khandwalla's forthcoming book. The Design
of Organisations.
9%
13%
5r"
47
For this study, only a subset of the firms
in the sample, numbering 82 firms, was utilized.
These were the firms that could be categorized
relatively unambiguously as "high performance"
or "low performance" organizations. For assembling this sample, two indices of performance
were used. One was an objective performance
index based on long range (five years) profitability and growth rate data supplied by the
respondents (and verified from published corporate financial reports). The three components
of this index were the long-run profitability of
the firm, the stability of its profits over a five
year period, and the long-term sales growth
rate. The other was an index of performance
relative to rival firms as subjectively assessed
by the respondents. The components of this
index were profitability, growth rate, liquidity
or solvency, public image, and employee morale,
all relative to the industry average. The scores
for the objective index were divided into "high"
and "low," while the scores for the relative
index were divided into "high," "medium," and
"low." The firms that were high on the objective index and medium or high on the relative
index were considered high performing organizations. The firms that were low on the
objective index and were medium or low on
the relative index were deemed as low performers. There were 44 high performers and
38 low performers. The remaining 21 firms
that were high performers on one index but
low performers on the other index were eliminated from consideration. In summary, the 44
high performers did at least as well as their
rivals and performed better than the low performers on objective criteria such as profitability,
stability of profitability, and growth rate of
revenues. The 38 low performers did no better
than their rivals and performed worse than the
high performers on common criteria of business
success. The average long term profitability,
growth rate, and range of profitability of the
high performance firms were 21.1% return on
net worth (before taxes), 19.47%, and 11.6%
respectively; those of the low performance firms
were 7.8%, 7%, and 15.7% respectively.
For the purposes of this paper, each
48
management style dimension and each environmental dimension was trichotomized into high,
medium, low categories.3 Firms were assigned
to the different styles on the basis of the
operating definitions of the styles described
earlier. All but 8 firms could be allocated to the
8 styles. It should be noted that a firm
could be allocated to one style and one style
only. Of the 8 firms that could not be allocated
to any of the 8 styles, 3 were high performers,
and 5 were low performers. Thus, of the 74
firms allocated to the 8 styles 41 or 55%
were high performers and 33 or 45% were
low performers.
Data
The principal information utilized for this
paper is reproduced in full in the Appendix.
It gives the number of high performing firms
and the number of low performers among the
users of each top management style for each
category of the task environment. It also gives
the number of high and low performers in each
environmental category, and the number of
high and low performers per each style. In the
succeeding sections, parts of the information
presented in the Appendix are utilized to explore
a number of design questions.
Four Decision Situations
The data presented in the Appendix can
help to shed light on four types of decision
situations :
1. The style of top management is to be
chosen, and it is not at all clear what kind of
an environment the organization is going to be
operating in. For example, a management team
is to be selected to identify opportunities for
diversification and pick one or a few of these
to launch new decisions. What ought to be
the operating philosophy or style of this
management team to maximize the probability
2 The score for the management style dimensions and
environmental dimensions were trichotomized into high,
medium, and low categories by assuming that the scores
on these dimensions were all normally distributed. Scores
exceeding the mean + (.43 x standard deviation) were
considered "high," scores below the mean - (.43 x standard
deviation) "low," and the rest "medium."
Vikalpa
of success of any new ventures such a team
may eventually head ? The answer to this
question may provide some guidelines as to
what kind of managers to pick for the team in
order to ensure compatibility with each other
and with the desirable management style.
2. The business environment is a deci
sion variable and it is not yet clear what the
style of top management of the organization is
likely to be. For example, management is consi
dering diversification possibilities and has nar
rowed the choice down to a few products and
market segments, each product and the market
segment it is to serve representing a distinctive
environment. It is not yet known what kind of
a management team will head the new divisions
if and when they are set up. Which environ
ment or environments should the management
choose, and which should they avoid?
