Academy of Management Journal

2004, Vol. 47, No. 5, 723734.

PRODUCT-LINE MANAGEMENT IN PROFESSIONAL ORGANIZATIONS:

AN EMPIRICAL TEST OF COMPETING THEORETICAL PERSPECTIVES
GARY J. YOUNG
MARTIN P. CHARNS
Department of Veterans Affairs and Boston University

TIMOTHY C. HEEREN
Boston University

Guided by two competing theoretical perspectives, we investigated effects of structure

on performance and human resource outcomes of general hospitals. Neither a product-
line nor a functional structure was associated with the performance outcomes of
service quality and innovation. However, the product-line structure was negatively
associated with the human resource outcomes, professional development, and job
satisfaction. In line with the professional autonomy perspective, our results raise
questions about the appropriateness of a product-line structure for professional orga-
nizations.

A fundamental issue for organizational theory is
how best to design complex organizations in terms
of grouping job positions. Organizational theorists
have long pondered the relative advantages and
disadvantages of two basic types of structures, one
in which job positions are grouped by function, and
another in which they are grouped by product
(Charns & Schaefer, 1983; Galbraith, 1973; Mintz-
berg, 1979, 1981). A functional structure groups
positions according to labor specialization (for in-
stance, marketing, sales, and production). By con-
trast, a product-line structure groups positions ac-
cording to the type of product (or service) that
occupants of the positions help the organization
produce. In essence, a functional structure is based
on inputs, while a product-line structure is based
on outputs (Charns & Tewksbury, 1993).
Although the functional structure was the domi-
nant approach among U.S. business organizations
through the first half of the 20th century, after
World War II the product-line structure, also
known as the multidivisional form, began to spread
quickly within the manufacturing industry and cer-
tain service sectors of the economy (Fligstein, 1985;
Williamson, 1975). More recently, this type of
structure has gained popularity among hospitals,
research and development companies, and other
types of professional organizations that are charac-
terized by workforces consisting of highly educated
individuals who traditionally have had much dis-
Financial support was provided by the National Sci-
ence Foundation and the Center for Health Management
Research.
723
cretion to control and coordinate their own work
activities (Scott, 1998). The actual prevalence of the
product-line structure among professional organi-
zations is not known, but various anecdotal sources
indicate it is on the rise (Eto, 1991; Camden Group,
2000; Galbraith, 1995; Parker, Charns, & Young,
2001; Scott, 1998).
Notwithstanding the growth in the popularity of
the product-line structure among professional or-
ganizations, no systematically conducted study has
addressed the issue of whether this structure is
appropriate for this type of organization. In this
paper, we report results from a study that focused
on the effects of product-line structures in general
hospitals. Our paper makes two contributions to
management theory and research. First, it extends
the literature on product-line management by as-
sessing its generalizability to different types of or-
ganizations. Although the extant literature suggests
that a product-line structure is associated with cer-
tain benefits and limitations, previous studies have
concentrated largely on firms in traditional manu-
facturing settings (e.g., Armour & Teece, 1978;
Baysinger & Hoskinson, 1989). However, the appli-
cability of that literature to professional organiza-
tions, given their distinctive workforces and activ-
ities, is open to question (Nadler & Tichy, 1982;
Shani & Eberhardt, 1987). Second, the paper ad-
dresses product-line structure at a different level of
theoretical and empirical analysis than previous
research has used. The focus of earlier research has
been largely on how this structure affects the deci-
sion-making effectiveness and priorities of senior
managers and has often entailed analyses of firm-
wide financial measures (e.g., Armour & Teece,
724 Academy of Management Journal
1978; Baysinger & Hoskinson, 1989; Williamson,
1975). These investigations have not addressed
how a product-line structure affects employees
who work within the technical core of an organi-
zation, even though the management literature
suggests that structure has direct effects on the
work activities of such employees (e.g., Mintzberg,
1979; Scott, 1998). By contrast, our study investi-
gated, from two competing theoretical perspec-
tives, the effects of a product-line structure on pro-
fessionals who were directly involved in the pro-
duction and delivery of services for their respective
organizations.
THEORY DEVELOPMENT AND HYPOTHESES
Professional Organizations and Organizational
Structure
Many professional organizations are large and
complex entities, requiring that job positions, and
thus different types of professionals, be grouped in
some manner into units (Mintzberg, 1979; Scott,
1998). Such groupings follow from the division of
labor that is a defining characteristic of complex
organizations (Mintzberg, 1979; Perrow, 1986). The
choice of structure for grouping positionsfunc-
tion versus product has long been considered an
important one with direct implications for the con-
trol and coordination of work activities, which in
turn affect organizational performance (Charns &
Schaefer, 1983; Mintzberg, 1979). Traditionally,
professional organizations group job positions to-
gether into units based on the professional training
or expertise that the positions require, thus forming
what is essentially a functional structure (Charns &
Schaefer, 1983; Charns & Tewksbury, 1993; Mintz-
berg, 1979). Thus, for example, hospitals have dis-
tinct departments for nurses, social workers, and
