Growth and Decline Processes in Organizations.

TL;DR: In this article, Blau and Schoenherr pointed out that larger organizations have more highly elaborated structures with regard to both horizontal and vertical differentiation, and that these elaborate structures produce coordination problems for which the organization compensates by hiring additional administrators.

Abstract: Since the original articles by Melman (1951) and Terrien and Mills (1955), researchers have most often attempted to explain variations in administrative intensity through reference to size. Administrative intensity is defined as the relative sizes of two personnel components in organizations: administrative (or "supportive") and production-worker (or "direct"). In its most recent form, the linkage between this variable and size has been asserted by Blau and a number of collaborators (Blau, 1970; Blau and Schoenherr, 1971; Blau, 1972; Blau, 1973). The essential idea is that bigger organizations have more highly elaborated structures with regard to both horizontal and vertical differentiation. Size has positive effects on administrative intensity because these elaborate structures produce coordination problems for which the organization compensates by hiring additional administrators. On the other hand, bigger organizations have previously made investments in organizational patterns required to manage a higher level of work activity. As Blau (1972:18) put it: ". . . the investment of administrative time required for organizing operations is not proportionate to their volume, increasing far less than the volume of work increases." In addition, larger size makes for a more efficient use of specialized administrative effort. Skills and abilities are not infinitely divisible. So small organizations are less able to use administrative manpower efficiently.