 Introduction

Mayne was one of the biggest and most dominating companies concerning health care in Australia. It had an unbalanced history with ups and downs. It specialized in different areas. They started as a delivery company, which grew into an important logistics company. Later Mayne entered different industries including the health care section. Their goal was to be the market leader in the medical industry by owning hospitals, providing drugs and services.
But due to poorly evaluated situations the company encountered several management and profitability issues.
Depending on which period we look at the company, it has its strengths and weaknesses. Directly after entering the health care section, they had very specialized workers, this was their strong point since they needed professionals with an experienced view on the job they had to do. The down side was that they did not have a lot of authority. They were forced to listen to the decision makers who were a small centralized group of managers.
Later on they even fired the specialized doctors and nurses and hired new inexperienced staff to do the job in order to keep the costs low. This of course was criticized and seen as a weak point in the history of the company.
The environment in the 20th century changed rapidly, Mayne did not have the ability to respond to those quick transformations because of the limited focused management. All this is presented in the case and is important information in order to understand what went wrong. They changed the structures within the organization, but did they choose the right ones to make the company come perform at it’s best? And was the cause of the issues the company struggled with a structural problem? All these questions will be discussed in this case study.

 Structural issues Mayne is facing

Mayne was founded as a delivery company in 1885, an organization with a simple structure, highly centralized and low in complexity since the authority laid in the hands of the two entrepreneurs Mayne and Nickless. As the company grew, it got more complex, and they installed the machine bureaucracy. They saw new opportunities and changed the strategy. They started to operate internationally and entered new industries.
This required an organizational restructuring. Based on the product lines they built divisions. In this case the divisional structure would be advisable. Complications arose as the strategic apex did not want to forfeit their control. The result was inadequate, because they had most of the characteristics of the divisional structure but lacked decentralized decision making.
A solution to the crisis was to hive of all industry lines except the medical sector. They enlarged this industry and restructured it under the new manager Peter Smedley. He had his own strategic goals for the company and to reach them he undertook radical steps.
He tried in a complex environment to build up the machine bureaucracy. The hospitals disposed of highly skilled medical specialists which did not have the authority to make any decisions. Their head office had to give permission for every action. This did not result in a positive outcome. When Smedley left the organization, they started to give the hospitals more responsibilities and this was the first step in the organization’s history to decentralization.

 Success and failure of organizations structure

The organizational structure is the framework of a company. It defines areas of responsibilities and gives guidelines to management who have to lead the organization. The effectiveness of the company depends on the structure. If the structure is applied at the appropriate time and in a correct way, success is more easily obtained. In contrast, if the structure is not used in the proper way the company can not achieve its goals and so we talk about failure.
Mayne provides an eidetic example: At the beginning they used an organizational structure which matched with the company’s environment. This gave the company an economic upturn and was the way to success.
On the other hand, when the organization got bigger and had to change the structure again. The problem was that they did not use exactly what the company needed. They grew into an organization which had separate divisions but still the head office did not want to decentralize. They tried to hold on but this ended up in failure.

 Mayne’s experience in comparison with the organisational life cycle

In order to analyse the development Mayne’s organisation took, we will have a closer look on its life cycle.
The early stages of Mayne’s organisation went rather according to the life cycle stages.
It passed through the entrepreneurial, collectivity and finally the formalisation and control stage, when coming to the elaboration of structure stage.
By the time, the organisation reached the elaboration of structure stage, the development changed with regards to the life cycle. The elaboration of structure stage is characterised by a complex structure, diversified markets and decentralisation.
Looking at Mayne’s company, one of the mentioned points does not fit the case, namely the decentralisation.

