Organizational structures Essay Example

management. Therefore, structure plays a significant role in the human dimension of an organization.

The significance of Organization structure is often ignored, as noted by Miller (1989) who points out a lack of attention towards the relationship between corporate or business strategies and structure in the literature. Designing Organizational structures is a crucial aspect of a manager's role, but it is often neglected (Sense, 1994). Master (1996) argues that there is a lack of understanding in Organizational design and that traditional management education focuses on corporate design.

In this paper, we will discuss the impact of corporate restructures in the 1990s and 2000s. This supports the notion that there is a lack of genuine understanding, which is seen as a significant shortcoming. According to Mullions (1993) and Maybe, Salaams ; Storey (2001), organizational structure refers to the pattern of relationships between roles and different parts that allocate work and responsibilities for directing activities and achieving goals.

The purpose of structure is to allow managers to plan, direct, organize, and control an organization's activities (Mullions, 1993, Maybe, Salaams & Storey, 2001). This article presents the traditional and non-traditional views of organizational design. The traditional view follows principles from classical and scientific management. Conversely, Upscale, Millennia, and Tioga (2000, p. 197) take a non-traditional approach by considering the role of architects and their principles in creating buildings that possess structural integrity, functionality, and aesthetic appeal. Architects collaborate with clients to develop structures that integrate into people's lives. Thus, architectural approaches provide a valuable model for understanding organization design principles. In my opinion, an organization's structure serves as its visible and invisible architecture that connects and integrates all

aspects of its activities to function as a dynamic entity.

One possible method is to examine how an Organization's structure is depicted diagrammatically, commonly seen in the Organization chart. This offers valuable understanding into the fundamental design principles. However, informal structures are not showcased in this paper, except when they are essential to the design, such as design Principles derived from complexity. Many credit Henry Payola as the pioneer of modern management theory and practice in the 20th Century's traditional approach.

At the start of the 20th century, Payola advocated for an Organization structure characterized by centralization, functional specialization, and hierarchy. Payola's view of management emphasized planning, organizing, forecasting, co-coordinating, and controlling. According to Morgan (1986), Payola's work laid the groundwork for management theory in the first half of the previous century, and it continues to be widely utilized today.

Frederick Taylor developed scientific management, a theory of management in the early 20th century. He applied traditional science and scientific method to different aspects of management, believing it to be the most efficient approach for production processes. The Ford motor car production line process exemplified the success of his methods. Consequently, many large organizations in the 20th century adopted linear, segmented, and hierarchical design principles as depicted in Figure 1.

The structure and number of sub-divisions in an organization are determined by its size. This design approach was influenced by the classical scientific worldview and early management theorists (see Figure 1). In the mid-20th century, organizations began to create large corporate structures with diverse businesses. Examples include Hanson Trust, Triangular House, Milliner, and NON in the UK, as well as General Electric in the

USA (Maybe, Salaams & Storey, 2001).

In the public sector, massive bureaucracies were created through the nationalization of public utilities after World War II and the establishment of the INS in 1948. These organizations required complex structures with multiple layers and divisions. They developed tall structures with up to 20 or more levels between the chief executive and the staff in charge. Managing employees at different levels involved a combination of direct orders and budgetary responsibility, following principles such as hierarchy, command, and control.

However, by the end of the 20th century, there was a shift away from larger structures. Most organizations underwent structural changes to improve efficiency and flexibility. Large conglomerates were fragmented and bureaucratic structures were streamlined to become more effective and adaptable in a rapidly changing world. These changes included mergers, demergers, acquisitions, sales, and various experimental approaches.

During this period, organizations were inundated with concepts such as delivering, right-sizing, and business process re-engineering. Shareholder returns reached record levels (Willis, 2001). Many companies turned to downsizing as a means of adapting their structures to become more agile and efficient. Kodak, IBM, and General Motors, which had numerous bureaucratic elements, reorganized using this approach (Maybe, Salaams & Storey, 2001). Additionally, there was a growing trend of outsourcing specialized knowledge.

The text states that in slimmer organizations, there were problems such as work overload, increased work stress, lack of vision, poor decision making, and corporate in fighting. This approach was unsatisfactory because it resulted in social costs and the loss of experience and valuable skills. Additionally, many organizations failed to take advantage of the restructuring and implement new supportive systems. Although they changed the structure

of the organization, it did not improve its long term effectiveness.

This limited comprehension of the principles of Organization design is evident in the apparent disregard for the significance of the relationship between structure and internal and external systems and human behaviors. During this period, many organizations also embraced business process re-engineering as a means of enhancing efficiency and eliminating bureaucratic structures. However, as Uniform and Hendricks (1996) note, numerous companies became overly fixated on cost reduction and staff reduction, neglecting the importance of effective reorganization and restructuring.

Some chief executives used the process to get rid of cumbersome bureaucratic chains of command, but failed to relinquish control. Salaams & Storey (2001, p. 158) describe this period as one of 'apparent chaos', as organizations also experimented with networking, outsourcing, and virtual forms of organization. However, they provide an analytical framework that I will use to categorize the different types of structure that still exist. Their framework includes four main types of structure: bureaucracy, devotionals structures, strategic business units, and 'De-structured' forms.

At the end of the 20th century, alternative forms of organizational structure began to appear, as described by Maybe, Salaams & Storey (2001) in their discussion of 'De-structured' forms. Handy (1990) notes that traditional mechanistic systems are breaking down everywhere. Maybe, Salaams & Storey (2001) discuss the emergence of a new paradigm for organizational form that aims to replace the rigidity and complexity of the traditional form. Shaken et al (1995) report on a significant shift in design principles.