3. A more common decision situation is :
Given the choice of top management style,
which environments are likely to raise the
probability of success of the organization and
which are likely to reduce it? The managements
of small or moderate sized organization com
monly confront this issue when considering
diversification. Their operating styles are rea
sonably well-set and there is not enough alter
native general management talent within the
organization to head any new divisions.
4. A still more common decision situa
tion is : Given the environment the organiza-
tion is to operate in, which management style
is most likely to contribute to the organization's
success? Business conditions change quite
commonly, and the question arises whether the
current operating style is appropriate in the
new circumstances. Or, the organization's product market strategy is determined (that is, its
environment is chosen), and the choice of the
operating style that would be most effective
in the chosen environment becomes critical.
Let us attempt to throw light on each
decision situation with the help of data from
the study of Canadian firms.
Styles and Performance
Table 3 indicates the percentage of high
performers for each of the eight styles. On the
average, the entrepreneurial and the professional bureaucratic appear to yield high performance, while the bureaucratic, conservative
traditional, and middle-of-the-road seem to yield
poor performance. The professional management
and professional entrepreneurial styles seem to
yield fairly high results, while the colleaguial
style yields barely acceptable results. On the
average, therefore, management would do well
to avoid the buraucratic, conservative traditional, and middle-of-the-road styles, and seek
the entrepreneurial, or the professional management style, or its conservative or entrepreneurial variants.
Table 3
Performance of the Eight Styles
Entrepreneurial style Professional
management style Bureaucratic
style Conservative traditional
style Professional entrepreneurial
style Professional bureaucratic
style Colleaguial style Middle-ofthe-road style
Vol. 1, No.2, April 1976
Number of firms
using style
Percentage
High
Performers
11
82
13
5
13
62
20
38
6
8
67
75
8
10
50
40
49
Environments and Performance
Sometimes, as when starting a new business or when thinking of diversification, the
environment is a decision variable. Table 4
suggests that in that case it is eminently sensible
lo choose the organization's environment carefully. It is clear from Table 4 that the more
hostile the environment, the lower will be the
organization's performance. This requires little
explanation. More intriguing, perhaps, is the
fact that the more restrictive the environment,
the higher is the organizational performance.
There are possibly two reasons for this. First,
a restrictive environment is uncongenial for
vigorous competitors and entrepreneurs. Temperamentally these prefer an environment they can
operate in freely. Thus, inter-organizational cooperative and collusive practices are likely to
emerge in a restrictive environment, pushing up
performance. Secondly, the existence of many
constraints is so likely to complicate top level
decision making that top management must
perforce become "professional" and rely on
sophisticated long range forecasting and planning, optimal capital budgeting and operations
planning, etc. This also is likely to improve
performance. A homogeneous environment, that
is, one in which the products sold by the
competitors are very good substitutes for one
Table 4 Success Rates of
Different Categories of Environment
Percentage of
High Performers
Dynamic
57
Moderately unstable
44
Stable
59
Hostile
31
Moderately hostile
56
Benign
77
Technologically complex
63
Technologically moderately complex
48
Technologically unsophisticated
50
Restrictive, such as of a regulated monopoly
68
Moderately restrictive
50
Non-restrictive
44
Heterogeneous
57
Moderately heterogeneous
70
Homogeneous
32
50
another owing to the lack of market segmentation opportunities, is worth avoiding, for rivalry
is likely to be intense and destructive in such
an environment. Overall, therefore, if the business environment is a decision variable, it is
better to seek one that is relatively benign,
restrictive, and/or not very homogeneous, and
avoid one that is hostile, unrestrictive, or
homogeneous.
Style and Choice of Environment
Table 5 indicates the environment judged
"best," "acceptable," and "worst" for each
given management style. The "best" environments are those in which the success rate for
the style, that is, the proportion of high performers, is significantly (over 15 percentage points)
better than the overall success rate for the
style. For example, the success rate for the
entrepreneurial style is 82% (Table 3). In a
technologically unsophisticated environment,
however, its success rate is 100%, as also in
a moderately restrictive environment (see
Appendix). Thus, these two environments are
judged "best" for this style. "Worst" environments are those in which a style's success rate
is more than 15 percentage points lower than
the style's overall success rate. All other environments are "acceptable," that is, all environments
in which the style's success rate is 15 percentage points plus or minus its overall success
rate. Only those environments were considered
in which at least four firms were found to have
used a particular style. This minimized random
successes and failures of a style causing environments to be regarded as "best" "or "accepts
ble" or "worst" for the style.
