Before delving deep into a discussion of the factors which affect organizational design and structure, it may help facilitate the discussion if we were to firstly describe the fundamental connotations relative to the terms which we hope to expound. Put simply, we need to firstly appreciate the implication and meaning of organizational design and structure.
On the one hand, organizational structure refers to the manner by which certain group, of any nature and established for whatever purpose, arranges its people and jobs in view of the need to accomplish its slated goals. On the other hand, organizational design, while largely related to organizational structure, pertains to the manner in which an organization chooses the best possible and most appropriate components and culture of the above-said structure for greater efficiency.
The two terms, one may correctly observe, are patently distinct: the former touches on the concrete system of doing things, while the latter deals with the adoption of strategies that can make a structure work well; the former pertains strictly to the structure itself, the latter to the components constituting such structure. But in ways more than one, it is not without good reasons to suppose that the two terms overlap in their meanings.
For one, both design and structure fundamentally pertain to the appropriate conduct of organizational affairs; both organizational design and structure, it must be further argued, aim at framing intelligent ways to have itself operate in a manner being both effective and efficient. In other words, both organizational design and structure are conceived and formulated by companies so as to come up with system that can generate targeted results as well as desirable outcomes.
Factors that Affect Organizational Design and Structure
Before a company implements these systems of controls, coordinates and frameworks, there are already certain forces that come into play at the onset of determining the very design and structure which an organization adopts. Surely, we can identify a myriad of distinct but related factors to such end.
But for the specific purpose of this paper, it merits noting at least three of these factors are noteworthy and evident: the size and workforce of the company, the strategies it hopes to adopt, and the technologies available at its disposal.
First, the size and composition of the workforce impinge upon a significant influence in the creation or articulation of a company’s structure, as well as in choosing the strategies pertinent to effective company operation. This, perhaps, is one most controlling force which informs the subsequent adoption of structures necessary to have a company operate.
Herein it is necessary to understand that company size not only represents the sheer number of human workforce which a company employs, but also of the capitalization and range of base-operation which it seeks to operate with. A large steel-producing company, for instance, may very well adopt an organizational structure that sees through the creation of processes aimed at, quite evidently, yielding greater produce.
Among others, they would delineate a well-defined chain-of-command, definition of functions/tasks and their neat separation thereof, departmentalization of its complex system, and creation of specialized functions and oversight committees, among others. Under normal circumstances, a typical organizational structure involves the reasoned definition of the tasks of its leaders (such as president, vice-president, board of directors), implementers (such as managers and supervisors) and the grassroots workers.
But the general rule of thumb defining the adoption of a structure lays in this trend: the larger the organization, the more bureaucracy is needed; the smaller the organization, the more organic structure is permitted (Organizational Structure, n.d.). The concept seems self-explanatory. Large companies, since they require more complexities, necessitate more control, while small companies, since they can be managed easier, can allow for greater latitude of freedom and flexibility. Briefly, two strains of structural philosophies come into play in this contention – the mechanistic vs. the organic approaches.
Under the mechanistic approach, a large organization moves towards defining neatly the complexities involved in the operation, centralizing its decision-making component, and adopting a highly hierarchic fixed-duties framework for the same. Meanwhile, an organic approach of organizational structure bears the marks of “low complexity” and “less formalization” of duties, as well as a perceptibly decentralized decision-making processes operative within the organization (Organizational Structure, n.d.).
In view of the foregoing, it helps to argue that organizational design is affected by a company’s size as well. Large companies usually lean towards adopting a more functional approach to implementing organizational design. A functional design, if we may define, has something to do with the development of “task specialization” (Organizational Structure, n.d.). This design goes well with the adoption of a more bureaucratic and mechanistic organizational structure.
Meanwhile, smaller companies may choose a “networked or virtual” structure in that such model can allow more room for less-defined interaction from among the workforce (Organizational Structure, n.d.). If a company is therefore large – being that it is a complex network of workforce and products – it may require a functional design. Conversely, if an organization’s size falls under the medium or small-size category, it may allow for a more flexible structure within it.
Next, company strategy is another factor determining the nature of organizational structure and design. By strategy, we mean the specific courses of action being conceived in view of a company’s desired outcome. It varies depending on the company’s “line of product” and “cost-estimation” (Organizational Structure, n.d.). Strategy affects structure insofar as it either broadens or limits the possibilities in respect to achieving slated goals.