respiratory therapists. Universities maintain sepa-
rate departments for different types of academic
specialists, whether they be biologists or historians,
and scientific research organizations often have
separate departments for different types of scien-
tists and engineers.
However, when organizations produce multiple
products or services, as is the case with many pro-
fessional organizations, grouping positions into
units becomes a more complicated matter (Charns
& Schaefer, 1983; Galbraith, 1995). In a product-
line structure, an organization establishes an ad-
ministrative system to coordinate and control the
work of those individuals whose job positions are
connected to the production of a product or service.
As such, a product-line structure conceptually
shifts a professional organization from one that is,
October
using Scotts (1998) terminology, autonomous (pro-
fessional employees are given wide discretion for
defining and implementing work activities) to one
that is heteronomous (professionals carry out their
work under some form of administrative control).
Within the organizational theory literature, two
perspectives offer different insights about whether
a product-line structure is appropriate, and why.
Both perspectives address the choice of structure as
an important one for professional organizations in
that it has direct as well as indirect implications for
performance. However, as discussed below, the
two perspectives differ in the choice they recom-
mend, which translates into competing hypotheses
about the appropriateness of a product-line struc-
ture for professional organizations.
Professional Organizations and the Structural
Contingency Perspective
From the perspective of structural contingency
theory, the structure of any type of organization,
professional or otherwise, should be contingent on
the nature of the organizations work requirements,
in particular the interdependencies that exist
among different types of job positions (Charns &
Schaefer, 1983; Galbraith, 1973; Thompson, 1967).
Galbraith (1973) presented complex organizations
as information-processing networks. He wrote that,
although grouping positions by function was the
most natural way to design an organization, high
levels of task interdependencies among functional
positions result in very substantial information-
processing requirements for organizations. The
greater the direct connection among the work re-
quirements of different functional positions, the
higher the level of task interdependencies an organ-
ization faces to produce a given product or service.
As such, if the organization is to perform at an
optimum level, it needs to address these informa-
tion-processing requirements. One approach is for
an organization to use a functional structure but at
the same time increase its capacity for managing
interdependencies, and thus for processing greater
amounts of information, through the use of various
lateral coordinative devices, including teams and
matrix arrangements (Burns, 1989; Charns &
Tewksbury, 1993; Galbraith, 1973). However, un-
der conditions of high interdependencies, an organ-
ization may need to reduce information-processing
requirements by grouping the types of positions
that are most interdependent within their own
units or departments. This latter approach is the
conceptual foundation for a product-line structure.
In the presence of high interdependencies, a
product-line structure is theoretically beneficial to
2004 Young, Charns, and Heeren
an organization in several ways that become man-
ifest in both the organizations performance and
human resource outcomes (Dennison, Hart, &
Kahn, 1996; Ford & Randolph, 1992; Knight, 1976;
Mintzberg, 1979). With respect to performance, the
product-line structure, by containing all key job
positions for a given product or service within the
same unit, facilitates the coordination of work ac-
tivities for producing a product or service. This
type of structure also enables better accountability
because all key employees who occupy job posi-
tions that are interdependent in regard to the pro-
duction of a product or service are supervised by
the same individual, who is responsible for the
performance of that product line. Both these factors
ultimately promote the quality of the services/
products that are produced within the product-line
structure (Ford & Randolph, 1992; Galbraith, 1995).
Also, integrating functional positions within a sin-
gle unit to produce a product or service provides
the occupants of these positions with diverse per-
spectives that can translate into creative problem
solving and innovation (Donaldson, 1985; Ford &
Randolph, 1992). With respect to human resources,
a product-line structure creates opportunities for
individuals with different types of job positions to
exchange ideas, formally and informally, which
can enhance their professional development and
job satisfaction (Ford & Randolph, 1992). Although
there are no empirical studies supporting these
claims for a product-line structure per se, several
studies of cross-functional integration efforts have
offered indirect evidence as to the benefits associ-
ated with this structure (e.g., Gittel, 2000; Lawrence
& Lorsch, 1967).
Thus, applying the structural contingency per-
spective to professional organizations brings into
focus the level of interdependencies that exist
among the different functional positions, and in
turn different types of professionals, in these or-
ganizations. Although, of course, the degree of such
interdependencies will vary by type of professional
organization, organization theorists have noted that
in many professional organizations, such as hospi-
tals and research and development companies, the
level of interdependencies among professionals is
relatively high (Charns & Schaefer, 1983; de Laat,
1994; Scott, 1998). Indeed, the fact that such or-
ganizations often maintain a functional structure in
the presence of high interdependencies has led
