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Organizational structures - Essay Example

Organizational structures developed from the ancient times of hunters and collectors in tribal organizations through highly royal and clerical power structures to industrial structures and today’s post-industrial structures. The typical hierarchical arrangement for lines of authorities, communications, rights and duties of an organization. Organizational structure determines how the roles, power and responsibilities are assigned, controlled, and coordinated, and how information flows between the deferent levels of management.

A structure depends on the organization’s objectives and strategy. In a centralized structure, the top layer of management has most of the decision making power and has tight control over departments and divisions. In a decentralized structure, the decision making power is distributed and the departments and dullness may have different degrees of independence. A company such as Proctor & Gamble that sells multiple products may organize their structure so that groups are divided according to each product and depending on geographical area as well.

The Importance of Organization Structure A number of writers have pointed out the Importance of an organization’s structure ND the relationship between It and an organization’s size, strategy. Technology, environment and culture. Integer (1989) has written extensively and significantly on the importance of organizational structure. Miller (1989) has explored the importance of configurations of strategy and structure. Burns and Stalker (1961) concluded that if an organization is to achieve maximum performance then its structure must fit with or match the rate of change In its environments.

Handy (1990, 1993) has discussed the Importance of culture In relation to organizational design and structure and the need for new organizational forms. Upscale, Melanin and Tioga (2000, p. 197) consider ‘design is the invisible hand that brings organizations to life and life to organizations. ‘ Further, organizational structure and design are closely entwined (Maybe, Salaams & Storey, 2001) with many aspects of human resource management. Thus structure has a key role in the all important human dimension of an organization.

Too often the importance of Organization structure is overlooked and Miller (1989) points to a gap in the literature whereby the content of corporate or business strategies has not been widely considered in relation to structure. One of the most important aspects of a manager’s role is the design of Organizational structures, yet this is often a neglected responsibility (Sense, 1994). Master (1996) argues that Organizational design Is not well understood and traditional management education corporate design.

The impact of the floury of corporate restructures that took place in the sass and sass, discussed later in this paper, supports this view. I would suggest that this lack of genuine understanding is a serious shortcoming. Definition of Structure Mullions (1993) and Maybe, Salaams & Storey (2001) describe the structure of an Organization as the pattern of relationships between roles in an Organization and its different parts. They see the purpose of this structure as serving to allocate work and responsibilities in order to direct activities and achieve the Organization’s goals.

Structure enables managers to plan, direct, organize and control the activities of the organization (Mullions, 1993, Maybe, Salaams & Storey, 2001). Here is a traditional view of Organizational design that uses principles derived from classical and scientific Management. A non traditional approach is taken by Upscale, Millennia and Tioga (2000, p. 197). They consider the role of architects and the principles they use to create buildings that provide ‘(1) structural integrity (sound buildings), (2) functionality (space appropriate for its intended use), and (3) aesthetic appeal. Using these principles an architect is able to work with the client in order to create a structure that is an integral and facilitating aspect of the life of the people who move in and around it. Thus architectural approaches can offer us a good model with which to consider Organization design principles. I would define an Organization’s structure as the architecture both visible and invisible which connects and weaves together all aspects of an Organization’s activities so that it functions as a complete dynamic entity.

One simple approach is to consider how an Organization’s structure is described when represented diagrammatically, which most is often shown in the Organization chart. This provides useful insights into the underlying design principles. It will not show informal structures, but this is not the focus of this paper, except where they are an integral part of the design, as in for example, design Principles derived from complexity. The 20th Century -Traditional way Henry Payola is credited by many as being the founder of modern management theory and practice.

Writing at the beginning of the 20th century he advocated an Organization structure that was centralized, functionally specialized and hierarchical, in which everything had its specific place. Management was viewed as being all about planning, organizing, forecasting, co-coordinating and controlling. Others built on Payola’s work, which Morgan (1986) claims provided the foundation of management theory in the first half of the last century, and which is still much in use up to the present day.

Also in the early 20th century Frederick Taylor drawing on his understanding of traditional science and scientific method devised a theory of management – scientific management. He advocated the use of ‘scientific’ methods of components. This was considered the most effective way of operating a production process and his methods achieved their apogee in the Ford motor car production line process. Thus the basic structure of many large Organizations in the 20th century was founded on linear, segmented, hierarchical design principles as typified by Figure 1 .

The larger the Organization the larger the structure and the more sub divisions. It was an approach to Organization design that reflected the classical scientific worldview as did the early management theorists Figure 1 . Traditional Organization Chart / Structure During the mid 20th century there was a trend for Organizations to create huge corporate structures, often composed of many varied and different businesses, for example, the Hanson Trust, Triangular House, Milliner, and NON in the UK and General Electric in the USA (Maybe, Salaams & Storey, 2001).

