An organizational structure formally dictates how jobs and tasks are divided among and coordinated between individuals and groups within a company. Module 14 – Organizational Structure in your textbook identifies and describes the key factors in designing an organization’s structure, including work specialization, chain of command, span of control, centralization of decision making, formalization, business environment, strategy, technology, size, and organizational form. It also points out some of the pitfalls inherent in restructuring and describes how to manage them.
Following are key elements of organizational structure:
Work Specialization—the way in which the tasks in an organization are divided into separate jobs. Highly specialized jobs, where workers do only one kind of task, may be efficient, but workers will lack flexibility and job satisfaction.
Chain of Command—deals with reporting relationships within an organization, capturing the flow of authority down through the levels of the organization. Modern organizations may have very complex chains of command, with people reporting to two or more managers
Span of Control—represents how many people report to a given manager. Narrow spans of control allow for close working relationships, but can significantly increase labor costs, and cause employees to become resentful of being too closely supervised. Current research suggests that a moderate span of control is best for an organization’s productivity, but spans of control in organizations have increased significantly in recent years, creating flatter structures. Small spans of control create “tall” organizational structures, while large spans of control create “flat” structures.
Centralization—shows where decisions are made in the organization. Centralized—managers at the top of the organizational chart make decisions. Decentralized—managers at the bottom of the organizational chart make decisions
Formalization—refers to the number of rules and procedures that are used to standardize behaviors and decisions; companies that have a lot of rules are formal, those with fewer rules, less formal. Formalization is a necessary coordination mechanism when organizations want to deliver a standardized product or service.
All of the above elements can be combined to paint a picture of two different types of organizations:
Mechanistic—Efficient, rigid, standardized, these companies thrive in stability. They have a structure that relies on formalization, a hierarchical chain of command, work specialization, centralization of decision-making, and narrow spans of control.
Organic—Flexible, adaptive, outward-focused organizations that thrive in dynamic environments. They have structures that rely on low levels of formalization, weak or multiple chains of command, low levels of work specialization, and wide spans of control.
Most organizations fall somewhere between the two types, and whether or not a type is effective depends on the environment of the organization.
Organizational design is the process of creating, selecting, or changing the structure of an organization. Factors that influence Organizational Design include:
Business Environment, which consists of customers, competitors, suppliers, distributors, and other factors external to the firm. Stable environments don’t change rapidly, and they are more suitable to mechanistic designs. Dynamic environments change rapidly, and they are more suitable to organic designs.
Company Strategy describes the organization’s objectives and goals and how it will capitalize on its assets to make money. Low cost producers rely on selling products at the lowest possible cost and being as efficient as they can, often taking a mechanistic approach. Differentiators focus on providing high quality or unusual products and adapting to their environment quickly, often taking an organic approach.
Technology includes the method by which an organization transforms inputs into outputs. Research suggests that the more routine a technology is, the more mechanistic a structure should be.
Company Size – the larger an organization becomes, the more likely it will be to have a mechanistic design.
Instructions
Provide thorough responses to the following questions. Your paper should be at least (2) double-spaced pages, include paragraph headings for each of the three assessment questions, and be written in APA format. An APA formatted template is provided.
1. Why do the elements of structure, such as work specialization, formalization, span of control, chain of command, and centralization, have a tendency to change together? Which of the five do you feel is the most important?
2. Which is more important for an organization: the ability to be efficient or the ability to adapt to its environment? What does this say about how an organization’s structure should be set up?
3. Which of the organizational forms described in this chapter do you think leads to the highest levels of motivation among workers? Why?