some observers to conclude that this type of struc-
ture largely serves the personal interests of the pro-
fessionals themselves, who often wield consider-
able influence within these organizations (Charns &
Schaefer, 1983; Freidson, 1970, 1985). Some schol-
ars have also commented that in recent years the
725
nature of work in many professional organizations
has been changing, resulting in even higher inter-
dependencies among different types of profession-
als (Scott, 1998). Such factors as heightened com-
petition for resources and increased pressures for
faster product cycles in the health care, education,
legal, accounting, and pharmaceutical industries
have reportedly created more numerous and more
intense connections among the work activities of
professionals employed by organizations within
these industries (Brock, Powell, & Hinings, 1990;
Scott, 1998). Accordingly, the structural contin-
gency perspective suggests that a functional design
may be increasingly inadequate to manage the in-
formation-processing requirements of professional
organizations that face high interdependencies
among employees. This view leads to the following
set of hypotheses:
Hypothesis 1a. For professional organizations,
a product-line structure will be associated with
a higher quality of professional services than
will a functional structure.
Hypothesis 1b. For professional organizations,
a product-line structure will be associated with
greater innovation in professional services
than will a functional structure.
Hypothesis 1c. For professional organizations,
a product-line structure will be associated with
more professional development among profes-
sionals than will a functional structure.
Hypothesis 1d. For professional organizations,
a product-line structure will be associated with
greater job satisfaction among professionals
than will a functional structure.
Professional Organizations and the Professional
Autonomy Perspective
Within the vast literature on professional organi-
zations, the view that the autonomy of profession-
als is central to ensuring the effectiveness of the
professional work these organizations do is a long-
standing theoretical perspective (Abbott, 1988;
Bucher & Stelling, 1969; Flood & Scott, 1987; Hoff,
2001; Scott, 1965). Advocates of this perspective do
not necessarily ignore the concept of interdepen-
dencies but rather assert that the associated infor-
mation-processing requirements can best be man-
aged through the efforts of professionals to
coordinate and control their own work activities.
From this perspective, professionals are a very spe-
cial case of workers who, by virtue of their rela-
tively extensive education and training, must be
given the discretion to manage their own work
726 Academy of Management Journal
largely outside the administrative oversight of their
organizations (Flood & Scott, 1987; Hoff, 2001;
Mintzberg, 1979).
Accordingly, from the professional autonomy
perspective, the choice of structurewhether to
group positions by function or productshould be
based on which type of structure best promotes the
autonomy of professionals within organizational
settings. As such, this perspective points to a func-
tional structure over a product one for professional
organizations (Mintzberg, 1979; Scott, 1998). Like
the structural contingency perspective, the profes-
sional autonomy perspective suggests that choice
of structure becomes manifest in both an organiza-
tions performance and human resource outcomes.
At the organizational level, this perspective sug-
gests that grouping professionals together within
their own departments (that is, using a functional
structure) puts each professional group in the best
position to regulate the quality of the work of its
own members in ways that will translate into better
professional services for customers (Charns &
Schaefer, 1983; Mintzberg, 1979). A product-line
structure undercuts this self-regulatory capacity by
imposing an administrative hierarchy over each
group of professions for purposes of defining and
monitoring work activities. Along this line, some
empirical studies have suggested that administra-
tive oversight of professions in organizational set-
tings can lead to a decline in the quality of profes-
sional services, possibly because administrators
make poorly informed decisions that affect quality
(e.g., Flood & Scott, 1987; Knight, 1976). Also,
grouping professionals within their own units pro-
motes opportunities for professionals to learn from
each other that can enhance professional develop-
ment and innovation (Charns & Tewksbury, 1993;
Mintzberg, 1979). Indeed, the literature in occupa-
tional sociology indicates that professional groups,
in response to changing consumer preferences,
have typically been very innovative in their service
offerings and development of new technologies;
this innovation has been attributed in large part to
the groups ability to conduct their work in the
absence of bureaucracy (e.g., Abbott, 1998; Starr,
1982). At the level of individual professionals, a
functional structure enables shared learning that
positively affects their professional development
(Mintzberg, 1979). Moreover, a clear premise of the
literature on professional organizations and of oc-
cupational sociology (though arguably not one that
has been well demonstrated empirically) is that
professionals place a very high premium on their
autonomy and ability to work without the interfer-
ence of administrative controls (Bucher & Stelling,
1969; Burns, Andersen, & Shortell, 1990; Freidson,
October
1970; Hoff, 2001). Accordingly, professionals are
more likely to be satisfied with their jobs when they
carry out their work under a functional structure
rather than a product-line structure. Thus, from the
professional autonomy perspective, a product-line
structure would appear to be inappropriate for a
professional organization. The forgoing leads to the
following set of hypotheses:
Hypothesis 2a. For professional organizations,