For instance, when a company is engaged in single product line, say shoes, it is presumed that its organizational structure is commensurate to the range of the market it aims to serve. This means that the set-up of the organization can meet the demands of the market it aims to maintain. If and when the same company decides to broaden its line of products, say venturing on various clothing lines on top of its shoe-production outfit, chances are, such move would generate correlative effects to the company’s structure.
Among others, the broadening of the sales and marketing divisions are to be expected. And this means more functions, as well as more workforce; more decision-makers, more overseers. Whereas before, all the company’s sales and marketing endeavors are singly focused on selling a single line of product, the introduction of new lines of product would meanwhile necessitate broadening its sales strategy.
By inference, any change of strategy breeds a collateral change in structure. And this basic rule of thumb applies not only in respect to the expansion of the structure, but also to the limitation and reduction of the same. This is most seen especially nowadays, when economic slowdown forces many companies either to reduce their base-operation or merge their ventures with other companies.
It seems needless to point that companies whose operations have been cut due to the economic crunch would witness a drastic change in their respective organizational structures to accommodate its increasingly depleting resources. Gone perhaps are the days when a company employs a director for sales on top of other local sales managers.
Gone too are the days when senior accountants would have separate sets of staff for its disbursements, from its revenues or collections. Surely, a key issue during an economic turmoil is to discern appropriate strategies for survival; and where strategies are meant to put up with the drastic reduction of operation costs, streamlining of company structures tend to follow suit.
The same goes true for organizational design. Existing strategies, we can safely assume, can likely influence the conduct of affairs of a given company. Under normal circumstances, organizations can employ either a “functional” or “divisional” approach to implementing company structure (Organizational Structure, n.d.). A functional approach, as previously noted, entails the development of a rigid system of task delineation, where each employee is defined by its specific job description.
The divisional approach meanwhile pertains to the process of distributing the goals and tasks to each department or division. Under this scheme, divisions, and not people, are the one’s defined by a rigid task-definition. Where resources allow, a company may take the liberty to adopt a divisional approach to organizational design. This can greatly enhance creativity of employees despite being susceptible to redundancy of tasks.
Where resources are low however, company may strategize to limit creativity and monitor redundancy; to such end, a functional approach becomes more appropriate. Once more, the crux of the matter lays in the fact that company strategy is crucial in the determination not only of concrete organizational structure, but also of the specific designs to implement it.
Last but not least, briefly we need to mention that the nature of technologies available at the disposal of any company is likewise a controlling factor that affects organizational structure and design as well. Technology, we have to admit, is not only able to facilitate the completion of certain tasks, but also (however disadvantageous to the concept of human workforce) is able to bring about changes within the organizational structure and/or of a company in question. In a more bureaucratic organization, technology is used to facilitate production.
For instance, a soda company may require many types of technologies to facilitate the production of massive amounts of their products, for an equally massive public consumption. If we take this as an example, the “mass production” and “routine” operation model is going to be adopted (Organizational Structure, n.d.). At least in respect to this structure, the organizational design demands lesser supervision from key functions. By way of contrast, we can take a company engaged in clothing business as another example.
Under normal circumstances, this company – or any company of the same nature –would employ technologies that facilitate “unit production and non-routine tasks”; being that their clients much too often require products that are tailored fit to their needs (Organizational Structure, n.d.). Thus, the organizational structure that is created out of this exigency requires more supervision and greater latitude for rigorous management.
By way of conclusion, this paper ends with a thought that affirms its initially slated central argument: i.e., that there are factors which significantly affect an organization’s adoption of structure and design. Such factors may come in myriad of forms and types.
The discussions hereinabove developed however did focus on at least three of these kinds: the size of the organization, the strategies that it hopes to adopt, and the technologies available at its disposal. First, size is a fundamental factor in determining the structure of an organization. If an organization is extensive both in terms of its workforce and line of business, the more bureaucracy is needed; the smaller its size, the more organic it can become.
Second, strategies also count as key factors that affect organizational structure and design. Specifically, strategies in respect to determining the extent of operation vis-à-vis a company’s existing financial resources are critical aspects that must be considered. Lastly, it was briefly pointed that existing technologies, because they facilitate the completion of organization’s goals, also impinge upon changes in its structure and design.
“Organizational Structure”. (n.d.). Retrieved 06 January 2009, from <http://www.sbea.mtu.edu/smgoltz/ba3700/OrgStructure.html>.