Some interesting points emerge from Table
5. The entrepreneurial style is likely to yield
better results in relatively unsophisticated and
unrestrictive environments than in sophisticated
and hostile environments. It is not likely to be
commonly utilized in restrictive environments.
Thus, even though the overall success rate of
this style is very high, an injudicious choice of
environment is likely to lower the probability
of success quite drastically. The conservativeVikalpa
traditional is a relatively low performance style.
And yet, a judicious choice of the environment,
for example, one that is fairly restrictive, stable,
hostile, somewhat technologically complex,
and/or heterogeneous, is likely to increase
substantially the probability of success, while
an injudicious choice, such as that of an unsophisticated, non-restrictive, or homogeneous
environment, is likely to spell disaster. The professional management style is likely to do better
in a relatively stable, hostile, restrictive, and/or
heterogeneous environment than in a dynamic
or homogenous one. The middle-of-the-road
style ought to avoid hostile environment, and
if it must be used, it ought to be used in an
environment that is at least moderately heterogeneous. It can also perhaps be used in technologically complex, non-restrictive, or moderately
hostile environments.
Table 5 Styles and
Appropriate Business Environments
1.
2.
3.
4.
Entrepreneurial style
Professional management style
Bureaucratic style
Conservative traditional
"Best" Environment
"Acceptable"
Environment
"Worst" Environment
Technologically
unsophisticated
Moderately
restrictive
Dynamic Nonrestrictive
Moderately
heterogeneous
Hostile
Technologically
complex
Stable
Moderately hostile
Moderately
heterogeneous
Hostile
Technologically
complex
Technologically
unsophisticated
Dynamic
Homogeneous
Restrictive
Heterogeneous
Homogeneous
Moderately
restrictive
5.
6.
Professional entrepreneurial
Professional bureaucratic
7.
Colleaguial
8.
Middle-of-the-road
Technologically
unsophisticated
Moderately complex
Moderately
heterogeneous
Non-restrictive
Homogeneous
Heterogeneous
Benign
Moderately unstable
Technologically
complex
Restrictive
Moderately complex
Moderately
technologically
unstable
Non-restrictive
Heterogeneons Moderately unstable
Hostile
Moderately
Moderately hostile
heterogeneous
Technologically
complex
Technologically unsophisticated
Environment and Choice of Style
We noted earlier that often the business
environment is given and the style of top
Vol. 1, No.2, April 1976
Stable Hostile
Moderately hostile
management is the decision variable. Table 6
shows the styles that are "best," "acceptable,"
and "worst" in each of the high, medium, low
categories of the five environmental dimensions.
51
Table 6 Business
Environmens and Appropriate Styles
•Best" styles
Dynamic environment
Moderately unstable
Stable Hostile
Moderately hostile
Entrepreneurial
Professional bureaucratic
Professional management
Entrepreneurial
"Worst" styles
Professional
management
Colleaguial
Conservative
traditional
Middle-of-the-road
Conservative
traditional
Professional bureaucratic
Entrepreneurial
Professional
management
Professional
bureaucratic
Technologically complex
Technologically unsophisticated
Middle-of-the-road
Conservative
Professional management traditional
Middle-of-the-road
Professional management
Benign
Moderately technologically complex
"Acceptable
styles
Middle-of-the-road
Conservative
traditional
Colleaguial
Entrepreneurial Conservative traditional
Middle-of-the-road
Professional
management
Entrepreneurial
Restrictive
Entrepreneurial
Professional
management
Professional
bureaucratic
Conservative
traditional
Colleaguial
Professional
entrepreneurial
Conservative
traditional
Moderately restrictive
Non-restrictive
Heterogeneous
Middle-of-the-road
Professional
management
Professional
entrepreneurial
Colleaguial
Professional Entrepreneurial Middle-of-the-road
management
Professional management
Moderately heterogeneous
Homogeneous
52
Conservative
traditional
Bureaucratic
Conservative
traditional
Vikalpa
The "best" styles in a given category of environment are those whose success rate is significantly better (by over 15 percentage points)
than the success rate for the environment. For
example, 23 firms reported themselves to be
operating in a dynamic environment. Of these,
13 were high performers, thus giving a success
rate of 56% for this environment (See Appendix
for details). Only one style, the entrepreneurial,
turned out to be "best" in this environment —
6 out of the 7 entrepreneurial firms in this
environment, or 86%, were high performers.