a product-line structure will be associated with
lower quality of professional services than will
a functional structure.
Hypothesis 2b. For professional organizations,
a product-line structure will be associated with
less innovation in professional services than
will a functional structure.
Hypothesis 2c. For professional organizations,
a product-line structure will be associated with
less professional development among profes-
sionals than will a functional structure.
Hypothesis 2d. For professional organizations,
a product-line structure will be associated with
lower job satisfaction among professionals
than will a functional structure.
METHODS
Study Setting
For our study of product-line structures in pro-
fessional organizations, we focused on general hos-
pitals as our research setting. Hospitals are an ex-
cellent setting for such a study for two reasons.
First, these organizations, more than 5,000 of
which exist in the United States alone (American
Hospital Association [AHA], 2002), have work-
forces consisting largely of highly trained profes-
sionals. More than 80 percent of a typical general
hospitals workforce consists of individuals with
professional backgrounds (in nursing, pharmacy,
and social work, for example) (AHA, 2003), all of
whom undergo substantial professional training
periods that include formal classroom curricula
and clinical apprenticeships.
Second, among the various types of professional
organizations, general hospitals face very high lev-
els of interdependencies among their different
types of professionals (Charns & Schaefer, 1983;
Longest & Young, 2000; Parker et al., 2001). As
noted, most general hospitals have traditionally
grouped job positions by profession (Charns &
Schaefer, 1983). In this type of arrangement, staff
nurses report ultimately to a senior nurse through
one or more levels of nurse managers. Similar ar-
2004 Young, Charns, and Heeren
rangements exist for other clinical professionals
such as pharmacists, social workers, and respira-
tory therapists. However, the work activities of
these professionals do connect with each other,
often in very substantial ways, around many pa-
tient care issues, including medication manage-
ment and discharge planning (Longest & Young,
2000). Over the last ten years, these connections
have only grown stronger as hospitals have experi-
enced significant competitive and funding pres-
sure, particularly from managed care organizations
such as health maintenance organizations (HMOs).
Hospitals are under pressure to both provide a
higher quality of patient care and to do so at lower
cost (Parker et al., 2001). It has also been during this
period that general hospitals have demonstrated
increased interest in the product-line concept
(Parker et al., 2001). In a hospital-based product-
line structure, employees from different clinical
professions share the common purpose of produc-
ing a comprehensive set of clinical services to man-
age a disease or clinical population. For example, a
cardiac product line may include such profession-
als as nurses, social workers, occupational thera-
pists, and physical therapists who collectively pro-
vide a full spectrum of services ranging from
wellness intervention to cardiac surgery to cardiac
rehabilitation (Charns & Tewksbury, 1993).
Sample
The study was conducted on a convenience sam-
ple of 11 general hospitals. At the time of the study,
each participating hospital belonged to one of five
health care systems that were members of a re-
search consortium, the Center for Health Manage-
ment Research, which provides financial and logis-
tical support for research addressing organizational
and managerial issues of interest to consortium
members. For the research project, we sought hos-
pitals that met two criteria. First, a hospital had to
offer distinct services in three or more of the fol-
lowing six clinical areas: behavioral health, cardiac
care, cancer, geriatrics, orthopedics, and womens
health. Second, a hospital had to have at least one
clinical area that appeared to be organized in a
manner that would meet our criteria for a product-
line structure (discussed below). We selected the
six clinical areas on the basis of general literature
and our own preliminary research indicating that
they were the most common clinical areas for
which product-line structures existed in hospitals
(Parker et al., 2001). The 11 hospitals that were
included in the sample collectively represented
five states: Arizona, Ohio, Michigan, North Caro-
lina, and Tennessee.
727
Although the use of a convenience sample limits
the studys generalizability, researchers often use
such samples to strengthen the internal validity of
an investigation that, for example, requires a high
degree of either comparability or diversity among
subjects (e.g., Barringer & Bluedorn, 1999; Brews &
Hunt, 1999). In the case of our study, the conve-
nience sample offered two important methodolog-
ical advantages. One advantage was that we were
able to assemble a study sample consisting of hos-
pitals that each had a mix of organizational struc-
tures among the relevant clinical areas. Because
none of the hospitals had product-line structures
for more than half of their clinical areas, self-selec-
tion bias was minimized. In essence, each hospital
served as its own control. Two, as discussed below,
we were able to collect data on organizational
structure and on the selected measures of perfor-
mance from independent data sources. In contrast,
many survey studies have relied on information
from one set of respondents for measures of both
independent and dependent variables (that is, sur-
veying employees to obtain both data on the or-
ganizational structures they work within and data
for outcome measures of the structures). As a result,
the data in the present study were not subject to
common methods bias. Moreover, we were able to
travel to each hospital to collect detailed data per-
taining to the organizational structure of each rele-
vant clinical area.