In the public sector too, huge bureaucracies were created with the nationalization of the public utilities after World War II and the creation of the INS in 1948. The management of these huge Organizations required a complex multilayered structure with many sub divisions. ‘Tall structures were created with as many as 20 plus levels between the chief Executive and the shockproof operative. Managerial control of employees at all the Multiple levels was based on a mixture of direct command and budgetary Responsibility. Hierarchy, command and control were the governing principles of Employee management. But by the last decades of the 20th century, however, the trend for larger and larger structures was over. Almost every Organization experimented with some kind of structural change process (Shaken et al, 1995). Large conglomerates were broken up and large bureaucracies slimmed down as Organizations sought to become more effective and flexible (Maybe, Salaams & Storey, 2001). Companies merged and demurred, made acquisitions or sold them off and experimented with a range of approaches designed to make them more effective and responsive to a rapidly changing world.

During this period Organizations were awash with notions of delivering, right / downsizing and business process re-engineering and for a time turns to shareholders were at record levels (Willis ,2001). Downsizing was used by many companies as a way of adjusting their structures in order to be fitter and more effective. Large Organizations with many bureaucratic aspects like Kodak, IBM and General Motors restructured in this way (Maybe, Salaams & Storey, 2001). This and the often accompanying trend for outsourcing expert knowledge.

Collusion- Thomas and CEO (1991) report that in many of these slimmer Organizations there were issues of work overload, increased work stress, lack of vision, poor decision making, corporate in fighting and so on. Further, this approach proved to be an unsatisfactory one, not only because of the immediate social costs and the loss of experience and valuable skills, but because many Organizations failed to capitalize on the restructuring and implement new supportive systems (Maybe, Salaams & Storey, 2001). They changed the structure of the Organization but not in such a way as to improve its overall long term effectiveness.

This apparent lack of insight concerning the importance of the relationship between structure and internal and external systems and human behaviors displays a restricted understanding of the principles of Organization design. Business process re-engineering was another approach which many adopted during this period as an effective way of improving efficiency and removing bureaucratic structures. But, Uniform and Hendricks (1996) point out, many companies became obsessed with cost cutting and associated staffing reductions and did not consider how best to reorganize and restructure.

Also some chief executives used the process to rid themselves of cumbersome bureaucratic chains of command but failed to cede control Maybe, Salaams & Storey (2001, p. 1 58) describe this period as one of ‘apparent chaos’ as Organizations also tried out approaches based on networking, outsourcing and notions of virtual forms of Organization. However, they provide an analytical framework which I shall use to describe the different types of structure that still ordinate. It offers four main types of structure: bureaucracy, devotionals structures, strategic business units and ‘De-structured’ forms.

Organizational – 21st Century At the end of the 20th century some less traditional forms of organization structure began emerge as evidenced by the ‘De-structured’ forms described by Maybe, Salaams & Storey (2001). Handy (1990) observes that the old mechanistic systems are everywhere breaking down. Maybe, Salaams & Storey (2001) talk of the emergence of a new paradigm for organizational form which seeks to replace the rigidity and cumbersome nature of the traditional form. Shaken et al (1995) report on a change in design principles that amounts to a major shift.

NEW SUCCESS FACTORS size speed role clarity flexibility specialization integration control innovation Design Principles for Organization Success The shift in design principles recognizes that size (large), role clarity (compartmentalizing and levels of authority), specialization (subdivisions of role / asks and tight functionalism) and control, all typical of the traditional type of organization structure shown in Figure 1 are no longer effective. From a complexity paradigm perspective the shift is encouraging and the new success factors resonate well with complexity principles.

But is this shift in design principles truly a deep level, second order change or transformation where mental models have shifted? Or is it a superficial change (Morgan, 1993) that has arisen as a learning response to past weaknesses and where nothing of real significance has happened? I would suggest hat for most large organizations it is probably the latter. They have amended or adjusted their design principles but have not thought about organization design in a ground breaking Way that is truly innovative. Organizational Structure Types Pre-bureaucratic structures Pre-bureaucratic (entrepreneurial) structures lack standardization of tasks.

This structure is most common in smaller organizations and is best used to solve simple tasks. The structure is totally centralized. The strategic leader makes all key decisions useful for new (entrepreneurial) business as it enables the founder to control growth and development. They are usually based on traditional domination or charismatic domination in the sense of Max Weeper’s tripartite classification of authority Bureaucratic structures Weber (1948, p. 214) gives the analogy that “the fully developed bureaucratic mechanism compares with other organizations exactly as does the machine compare with the non-mechanical modes of production.

