This chapter discusses the progress made by financial services companies in adapting their organisational structures to enable them to respond to the challenges of a new environment. It summarises the changes which occur as an organisation moves through a transitional stage between bureaucracy and the more flexible adhocracy, and the findings of Survey HR3 conducted in 1995 (see Appendix) to determine the stage reached by firms in the sector. It then examines the trend towards knowledge intensity in the industry, looking in particular at the effect of IT.
The survey found that retail financial services companies are changing in response to the environmental and technological challenges described, though progress varies. Many of the firms participating claim to have reached a period of structural transition and our research aimed to chart their progress in four key areas: the shift from hierarchical to flattened structures, from function and procedure-orientation to process-orientation, from control to empowerment, and from administrative-focus to customer-focus. Many retail financial services companies are at a stage of structural development which Moss-Kanter (1983) calls ‘bureaucracy in transition’ (see Figure 10.1).
To achieve economies of scale, large companies have traditionally organised in a hierarchical way with business processes broken down into narrowly defined tasks or procedures and spread amongst several departments. In most sectors today, bureaucracies with rigid hierarchical structures are finding that their efforts to compete in new markets and to increase productivity are hindered by the functional barriers which separate decision makers from customers. As previously stable and predictable markets become more dynamic and