Data Sources
The two primary sources of data were an em-
ployee survey and site visits. All data were col-
lected during 2001. The unit of analysis was the
survey respondent.
Survey. To obtain data pertaining to the hypoth-
esized outcomes of product-line structure, we con-
ducted a survey of clinical professionals employed
in the relevant clinical areas of the sample hospi-
tals. The target group for the survey consisted of all
staff nurses, social workers, pharmacists, and ther-
apists (including physical, respiratory, and occupa-
tional therapists) whose responsibilities for at least
12 months prior to the survey pertained to patient
care in one of the six clinical areas. All these clin-
ical professionals work within the technical core of
a hospital and are an excellent source of informa-
tion on the organizational performance and human
resource outcomes of interest (Bigelow & Arndt,
2001). Although physicians also work at the front-
lines of patient care, in most hospitals they are not
employees but rather, independent contractors,
and thus they are not as directly affected by the
organizational structure of hospitals as the other
728 Academy of Management Journal
professionals we surveyed (Charns & Schafer,
1983). Of the 11 hospitals in the study sample, only
1 had more than a few physicians as employees.
We conducted the survey according to the fol-
lowing procedures. We obtained personnel lists
from sample hospitals for each of the six clinical
areas in which they offered distinct services. We
then, with statistical precision considerations in
mind, selected up to 50 eligible clinical profession-
als for each available clinical area (on the basis of
where each employee spent the majority of his or
her time). If there were more than 50 eligible, we
reached the target number through a stratified ran-
dom selection process that took into account the
proportion of professionals for that clinical area in
relation to the hospitals total number of employ-
ees. The target population for the survey contained
1,171 employees, almost 90 percent of whom were
nurses. We distributed the self-administered ques-
tionnaire to all members of the target population
through the internal mail of each hospital in the
sample.
Site visits. To classify the clinical areas organi-
zational structures, we visited each hospital in the
sample. During each site visit, we interviewed se-
nior managers (such as chief executive officers,
chief operating officers, and vice presidents of
nursing); middle managers (department and prod-
uct-line managers); and frontline employees. The
interviews were used to determine, for each avail-
able clinical area (1) to whom the clinical profes-
sionals reported, (2) who was responsible for bud-
get development and control, (3) who else, if
anyone, had a role in the decision making or man-
agement of the clinical area, and (4) the historical
development of the product line, if one existed. For
a given clinical area, discrepancies among inter-
viewees on these points were rare, but when they
did occur we brought interviewees together to clar-
ify the issues. In addition, the site visits were used
to obtain additional institutional and operational
data for the sample hospitals and their respective
clinical areas.
Measures
Organizational structure. The primary indepen-
dent variable was the structure for grouping profes-
sionals into units. We classified a clinical area as a
functional structure if clinical professionals for that
area reported through a traditional hierarchy to
managers of departments for their respective clini-
cal disciplines. We classified a clinical area as a
product-line structure if the professionals for that
clinical area reported to a manager who was out-
side the traditional discipline-based hierarchy of
October
the hospital and who had budget authority and
accountability for producing a largely comprehen-
sive set of patient care services for that clinical
area. The total number of clinical areas included in
the study was 44; 32 were functional structures,
and 12 were product-line structures. Approxi-
mately one-third of the clinical areas assigned to
the functional category had in place an individual
who, on a part-time basis, had responsibility for
coordinating clinical activities among the func-
tional departments, but had no budget responsibil-
ity or personnel authority. In testing our hypothe-
ses, we did not differentiate between these clinical
areas and the others assigned to the functional
group; we lacked a strong theoretical rationale for
doing so because these liaisons appeared to have
very little capacity to affect the work of the profes-
sionals in the sample organizations. In addition,
while theoretically the study hospitals might have
used other structural options, such as matrix or
cross-functional team arrangements, none had any
experience with these types of structures. Only
clinical areas that had had the same organizational
structure in place for at least 12 months prior to
data collection were included in the study. To ac-
count for organizational structure in multivariate
analyses, we used a dichotomous variable so that a
product-line structure was assigned a value of 1
and a functional structure a value of 0.
Outcomes. In accordance with study hypotheses,
our study examined two performance outcomes,
professional service quality and clinical innova-
tion, and two human resource outcomes, profes-
sional development and job satisfaction. We mea-
sured the outcome variables of interest on the basis
of four scales contained in the survey question-
naire. Because this was the first study to investigate
the outcomes of organizational structure in profes-
sional organizations, established measurement
scales were not readily available. Accordingly, we
constructed each of the four scales by integrating
and modifying items from scales that have been
used in the past for assessing the effects of cross-
functional structures such as teams and matrix ar-