The "worst" styles are those whose success
rates are over 15 percentage points below the
success rate for the environment. The one
"worst" style in the dynamic environment was
the professional management style, with a
success rate of only 40%. The rest were considered "acceptable." Only those styles were
considered for each category of environment
that were represented at least four times in the
environmental category. This minimized the
probability that a style would be judged as
desirable or undesirable for a category of environment based on purely random successes
or failures.
Table 6 indicates that the effectiveness or
ineffectiveness of top management styles is
often very situation specific. That the entrepreneurial style and the professional management style (along with its conservative and
entrepreneurial variants) emerges with flying
colours in a number of environmental categories
is not surprising. But even the mighty professsional management style, the cynosure of
modern business education, can be a disaster
in the wrong environment. The entrepreneurial
style, "best" in several environments, is merely
"acceptable" in technologically complex and
moderately heterogeneous environments. In the
latter environment, it is clearly less suitable
than the professional management style even
though the overall success rate of the entrepreneurial style is substantially higher than that
of the professional management style. On the
other hand, the lowly conservative traditional
style, the bete noire of modern business education, and rated "worst" in several categories of
Vol.1, No.2, April 1976
environment, is found "acceptable" in stable,
hostile, moderately technologically complex, and
moderately restrictive environments. The equally
lowly middle-of-the-road style ranks "acceptable" as do the entrepreneurial and the professional management styles in a technologically
complex environment such as that of nuclear
engineering, petrochemicals, and aerospace
firms. The data suggest that to raise substantially
the probability of high organizational performance it is necessary a) to identify clearly the
properties of the business environment of the
organization and b) make a judicious choice
of the top management style that accords best
with the environment.
Notice that the entrepreneurial style is
"best" in a hostile environment, although as
we saw in the last section, a hostile environment is a "worst" for the entrepreneurial
style. This is not at all contradictory. Given a
hostile environment, the entrepreneurial style is
a stellar performer among the eight styles.
But given the choice of an entrepreneurial
style, the organization can improve its probability of success by avoiding operations in a
hostile environment and getting involved, instead, in a less hostile, relatively unconstraining,
dynamic environment.
There are some good reasons why the
two "best" styles, the entrepreneurial and the
professional management, are effective in environments that sometimes differ substantially.
For example, the entrepreneurial style is highly
effective in a dynamic environment, while the
professional management style is quite ineffective. The professional management style is quite
effective in a highly restrictive environment
while the entrepreneurial style is seldom used
in such an environment. Remember that the
entrepreneurial style strongly emphasizes a risk
taking, innovative, combative approach towards
the environment and a great deal of administrative flexibility. No wonder that it thrives in
a turbulent environment in which challenges
and opportunities continually besiege the organization and standing still is fatal. Decisions
have to be taken in a hurry, without the full
facts being assembled, and the administrative
53
arrangements must be very flexible to roll with
the punches of a fast changing situation. Also,
too many constraints cramp the style of the
entrepreneur. On the other hand, the professional management approach marked by sophisticated analysis and group decision making
can be attuned effectively only to a slower pace
of change. There must be time to get all the
facts, get them processed by experts using
sophisticated techniques, work out the feasible
alternative courses of action dictated by the
facts, present them for discussion to groups of
decision makers, for the latter to make decisions,
and for these decisions to be implemented in
an orderly fashion. Also, if the top decision
makers must take into account many constraints,
and must ensure that these constraints permeate
all decision making in the organization, then
clearly many technocrats are needed, a technocratic, analytical approach to decision making
is needed, and much group decision making is
also needed to make sure that everybody
understands and respects the constraints.
