Home Concepts Organizational Theory Theory E²: Working with Entrepreneurial Professionals in Closely-Held Enterprises

Theory E²: Working with Entrepreneurial Professionals in Closely-Held Enterprises

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1. Diffuse Roles/Responsibilities/Boundaries

The traditional boundaries to be found in the carefully constructed bureaucracies of corporations, governmental agencies and other large organizations are often absent in closely held enterprises. Nepotism often reigns (especially in family-run businesses), with family members working for other family members. Furthermore, there is often an esprit de corps in the closely held enterprise that leads every employee to lend a hand in whatever way will help the organization. As one of the members of a closely held enterprise with whom we consult recently noted: “Everyone does a little of everything . . . and we can never seem to get totally away from our work.”

Using more technical language, the closely held enterprise is one in which there typically is a high level of integration, but a low level of differentiation among functions. Classical organizational theory suggests that an organization initially begins (like any system) with low levels of differentiation among functions. There is not much division of labor. Everyone does everything when an organization is young. However, as most organizations grow larger or older there is increasing differentiation. Each person does a specific job and there is ever-increasing differentiation of roles, language, and even organizational culture. We often describe this today as the tendency for organizations to create “silos”.

While the creation of silos is an effective and expected response to the growth of any organization, silos can create their own unique challenges if coordination and collaboration between these silos begins to suffer. This is where integration enters the picture. As an organization becomes increasingly differentiated, it must create an increasingly large and powerful set of integrating functions. These functions include management, intra-organizational communication channels (for example, telephone, email and intranet systems), and a unifying vision, mission or set of values.

It is important to note that many closely held enterprises do not follow this traditional and often normative model of organizational effectiveness. These enterprises often do not differentiate. Everyone continues to lend a hand in all aspects of the enterprise, even as this enterprise grows larger and older. As a result, there is less need for formal integration among differentiated functions in these unique organizations. The informal and powerful integrative forces that existed when the enterprise was begun remain in force throughout the life of the organization. This is both an asset and liability for the enterprise and for the entrepreneurs who lead this enterprise.

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