rangements (e.g., Denison et al., 1996; Shani &
Eberhardt, 1987; Stetler & Charns, 1995). Each item
contained a statement with a five-point response
set based on level of agreement/disagreement. The
professional service quality scale consisted of four
items concerning the extent to which professionals
met the needs and expectations of patients; an ex-
ample item is Patients and their families are sat-
isfied with the services provided in the clinical
units I service. The clinical innovation scale con-
sisted of three items concerning the extent to which
professionals developed new ideas for improving
2004 Young, Charns, and Heeren
patient care (example: We are always developing
new practices and better ways of caring for patients
in the clinical units I service). The professional
development scale consisted of four items concern-
ing the extent to which individuals had opportuni-
ties for developing knowledge and skills for their
careers (example: I regularly have opportunities
for professional development). The job satisfac-
tion scale consisted of four items concerning an
employees general satisfaction with his/her job
(example: All things considered, I am satisfied
with my job). Each outcome variable was included
in the multivariate analyses as a continuous
measure.
To assess the construct validity of the four scales,
we conducted confirmatory factor analyses of scale
items (Hatcher, 1994). We first fitted a four-factor
model of the items corresponding to the four scales
described above. The comparative fit index, the
adjusted goodness-of-fit index, the nonnormed fit
index, and the root-mean-square residual were .94,
.93, .91, and .06, respectively, suggesting that the
model provided an adequate fit to the data. We also
tried several alternative models consisting of three,
five, and six factors, but these models did not fit the
data as well as the noted four-factor model. We
calculated chi-square differences between the four-
factor model and each of the alternative models,
and all of the differences were statistically signifi-
cant (p .01). All four scales had Cronbachs al-
phas above .85 and thus met conventional require-
ments for reliability.
Control variables. Our multivariate analyses in-
cluded several control variables accounting for
characteristics of the survey respondents and clin-
ical areas. With respect to survey respondents, we
controlled for employee tenure because length of
employment may be a proxy for an employees
general assessment of his/her work environment
(Bernal, Snyder, & McDaniel, 1998). Survey respon-
dents provided data on tenure, which was mea-
sured as a continuous variable in years, as part of
completing the questionnaire. We also controlled
for type of professional. For purposes of the analy-
ses, we created two groups of professionals, nurse
professionals and all nonnurse professionals (for
instance, social workers and pharmacists), because
among the nonnurse professionals the numbers of
respondents were too small for more refined group-
ings by type of profession.
As for clinical areas, we controlled for penetra-
tion of HMOs because these insurance entities are a
likely key source of competitive pressures relevant
to a general hospitals level of interdependencies
among clinical professionals (Longest & Young,
2000). Also, the health care management literature
729
suggests that the utilization controls used by such
insurance entities are a source of frustration to clin-
ical professionals and thus may have affected their
survey responses (Keuter, Byrne, Voell, & Larson,
2000). We obtained data from each hospital in the
sample as to the percentage of its patients enrolled
in HMOs by clinical area for calendar year 2001.
We also accounted for a clinical areas relative vol-
ume of patients because this may be a proxy for a
clinical areas prominence within a hospital and
thus a potential factor affecting the pattern of sur-
vey responses. We measured this variable as the
annual (for 2001) number of inpatients for a clinical
area divided by the hospitals total number of in-
patients. Finally, we accounted for the type of clin-
ical area in which respondents worked (for in-
stance, behavioral health, cancer). Each clinical
area was represented in the multivariate analyses
as a dichotomous variable with a value of 1 if the
respondent worked in that area, and a value of 0
otherwise.
RESULTS
The overall response rate to the survey was ap-
proximately 55 percent. The response rates by clin-
ical area ranged between 35 and 74 percent, and by
hospital ranged between 43 and 81 percent. In
terms of surface characteristics, nonresponse bias
was not present. Respondents did not differ from
nonrespondents on any of the employee-level or
clinical-area-level variables. Moreover, response
rates by clinical area were not correlated with aggre-
gated survey scores for any of the outcome measures.
Table 1 presents descriptive data and correla-
tions for the full survey sample used to examine the
relationship between the dependent variables and
organizational structure. Approximately 18 percent
of the survey responses were from professionals
working in clinical areas that had product-line
structures. Table 2 presents results from multivar-
iate analyses relating each of the four dependent
variables to organizational structure. To account for
the nesting of survey respondents within the same
clinical areas and within the same hospitals, we
conducted the multivariate analyses using a hierar-
chical linear model (Wong & Mason, 1985). Of the
two sets of competing hypotheses, two received
empirical support (Hypotheses 2c and 2d). In keep-
ing with the professional autonomy perspective, a
product-line structure was significantly and nega-
tively associated with both job satisfaction and pro-
fessional development. With respect to the control
variables, HMO penetration was significantly and
positively associated with clinical innovation; em-
730 Academy of Management Journal October