On the other hand, both these styles are
comparably effective in a hostile environment,
a technologically complex environment, and a
technologically unsophisticated environment. In
a hostile environment, three choices are available to an organization. One response is to
bury one's head in the sand, so to speak, in
a defensive posture, in the hope that the storm
will pass or the enemies will be less brutal to
a passive foe. A conservative traditional or a
middle-of-the-road style is evidence of this
non-response. As Table 6 indicates, this is a
poor response. Another response is an aggressive one in which the opposition is taken by
storm by big, bold, imaginative, aggressive
moves, such as of a Napoleon. There are
attendant risks and success is not guaranteed,
but if comes, it is a magnificent one. The
third approach is one of putting one's best
brains to work on a rational solution, on building up the morale of the rank-and-file by letting
them participate in the decisions that finally
emerge — in other words, the professional
approach that, say, the General Motors Corporation used in its successful penetration of the
54
highly competitive European car market.
A technologically sophisticated environment has one feature that makes success highly
probable for entrepreneurs as well as professional managers, namely the cornucopia of new,
highly sophisticated products with dizzying
market potential. That is to say, it attracts high
achievers and ambitious men, those that like
to take big gambles on the basis of intuition,
and those that like to seek out growth opportunities after a great deal of professional analysis
and joint consultation. It discourages the faint
of heart and faint of mind from venturing into
the realms of high technology. The rationale
for the success of the entrepreneurial and the
professional management styles in a technologically unsophisticated environment is probably
somewhat different. Such an environment is an
easy entry environment and, therefore, likely to
be highly competitive and hostile. In such an
environment, the management with the extra
intuition and boldness, or the one with the
extra morale and technocratic expertise, is likely
to be most effective, while the run-of-the-mill
traditional, conservative, middle-of-the-road
management is likely to be quite ineffective.
This is exactly what Table 6 indicates.
Summary of Key Decision Rules
We may summarize the decision rules that
emerge from our analysis so far as follows :
1. In the absence of information about
the operating environment of the organization,
pick the entrepreneurial or the professional
management style, or the latter's conservative
or risk taking version. These styles are likely
to serve well in a variety of environments. Avoid
the bureaucratic, conservative traditional, and
the middle-of-the-road styles. These are more
likely to fail in a wider variety of environment.
2. In the absence of information about
operating styles, pick a reasonably benign and/or
restrictive environment, and avoid a hostile and/
or homogeneous environment.
3. Given the top management operating
style, look up Table 5 to find out which envi
ronments are likely to yield best results.
Vikalpa
4. Given the operating environment of the
organization, look up Table 6 to find out which
operating styles are likely to yield best results.
Implications for Indian Management
The sample of firms on which this study
is based is Canadian. There are some major
differences between Canada and India, and also
some similarities. The major differences reside
in the level of affluence, urbanization, literacy,
work ethics, social structure, and governmental
control of economic activity. The similarities are :
both India and Canada are borrowers of foreign
technology and capital; both are mixed
economies with widespread state participation
in the industrial sector; both try to protect their
industries from foreign competition, having been
latecomers to industrialization; both offer
medium sized markets to their manufacturers.
These gross similarities and differences may be
helpful in explaining any differences we may
find in the average levels of aspects of management style such as risk-taking, structuring,
technocracy, and participativeness in the managements of the two countries.
