Structure in product line management: The role of formalization in service elimination decisions

Formalization is a core structural characteristic of the firm and an important determinant of decision-making efficiency. This empirical paper explores formalization in financial institutions' product line pruning decisions. The authors develop a set of hypotheses that are empirically tested in a stratified random sample of UK financial institutions. The results demonstrate that the level of formalization in the elimination decision-making process depends on specific organizational and environmental conditions, including overall company strategy, product line length, market orientation, top management attitude toward line pruning, austerity of the regulatory context, and rate of technological change. The results also show that formalization enhances the procedural rationality of elimination decisions, and leads to customer-sensitive implementation strategies. This paper is the first attempt to link service elimination decision-making with structural characteristics of organizational decision-making. The results yield important managerial implications and point at useful directions for future research.