Peter Blau "A Formal Theory of Differentiation in Organizations" (1970)

Main Point: In this article Blau seeks to develop a "deductive" theory of organizational differentiation which he defines as "the number of structural components distinguished by one criteria". Blau's crucial variable is organizational size which leads to structural differentiation (such as increasing numbers of subdivisions) and coordination problems within the organization. Blau sets forth two general principals and nine related propositions which comprise the framework of his theory. It is important to note that Blau's theory refers to organizations with paid employees and largely ignores technology, environmental factors, or individual psychology within organizations. Blau develops his theoretical framework with reference to quantitative research of structural differentiation in 53 governmental organizations.

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Blau's general propositions:

1. Increasing organizational size generates differentiation at decelerating rates

As the size of an organization increases, its marginal influence on differentiation decreases.

a. large size promotes structural differentiation

b. large size promotes differentiation along several different lines

c. the rate of differentiation declines with expanding size

d. the subunits into which an organization is differentiated become internally differentiated in a parallel manner (differentiation is uniform throughout the organization)

1.2 The larger an organization is, the larger the structural components of all kinds

1.3 Proportionate size of the average structural component, as distinguished from its absolute size,

decreases with increases in organizational size

1.4 The larger the organization is, the wider the span of supervisory control (the greater the number of

people under a manager's supervision)

1.5 Organizations exhibit an economy of scale in management

1.6 The economy of scale in administrative overhead declines with increasing organizational size

The process of structural differentiation which is meant to address problems of control and supervision within ever larger organizations is itself the source of new administrative problems for supervision.

2. Structural differentiation in organization enlarges the administrative component.

The more differentiated the formal structure, the more administrative personnel of all kinds should be found in an organization of a given size, and the narrower the span of control of first-line supervisors and higher managers.

2.1 The larger size of an organization raises the ratio of administrative personnel

2.2 Direct effects of large organizational size lowering the admin ratio exceed indirect effects related to structural differentiation

2.3 Differentiation of large organizations into subunits stems the decline in the decrease in the proportion of managerial personnel with increasing size