Precision, speed, UN ambiguity, strict subordination, reduction of friction and of material and personal costs- these are raised to the optimum point in the strictly bureaucratic administration. “[5] Bureaucratic structures have a certain degree of standardization. They are better suited for more complex or larger scale organizations, usually adopting a tall structure. The tension between bureaucratic structures and non-bureaucratic is echoed in Burns and Stalker’s distinction between mechanistic and organic structures. The Hibernia characteristics of bureaucracy are: 1.

Clear defined roles and responsibilities 2. A hierarchical structure 3. Respect for merit Post-bureaucratic The term of post bureaucratic is used in two senses in the organizational literature: one generic and one much more specific. [7] In the generic sense the term post eructation is often used to describe a range of ideas developed since the sass that specifically contrast themselves with Weeper’s ideal type bureaucracy. This may include total quality management, culture management and matrix management, amongst others. None of these however has left behind the core tenets of Bureaucracy.

Hierarchies still exist, authority is still Weeper’s rational, legal type, and the organization is still rule bound. Hecklers, arguing along these lines, describes them as cleaned up bureaucracies,[8] rather than a fundamental shift away from bureaucracy. Gideon Sundae, in his classic study of culture management at ‘Tech’ argued that ‘the essence of bureaucratic control – the formalization, codification and enforcement of rules and regulations – does not change in principle….. It shifts focus from organizational structure to the organization’s culture’.

Another smaller group of theorists have developed the theory of the Post-Bureaucratic Organization. Provide a detailed discussion which attempts to describe an organization that is fundamentally not bureaucratic. Charles Hecklers has developed an ideal type, the post- bureaucratic organization, in which decisions are based on dialogue and consensus ether than authority and command, the organization is a network rather than a hierarchy, open at the boundaries (in direct contrast to culture management); there is an emphasis on meta-decision making rules rather than decision making rules.

This sort of horizontal decision making by consensus model is often used in housing cooperatives, other cooperatives and when running a non-profit or community organization. It is used in order to encourage participation and help to empower people who normally experience oppression in groups. Still other theorists are developing a resurgence of interest in complexity theory and organizations, and have adaptations. For instance, Miner et al. (2000) studied how simple structures could be used to generate improvisational outcomes in product development. Their study makes links to simple structures and improviser learning.

Other scholars such as Jan Irvin and Giggliest, and Nelson Repenting revive an older interest in how structure and strategy relate in dynamic environments. Functional structure Employees within the functional divisions of an organization tend to perform a specialized set of tasks, for instance the engineering department would be staffed only with software engineers. This leads to operational efficiencies within that group. However it could also lead to a lack of communication between the functional groups within an organization, making the organization slow and inflexible.

As a whole, a functional organization is best suited as a producer of standardized goods and services at large volume and low cost. Coordination and specialization of tasks are centralized in a functional structure, which makes producing a limited amount of products or services efficient and predictable. Moreover, efficiencies can further be realized as functional organizations integrate their activities vertically so that products are sold and distributed quickly and at low cost. For instance, a small business could make components used in production of its products instead of buying them.

Divisional structure Also called a “product structure”, the divisional structure groups each organizational function into a division. Each division within a divisional structure contains all the necessary resources and functions within it. Divisions can be categorized from different points of view. One might make distinctions on a geographical basis (a US division and an EX. division, for example) or on product/service basis (different products for different customers: households or companies).

In another example, an automobile company with a divisional structure might have one division for Subs, another division for subcompact cars, and another division for sedans. Each division may have its own sales, engineering and marketing departments. Matrix structure The matrix structure groups employees by both function and product. This structure can combine the best of both separate structures. A matrix organization frequently uses teams of employees to accomplish work, in order to take advantage of the strengths, as well as make up for the weaknesses, of functional and decentralized forms.

An example would be a company that produces two products, “product a” and “product b”. Using the matrix structure, this company would organize functions within the company as follows: “product a” sales department, “product a” customer service department, “product a” accounting, “product b” sales department, “product b” customer service department, “product b” accounting department. Matrix structure is amongst the purest of organizational structures, a simple lattice emulating order and regularity demonstrated in nature. Verses the cross- functional aspects of the project. The functional managers maintain control over their resources and project areas. Balanced/Functional Matrix: A project manager is assigned to oversee the project. Power is shared equally between the project manager and the functional managers. It brings the best aspects of functional and productized organizations. However, this is the most difficult system to maintain as the sharing of power is a delicate proposition. Strong/ProJect Matrix: A project manager is primarily responsible for the project.