TABLE 1
Descriptive Statistics and Correlationsa
Variableb Mean s.d. 1 2 3 4 5 6 7 8 9 10 11 12 13 14

1. Service quality 3.64 0.57

2. Clinical innovation 3.23 0.64 .26
3. Professional 3.18 0.80 .29 .23
development
4. Job satisfaction 3.31 0.90 .31 .28 .45
5. Organizational 0.18 .06 .08 .14 .17
structure
6. Tenure 9.37 7.01 .13 .03 .06 .09 .04
7. Profession 0.89 .07 .06 .00 .11 .05 .15
8. HMO penetration 29.26 9.37 .14 .02 .06 .03 .11 .09 .04
9. Patient volume 0.18 0.11 .12 .12 .02 .09 .08 .01 .09 .15
10. Behavioral 0.09 .06 .04 .04 .16 .08 .06 .13 .01 .20
11. Cardiac 0.26 .03 .03 .03 .10 .08 .07 .10 .10 .11 .14
12. Geriatrics 0.05 .02 .05 .05 .07 .11 .03 .03 .08 .08 .05 .13
13. Cancer 0.22 .06 .08 .04 .07 .08 .09 .13 .08 .18 .13 .30 .12
14. Orthopedics 0.15 .03 .02 .03 .03 .06 .02 .26 .17 .09 .05 .12 .05 .11
15. Womens 0.24 .02 .05 .05 .04 .05 .08 .16 .01 .11 .14 .32 .12 .29 .12

a
n 642.
b
For organizational structure, product line was coded 1; for profession, nurse was coded 1.

ployee tenure was significantly and positively as-
sociated with job satisfaction; and the professional
category of nurses was significantly and negatively
associated with job satisfaction. No significant re-
lationships were observed for type of clinical area
and, to conserve space, these results have been
omitted from the tables.
To assess the robustness of the study results, we
conducted several additional analyses. First, we
repeated the multivariate analyses after deleting
each respondent from the functional design cate-
gory whose clinical area had an individual serving
as a liaison. However, doing this did not affect the
results already reported. In addition, we examined
whether study results might reflect limited experi-
ence on the part of the study hospitals with prod-
uct-line structures. We repeated the multivariate
analyses for a subsample of only those survey re-
spondents from clinical areas that had product-line
structures and included the age of the product line
as a variable in the model. Using information ob-
tained from the site visits, we measured age as the
number of years, as of 2001, that had passed since
an individual (or a team) was named product-line
manager and given line and budget authority for
professionals previously assigned to functional
units (this number of years ranged from 1 to 12). No
relationship existed between age and any of the
four dependent variables.
DISCUSSION
Product-line management has grown in popular-
ity among professional organizations. The struc-
tural contingency and professional autonomy per-
spectives point to different outcomes as likely to
arise from the use of such a structure in profes-
sional organizations. In our study, we found some
evidence to support the professional autonomy per-
spective. A product-line structure was negatively
associated with each of the two human resource
outcomes, professional development and job satis-
faction. However, neither type of organizational
structure was associated with the two performance
outcomes, service quality and clinical innovation.
Thus, our results point to some possible disadvan-
tages of a product-line structure and suggest no
clear offsetting advantages to professional organi-
zations in terms of performance outcomes within
their technical cores. This study did not directly
address the repercussions to organizations from
lower skill development and job satisfaction among
professionals, but such repercussions are likely to
include problems in employee turnover. For hospi-
tals, turnover is a particularly significant concern,
given the currently tight labor market for nurses
and other clinical professionals (Barney, 2002).
Further, problems in professional development and
job satisfaction can likely translate into lower per-
formance for an organization.
The study has several limitations. As was noted,
the use of a convenience sample limited the gener-
alizability of the findings and, thus, a need exists to
replicate this study in a larger and more diverse
sample of professional organizations. The study
was also conducted as an observational, cross-sec-
tional analysis, so we cannot attribute causality to
any of the observed relationships between organi-
2004 Young, Charns, and Heeren 731

TABLE 2
Results of Regression Analysis for Outcomes of Organizational Structurea

Performance Human Resources

Variablesb Service Quality Innovation Professional Development Job Satisfaction

Intercept 2.26** 3.07** 3.81** 4.20**

(0.85) (0.85) (0.97) (0.94)

Product line 0.02 0.03 0.15* 0.27*

(0.02) (0.03) (0.07) (0.11)

Tenure 0.02 0.01 0.004 0.02*

(0.02) (0.02) (0.00) (0.01)

Profession 0.11 0.004 0.07 0.27*

(0.11) (0.00) (0.10) (0.12)

HMO penetration 0.02 0.17* 0.002 0.01

(0.02) (0.07) (0.02) (0.01)

Patient volume 0.21 0.12 0.75 0.50

(0.21) (0.11) (0.06) (0.78)

Pseudo-R2 .08 .09 .12 .14

a
Standard errors are in parentheses; n 642.
b
For product line, the reference category is functional. For profession, the reference category is nonnurse.
* p .05
** p .01
Two-tailed tests.