In the 1970s and 1980s, Mayne had become a large size company which, for the first time, had to face stagnation of growth. Thus, the company decided to change its strategy which meant first of all to increase diversification of the product line. Due to the broader product range new divisions (higher complexity) were created, this led to an increase of bureaucracy.
Keep in mind that, at this point of Mayne’s life cycle, the structure still was very centralised.
Having mentioned this, the problem Mayne had to face becomes rather clear.
The higher increase of bureaucracy accompanied by centralised decision making lead to a slowdown of the decision making process.
Therefore the difference between organisational life cycle and Mayne’s development lies in the fact that Mayne left out the decentralisation during the elaboration structure stage. But this was urgently essential regarding the different divisions.
Coming to the end, the decline stage went rather the same as the life cycle sample.
Decision making was still centralised. There was a high amount of conflicts which finally led to the nomination of Peter Smedley.

To sum up, we can say that the development of Mayne was very similar to the sample of the organisational life cycle. The only difference was the neglect of introducing decentralised decision making.

 Structure follows strategy – does this slogan apply to Mayne’s company?

First of all we have to clarify what we mean by this slogan.
The developed strategy of an organisation sets the bases for the appropriate structure which is supposed to perform this strategy.
In the case of Mayne, this slogan proves itself true. Nevertheless, the structure does not suit every situation.
By the time, the company decided to provide a more diversified product range, this new strategy was followed by a new structure, including new and different divisions.
Another adequate example is the nomination of Peter Smedley.
Again, firstly the strategy was introduced; in this case, Smedley focused his strategy on the health industry. This was followed by a new structure, namely to drop the overseas interventions and concentrate on the medical sector.
Both, the first and the second example clearly show that the slogan is applicable to Mayne’s company. Nevertheless, we have to mention that there should have been at least one further structural change, namely to decentralise decision making in order to speed up the entire process.

 Solutions and recommendations

The major problem Mayne had to face was a combination of two important elements.
First, the development of the company to a large size did not run parallel to the change in structure.
The decision to diversify the product line included more divisions and thus an increase of bureaucracy. Mayne was not able to adapt to this enlargement properly as major decision stayed centralised which lead to an inflexible and slow moving management, although the environment needed exactly the opposite.
Second, the divisions had a lot of problems and were not able to fix those. Therefore, it was impossible to achieve economy of scale.
In addition to that, the nominations of Peter Smedley made things worse instead of solving the problems.
He totally undervalued the impact doctors could have on hospitals.

Looking at all the mentioned problems, we can note that the biggest problem Mayne actually was facing was the centralised bureaucracy in a rather complex world.
The decision to diversify the product range, expanding overseas and introducing new divisions were not wrong, but not brought to an end. In order to speed up processes and to give more power to specific divisions a decentralisation probably would have solved a lot of problems.

A completely different solution could be the idea of focusing on a specific market niche rather than trying to establish different product ranges, as this needs a lot of background information and experience.
Mayne could have tried to further develop the already established logistic company and to specialise in it. By doing so, it would avoid the risk of entering a completely new market without any experience but use the already gained experience in order to invent new transport ideas.
Of course the main disadvantage of a market niche is the dependence on this specific product. So if there is a big change in the environment or competitors invent something new, the business really has to be aware of this. Therefore a flexible organisation with flat hierarchy is essential.

 Conclusion
Mayne’s situation never stayed stable since it was founded. Especially in the last three decades the company went through different managements and strategic goals. They tried various structures but could not find the exact way how to manage the big divisional organization in the 70’s and 80’s.
In 1998, Mayne quit a lot of different divisions, and decided to focus only on the health care industry. Still problems were rising when a new manager came into the company. He did not want to decentralize the organization and so the different hospitals did not have the authority they needed to do their jobs. The new manager was not able to reorganize and overcome the problems being encountered by the company.
Studying the organizational structure the company adopted, we found out that an important thing could be missing: the control of decision making was always in the hands of the top management. They never decentralized. Perhaps this could have been an interesting alternative. By decentralizing, they would have overcome the problem of managers who could not oversee the situations because of the high complexity, which happened after diversifying in different industries.
This also could have helped in a later stage when hospitals needed more freedom to do things as they should.
Another alternative was a complete different thing of what the company did, instead of diversifying they could have focused on a single product and specialize in it because diversifying asks for a lot of experience especially if you do not know the market.
These could have been interesting ideas to focus on to try to overcome the problems that Mayne struggled with.