Functional managers provide technical expertise and assign resources as needed. Organizational circle: moving back to flat The flat structure is common in small companies (entrepreneurial start-ups, university spin offs). As companies grow they tend to become more complex and hierarchical, which leads to an expanded structure, with more levels and departments. However, in rare cases, such as the examples of Valve Corporation, Eighth, Inc. And signals, the organization remains very flat as it grows, eschewing middle managers.

All of the aforementioned organizations operate in the field of technology, which may be significant, as software developers are highly skilled professionals, much like lawyers. Senior lawyers also enjoy a relatively high degree of autonomy within a typical law firm, which is typically structured as a partnership rather than a hierarchical bureaucracy. Some other types of professional Organizations are also commonly structured as partnerships, such as accountancy companies and GAP surgeries. Often, growth would result in bureaucracy, the most prevalent structure in the past.

It is still, however, relevant in former Soviet Republics, China, and most governmental organizations all over the world. Shell Group used to represent the typical bureaucracy: top-heavy and hierarchical. It featured multiple bevels of command and duplicate service companies existing in different regions. All this made Shell apprehensive to market changes, leading to its incapacity to grow and develop further. The failure of this structure became the main reason for the company restructuring into a matrix.

Struck is one of the numerous large organizations that successfully developed the matrix structure supporting their focused strategy. Its design combines functional and product based divisions, with employees reporting to two heads. Creating a team spirit, the company empowers employees to make their own decisions and train them to develop both hard and soft kills. Some experts also mention the multinational design, common in global companies, such as Procter & Gamble, Toyota and Milliner.

This structure can be seen as a complex form of the matrix, as it maintains coordination among products, functions and geographic areas. In general, over the last decade, it has become increasingly clear that through the forces of globalization, competition and more demanding customers, the structure of many companies has become flatter, less hierarchical, more fluid and even virtual. One of the newest organizational structures developed in the 20th century is team. In mall businesses, the team structure can define the entire organization. Teams can be both horizontal and vertical.

While an organization is constituted as a set of people who synergies individual competencies to achieve newer dimensions, the quality of organizational structure revolves around the competencies of teams in totality. For example, every one of the Whole Foods Market stores, the largest natural- foods grocer in the US developing a focused strategy, is an autonomous profit centre composed of an average of 10 self-managed teams, while team leaders in each store and each region are also a team. Larger bureaucratic organizations can benefit from the flexibility of teams as well.

Xerox, Motorola, and Demolisher’s are all among the companies that actively use teams to perform tasks. Network Another modern structure is network. While business giants risk becoming too clumsy to protract (such as), act and react efficiently, the new network organizations contract out any business function that can be done better or more cheaply. In essence, managers in network structures spend most of their time coordinating and controlling external relations, usually by electronic means. H&M is outsourcing its looting to a network of 700 suppliers, more than two-thirds of which are based in low-cost Asian countries.

Not owning any factories, H&M can be more flexible than many other retailers in lowering its costs, which aligns with its low-cost strategy. The potential management opportunities offered by recent advances in complex networks theory have been demonstrated including applications to product design and development, and innovation problem in markets and industries. Virtual Virtual organization is defined as being closely coupled upstream with its suppliers and downstream with its customers such that where one begins and the other ends means little to those who manage the business processes within the entire organization.

A special form of boundary less organization is virtual. Heeders, Deadlier, Hansson, and Love (1999) consider the virtual organization as not physically existing as such, but enabled by software to exist. The virtual organization exists within a network of alliances, using the Internet. This means while the core of the organization can be small but still the company can operate globally be a market leader in its niche. According to Anderson, because of the unlimited shelf space of the Web, the cost of reaching niche goods is falling dramatically.

Although none sell in huge numbers, there are so many niche products that collectively they make a significant profit, and that is what made highly innovative Amazon. Com so successful. Key Elements in Organizational Design 1 . Work Specialization jobs. The main idea of this organizational design is that an entire Job is not done by one individual. It is broken down into steps, and a different person completes each step. Individual employees specialize in doing part of an activity rather than the entire activity. 2. Differentiations It is the basis by which Jobs are grouped together.

For instance every organization has its own specific way of classifying and grouping work activities. There are five common forms of differentiations: a. Functional Differentiations. It groups Jobs by functions performed. It can be used in all kinds of organizations; it depends on the goals each of them wants to achieve. Different aspects on this type of differentiations: Positive Aspects Negative Aspects Efficiencies from putting together similar specialties and people with common skills, knowledge, and orientations. Coordination within functional area In-depth specialization

Poor communication across functional areas Limited view of organizational goals b. Product Differentiations. It groups Jobs by product line. Each manager is responsible of an area within the organization depending of his/her specialization Allows specialization in particular products and services Managers can become experts in their industry Closer to customers Duplication of functions c. Geographical Differentiations.