zational structure and the outcome measures. As
previously discussed, our research design helped
to protect against self-selection effects, because all
sample hospitals had mixes of organizational struc-
tures among the six clinical areas. Moreover, pre-
vious research suggests that hospitals select clini-
cal areas for product-line structures using business
criteria that would not be likely to be confounded
with our outcome measures (Parker et al., 2001).
Still, research is needed that can assess the out-
comes of product-line structures longitudinally rel-
ative to baseline data. In addition, our outcome
measures were based on the perceptions of front-
line employees. In the future, it may be valuable to
replicate our study with other types of outcome
measures, such as service quality data obtained
directly from patients. Unfortunately, we were un-
able to collect uniform data from patients across the
sample hospitals.
Our study does raise questions about the appro-
priateness of the product-line structure in profes-
sional organizations such as general hospitals. The
professional autonomy perspective suggests that a
product-line structure is not a good fit with the
workforce characteristics of a professional organi-
zation. An important opportunity for future re-
search would be to explore such interactions be-
tween nonprofessional managers and professionals
in a product-line structure, relating interaction pat-
terns to the definition and monitoring of work ac-
tivities and to effects on the professionals and the
services they provide.
Future research could also address the value of
other theoretical perspectives for investigating the
implementation and impact of the product-line
structure in professional organizations. In particu-
lar, researchers might draw from institutional the-
ory and its insights regarding the inclination of
organizations to adopt structures for largely sym-
bolic reasons, without careful consideration for
how well the structure fits their goals and activities
(DiMaggio & Powell, 1983). Such inclinations have
reportedly been common among general hospitals
(e.g., Young, Stedham, & Beekun, 2000); the most
recent example may be the industrys ostensibly
ill-fated efforts to form vertically integrated care
models (Burns & Pauly, 2002). Another theoreti-
cal perspective to consider is the intraor-
ganizational power approach, according to which
information-processing requirements within organ-
izations are a potential source of power for those
organizational subgroups that can help organi-
zations cope with these requirements (Bariff & Gal-
braith, 1978; Hickson, Hinings, Lee, Schenk, & Pen-
732 Academy of Management Journal
nings, 1971). To the extent that a product-line
structure reduces information-processing re-
quirements in professional organizations, it
likely threatens the power base of certain profes-
sional groups that are apt to resist the new struc-
ture. During the site visit component of the study,
we did hear of instances in which hospitals ini-
tial efforts to implement product lines engen-
dered heavy resistance from professionals; how-
ever, we lacked the means to systematically
assess the persistence of such resistance over
time and how it might have affected study re-
sults. Along this line of inquiry, researchers
should also consider how professionals, once
faced with a product-line structure, seek to pre-
serve their traditional autonomy over work activ-
ities. A recent study conducted at the level of
organization fields indicates that events that
limit the influence of dominant professional
groups ultimately lead the groups to fragment
into more specialized professional coalitions that
compete with one another for resources and in-
fluence (Galvin, 2002). Similar dynamics may
occur within professional organizations. Finally,
given growing evidence from studies linking the
management of human resources to firm perfor-
mance (e.g., Barney, Wright, & Ketchen, 2001;
Hitt, Bierman, Shimizu, & Kochhar, 2001), re-
searchers should consider how product-line
structures interact generally with the human re-
source practices of professional organizations,
and implications for performance.
In conclusion, this research note offers a first
attempt to assess the effects of the product-line
structure in professional organizations. Clearly,
many opportunities exist to further investigate this
topic. Our hope is that other researchers will soon
capitalize on these opportunities.
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734 Academy of Management Journal
Gary J. Young (health@bu.edu) is associate director of
the Center for Organization, Leadership and Management
Research, a research component of the Department of
Veterans Affairs. He is also an associate professor at the
Boston University School of Public Health, where he
codirects the Program on Health Policy and Management.
His research interests span a wide range of issues con-
cerning the managerial, policy, and legal environment of
the health care industry. He received his Ph.D. (School of
Management) and J.D. from the State University of New
York at Buffalo.
Martin P. Charns is the director of the Center for Organi-
zation, Leadership and Management Research, a research
component of the Department of Veterans Affairs.
October
He is also a professor at the Boston University School of
Public Health, where he codirects the Program on Health
Policy and Management. His research interests are or-
ganizational design and diffusion of knowledge in the
health care industry, and he previously served as chair of
the Academy of Managements Health Care Management
Division. He received his M.B.A and D.B.A from the
Harvard Business School.
Timothy C. Heeren is a professor of biostatistics at the
Boston University School of Public Health. He received
his Ph.D. in mathematical statistics from Boston Univer-
sity. His research interests focus on the application of
statistical concepts to clinical and health services re-
search studies.