Our interest, however, is not in identifying
these average differences. We have tried to
identify the styles that work and the styles that
do not work in specific environmental conditions
in Canada. Since the Canadian and the Indian
societies show a comparable range of variation
in environmental conditions and managerial
styles, it would seem that what works in a
given environmental situation in Canada may
also work in a similar environmental situation
in India. After all, we also have fiercely competitive industries; industries that are stagnating;
industries that employ a sophisticated technology;
industries that are very dynamic, etc. And the eight
styles described in this paper are also seen in
operation in India. If the reasons suggested for
the success of certain styles in these environments are sound, similar success may be attainable anywhere in the world. It has been claimed
that "American style" professional management
cannot work in a poor country like India. Perhaps so, if this style of management was tried
Vol.1, No.2, April 1976
indiscriminately in every organization regardless
of the task environment of the organization.
But were it to be tried in organizations that
operate in relatively stable, hostile, and restrictive environments in India, is there any reason
to think that it would not yield good results?
Let us assume that the broad findings of the
Canadian study are applicable to Indian
management. What prescriptive statements can
we make for management in India ?
1. The entrepreneurial style is a highly
desirable style for a country like India that
wants to and needs to develop in a hurry. A
wide variety of organizations need to be innovative and aggressive if rapid socio-economic
change is to be brought about in this country.
But it should be remembered that risk taking
has to be combined with administrative flexi
bility, and that the entrepreneurial style flourishes best in a dynamic, hostile, competitive
environment. It does not flourish in a restrictive
environment. If we wish to reinforce entrepreneurship in developmental organizations (the
federal and state cabinets are good examples)
then it becomes absolutely necessary to have
a) a competitive, dynamic environment; b) the
appointment of risk takers in key decision
making positions; c) the elimination of bureau
cratic procedures and a shift in emphasis from
working to rules to the exercise of authority
by situational experts and a free flow of information, and informality; and d) the removal
of the multitudinous constraints under which
these organizations have to perform today.
2. Many key organizations in India must,
however, operate in restrictive environments.
Enterprises that need foreign exchange, or
whose products or services are deemed strategically important or are necessities, or enterprises
in which large public funds are invested, or
key governmental departments must, in a
democracy, be subject to various constraints.
For these organizations, the entrepreneurial style
is not very feasible. However, the professional
management and the professional-bureaucratic
styles should yield superior results if utilized
by these organizations. It should be remembered,
however, that emphasis merely on sophisticated
55
planning of operations and technocracy is not
enough, nor merely an emphasis on the structuring of activities, roles, and relationships. A
crucial condition is a moderate to low rate of
task environmental change. Managerial professionalism does not flourish in too capricious
an environment. Environmental changes are all
right provided that they come at substantial
time intervals to permit the organizational
technocrats to analyse carefully all the relevant
information and the organizational decision
makers to take decisions participatively. Since
government policies represent a major part of
the task environment of these organizations, a
key necessity is reasonable stability in governmental policies that affect the operations of
these organizations. A key internal requirement
is a high degree of participative management
and humane interpersonal relations. Participation is much more than formally democratic
management involving the representation of
various interests in management decision making, prescription of voting procedures, and the
like. Team building, consensual decision making,
fostering of a climate of collaboration, skills in
motivating employees, and constructive resolution of intergroup and interpersonal conflicts
are essential ingredients of a participative orientation. Without these, the most vicious forms
of conflict may flourish even in formally democratically managed organizations. For organizations that must operate in restrictive environments and, therefore, must have professional
management for superior performance, managerial training in planning, modern management
techniques, and participative management in
the sense described here are absolutely necessary. Equally truly, authoritarian, traditional, nonparticipative management of such organizations
is likely to lead to poor or even disastrous
organizational performance.
3. The bureaucratic style is widely prevalent in Indian public administration and the
conservative-traditional style is widely used in
our private enterprises. As the Canadian study
shows, there is little to commend in these styles.
A strategy of improvement for organizations with
a long history of bureaucratic administration is
56
to superimpose managerial professionalism on
bureaucratic values and traditions. This way,
the bureaucratic style is converted into the
highly beneficial professional-bureaucratic style.
One strategy of change would be to have
MBAs or equivalently trained managers in all
the strategic posts in the organizations. These
agents of change would then introduce sophisticated planning and participative management
into the bureaucracy. An injection of risk takers
would turn conservative-traditional firms into
entrepreneurial ones. One strategy would be
to auction off poorly performing firms rather
than their being taken over by the government.
