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The Emergence and Evolution of the Multidimensional Organization

J. Strikwerda J.W. Stoelhorst

“In terms of its impact, not just on economic activity, but also on human life as a whole, the multidivisional organizational design must rank as one of the major innovations of the last century.”—John Roberts1

The multidivisional, multi-unit, or M-form, is widely acknowledged as the most successful organization form of the twentieth century.2

Firms that employ the M-form organize their activities in separate business units and delegate control over the resources needed to

create economic value to the managers of these units. This organization form is widespread, is central to the “theory in use” of managers, and serves as the basis of most accounting systems.

However, the organization of productive activities in many contemporary firms violates the principle that is central to the M-form: that business units are self-contained. The quest for synergies that have been high on the corporate agenda since the late 1980s has resulted in the widespread adoption of corporate account management, shared service centers, and matrix organizations.

As a result, most business units now depend at least in part on resources that are controlled by other units. This raises fundamental questions about the status of the M-form in contemporary firms.

Questioning the status of the M-form is not merely a theoretical fancy, but is high on the agenda of managers as well. In this article, we report on research that was commissioned by the Foundation for Management Studies, a Dutch organization of management executives.

These practical men and women shared a fundamental uneasiness about structuring their organizations. On the one hand, many of them experienced problems with the M-form: high employee costs, internal battles over resources, lack of standardization, lack of cooperation, and loss of market opportunities. On the other hand, they did not



The Emergence and Evolution of the Multidimensional Organization