M-form organization

M-form (multidivisional-form) organization

an organizational structure adopted by firms in which the management of a firm is decentralized, with separate groups or divisions of the firm responsible for groups of similar products or serving separate markets. Each group or division will have its own autonomous management team and its own separate marketing, production, etc., functions. With such a structure, the top managers at head office leave the day-to-day running of the divisions to the managers responsible, although they monitor the profitability performance of the divisional managers and generally retain power over the allocation of investment funds to the divisions. Oliver Williamson coined the term ‘M-form’, and he argued that firms with M-form organizations were less likely to pursue nonprofit goals (MANAGEMENT-UTILITY MAXIMIZING) than firms with U-FORM (UNITARY-FORM) ORGANIZATIONS because top managers could set clear profit goals for divisions and so suffer little control loss over their subordinates compared with U-form firms. See also MANAGERIAL THEORIES OF THE FIRM, BEHAVIOURAL THEORY OF THE FIRM.

Collins Dictionary of Economics, 4th ed. © C. Pass, B. Lowes, L. Davies 2005