Indeed, the following equations may help
organizations using one of the inferior styles
to change most expeditiously to one of the
superior styles :
a)
Bureaucratic style + Risk taking + Tech
nocracy and planning + Participation =
Professional management style. (Involves
a great many changes. Recommended only
if the task environment is relatively stable,
hostile, and restrictive.)
b)
Bureaucratic style + Risk taking - Structuring of activities etc. = Entrepreneurial
style. (Recommended if the organization
has to operate in a dynamic, hostile, nonrestrictive environment, or if it is to intro
duce major innovations in society.)
c)
Bureaucratic style + Technocracy and plan
ning + Participation = Professional-bureau
cratic style. (Recommended if the organization is to operate in a relatively restrictive, benign, and technologically sophisticated environment.)-
d)
Bureaucratic style + Risk taking - Structuring of activities etc. + Technocracy
and planning + Participation = Professionalentrepreneurial style. (Involves too many
changes. Not recommended.)
e)
Conservative-traditional style + Risk taking
+ Structuring of activities etc. + Technocracy and planning + Participation =
Professional management style. (Involves
a geat many changes. Not recommended.)
Vikalpa
f)
Conservative-traditional style 4 Risk taking=
Entrepreneurial style. (Highly recommend
ed, especially if the environment is dynamic, hostile, and non-restrictive.)
g)
Conservative-traditional style 4 Structuring
of activities etc. 4 Technocracy and planning + Participation = Professional-bureaucratic style. (Involves many changes but
recommended if the organization is to
operate in a relatively restrictive, benign,
and technologically sophisticated environ
ment.)
h) Conservative-traditional style 4- Risk taking
+ Technocracy and planning 4 Participation = Professional-entrepreneurial style.
(Involves many changes. Not recommended,
especially since (f) above is much easier.)
i) Middle-of-the-road style 4 Technocracy
and planning + Participation = Professional management style. (Highly recommended, especially if the environment is
relatively stable, hostile, and restrictive.)
j) Middle-of-the-road style 4 Risk taking =
Entrepreneurial style. (Highly recommended,
especially if the environment is relatively
dynamic, hostile, and non-restrictive.)
k) Middle-of-the-road style - Risk taking 4
Structuring of activities etc. 4 Technocracy and planning 4 Participation = Professional bureaucratic style. (Too many
changes. Not recommended, but may be
worth the effort if the environment is
relatively benign, restrictive and technologically sophisticated.)
I) Middle-of-the-road style - Structuring of
activities etc. 4 Technocracy and planning + Participation = Professional-entrepreneurial style. (Too many changes. Not
recommended, especially in view of the
case of (j) above.)
m) Colleaguial style 4 Risk taking 4 Structuring of activities etc. 4 Technocracy and
planning = Professional management style.
(Involves too many changes. Not generally
recommended, but may be worth the
effort if the environment is relatively stable,
Vol.1, No.2, April 1976
hostile, and restrictive.)
n) Colleaguial style + Risk taking - Participation = Entrepreneurial style. (Highly recommended, especially if the environment
is relatively dynamic, hostile, and unrestrictive.)
o) Colleaguial style 4 Structuring of activities
etc. 4 Technocracy and planning = Professional-bureaucratic style. (Highly recommended, especially if the environment
is relatively benign, restrictive and technologically sophisticated.)
p) Colleaguial style - Risk taking 4 Technocracy and planning = Professional-entrepreneurial style. (Recommended, especially
if the environment is relatively benign, and
heterogeneous.)
Strategy of Change
Apart from some of the ways indicated
earlier for changing from "poor" styles to
more effective styles, a strategy of change that
has worked well in some organizations is the
one developed at Michigan Survey Research
Center. This may be used as follows :
1. In-house organizational planners or
outside consultants gather information about
the nature of the operating environment and
operating top management style of the target
organization. The information may be gathered
through questionnaires filled out by senior
decision makers and/or interviews with them,
possibly supplemented by company records,
published information, etc.
2. The information about the properties
of the operating environment and the operating
management style is summarized and fed back
to the top managers. The latter meet as a
group with the consultants to discuss the
information and its implications. The implications are discussed in the light of available
organization theory and findings about managerial styles and their effectiveness, and decisions are made about changes in environment
and/or operating style.
3. An individual or a group is asked to
57
References
develop a plan of action to carry out the decisions. This may include management training
to shift from an inappropriate style to an
appropriate one.
4. The approved plan of action is put
into practice.
5. Periodically steps 1 through 4 are
repeated to keep the organization attuned to
its environment and to exploit possibilities of
attuning the environment to the organization's
managerial resources.
Burns, Tom, and Stalker, G. M. The Management of
Innovation. London : Tavistock Publications, 1961.
Child, John. "Organizational Structure, Environment, and
Performances: The Role of Strategic Choice,'' Sociology, Jan. 1972, pp. 2-22.
Khandwalla, Pradip N. (a) "The Environment and its Impact
on the Organization," International Studies of Management and Organization, Fall 1972, pp. 297-323.
Khandwalla, Pradip N.(b) The Design of Organisations. New
York : Harcourt, Brace, Jovanovich. Under Publication.
Mann, Floyd C "Studying and Creating Change : A Means
to Understanding Social Organization," Industrial Relations Research Association, Monograph No. 17, pp.
146-147.
Nunally, Jum. Psychometric Theory. New York : McGrawHill. 1967.
Thompson, James D. Organizations in Action. New York:
McGraw-Hill, 1967.
APPENDIX
THE NUMBER OF HIGH PERFORMERS AND LOW PERFORMERS IN DIFFERENT CATEGORIES
OF THE ENVIRONMENT
TOP MANAGEMENT STYLES
Task environment
Dynamic
Moderately unstable
Stable
Hostile
Moderately hostile
Benign
Techno. Complex
Moderately complex
Technologically
unsophisticated
Restrictive
Mode, restrictive
Non-restrictive
Heterogeneous
Mod. heterogeneous
Homogeneous
Overall scores for
each style
EntrepreScope ror
environment neurial
Hi
Lo Hi
Lo
Prof,
man.
Hi Lo
BureauConservProf.Prof.Collea- Middleof-road
cratic
traditional entre.
bureau.
guial
Hi
Lo
Hi
Lo Hi Lo
Hi Lo Hi
Lo Hi Lo
13
11
20
9
15
20
17
11
10
14
14
20
12
6
10
12
6
1
2
4
2
3
3
1
1
1
0
2
0
0
2
0
2
2
4
2
6
0
4
1
3
1
1
2
1
2
3
1
0
1
0
1
0
2
-
16
19
11
14
17
19
8
16 5
9 1
11 4
18 4
13 3
8 4
17 2
0
1
0
1
0
1
1
3
6
0
2
2
4
2
1
2
2
1
2
0
3
1
1
2
0
1
3
0
4
2
8
5
4
9
0
0
1
0
1
2
2
-
2
2
0
1
4
1
2
2
2
2
2
2
4
3
4
1
0
4
2
0
2
1
0
3
1
1
0
1
1
1
1
0
1
1
1
3
2
1
1
4
3
2
0
1
1
2
0
0
1
0
1
1
2
0
1
3
0
2
0
3
1
2
2
0
1
2
0
2
2
0
2
2
2
1
1
4
1
4
2
0
2
1
1
0
3
0
2
1
4
2
2
6
0
2
6
2
2
1
1
2
1
1
0
2
0
0
2
0
0
1
5
• 1
1
3
2
1
2
0
2
0
0
2
1
1
2
3
1
0
1
0
2
2
2
1
1
1
1
1
2
0
4
0
3
2
2
2
3
2
1
5
8
4
2
6
2
4
4 4
6
2
Note : In the table "Hi" means the number of high performing firms; and "Lo," the number of low performing firms.
55
Vikaff
Vikalpa