NEW SUCCESS FACTORS size speed role clarity flexibility specialization integration control innovation Design Principles for Organization Success The traditional type of organization structure, shown in

Figure 1, incorporates elements such as size (large), role clarity (compartmentalizing and levels of authority), specialization (subdivisions of role / asks and tight functionalism) and control. However, these factors are no longer effective in today's context. The shift in design principles acknowledges this and emphasizes the importance of size, speed, role clarity, flexibility, specialization, integration, control, and innovation as the new success factors. This shift aligns well with complexity principles from a complexity paradigm perspective.

Is this shift in design principles a profound second order change where mental models have shifted, or is it merely a surface-level change (Morgan, 1993) that has arisen as a response to past weaknesses without any significant impact? For most large organizations, it is likely the latter. They have made adjustments to their design principles but have not approached organizational design in a truly innovative and ground-breaking manner. Pre-bureaucratic structures lack standardized tasks.

The centralized structure, commonly found in smaller organizations, is ideal for handling simple tasks. This structure is completely centralized, with the strategic leader making all key decisions. It is particularly beneficial for new businesses as it allows the founder to have control over growth and development. These structures are typically based on traditional domination or charismatic domination, as categorized by Max Weber's authority classification. Weber (1948, p. 214) aptly compares the fully developed bureaucratic mechanism to a machine in relation to other non-mechanical modes of production.

The strictly bureaucratic administration aims to achieve optimal precision, speed, lack of ambiguity, strict subordination, and reduction of friction and costs. Bureaucratic structures have a certain level of standardization and are more suitable for complex or large-scale organizations that usually adopt a

tall structure. The tension between bureaucratic and non-bureaucratic structures is similar to Burns and Stalker's differentiation between mechanistic and organic structures.

The Hibernia Characteristics of Bureaucracy Are:

• Clear defined roles and responsibilities
• A hierarchical structure
• Respect for merit

The term "post-bureaucratic" is used in two ways in organizational literature: a generic sense and a more specific sense. In the generic sense, it is often used to describe various ideas that emerged since the 1970s, which contrast with Weber's bureaucratic ideal. These ideas may include total quality management, culture management, and matrix management, among others. However, none of these ideas completely abandon the fundamental principles of bureaucracy.

Even though there have been advancements, hierarchies, rational authority, and rule-bound organizations continue to exist. Critics view these as enhanced bureaucracies rather than a complete break from bureaucratic systems. According to Gideon Sundae's well-known study on culture management at 'Tech', it is asserted that the fundamental aspect of bureaucratic control, which entails formalizing, codifying, and enforcing rules and regulations, remains unchanged in essence. However, the emphasis has shifted from organizational structure to the organization's culture.

The Post-Bureaucratic Organization is a concept proposed by another group of theorists. It describes an organization that is not bureaucratic in nature. Charles Hecklers has created an ideal type called the post-bureaucratic organization, which emphasizes decision making through dialogue and consensus rather than authority and command. This type of organization operates as a network rather than a hierarchy and has open boundaries, unlike culture management. Furthermore, it prioritizes meta-decision making rules over decision-making rules.

The consensus model of horizontal decision-making is widely used in

housing cooperatives, as well as other cooperatives and non-profit or community organizations. Its aim is to foster participation and empower individuals who often experience oppression in group settings. Moreover, there is a rising interest among theorists in complexity theory and organizations, resulting in different adaptations. Miner et al. (2000) investigated the utilization of simple structures to achieve improvisational outcomes in product development, thus linking simple structures to the learning process of improvisers.

Jan Irvin, Giggliest, and Nelson Repenting, along with other scholars, revive the previous fascination with examining the connection between structure and strategy in dynamic environments. Concerning functional structure, employees in particular divisions of an organization concentrate on executing specialized tasks. For instance, the engineering department is comprised solely of software engineers. This specialization brings operational efficiencies within each group but can also cause a lack of communication among different functional groups in the organization which may lead to slowness and inflexibility.

To summarize, a functional organization is well-suited for generating standardized goods and services on a large scale and at a low expense. This setup consolidates coordination and specialization, resulting in efficient and predictable production of a specific range of products or services. Moreover, functional organizations can enhance their efficiencies by vertically integrating their activities, facilitating the rapid and cost-efficient sale and distribution of products. For instance, instead of buying them externally, a small business may opt to produce its own components.

The divisional structure, also known as a "product structure," groups each organizational function into a division. Each division in this structure has all the necessary resources and functions contained within it. Divisions can be categorized based on geographical or product/service basis,

such as distinguishing between a US division and an EX. division or offering different products for different customers (households or companies).

In another example, an automobile company with a divisional structure could have separate divisions for Subs, subcompact cars, and sedans, each with their own sales, engineering, and marketing departments. The matrix structure combines employees by both function and product, utilizing teams to take advantage of the strengths and compensate for the weaknesses of functional and decentralized forms.

The matrix structure allows a company to organize its functions based on the products it produces. For example, a company producing "product a" and "product b" would have departments for sales, customer service, and accounting for each product. This structure is considered one of the purest organizational structures due to its simple lattice design that emulates order and regularity found in nature. Unlike the cross-functional aspects of projects, functional managers in this structure maintain control over their resources and project areas.

There are different types of matrix structures. In a balanced/functional matrix, a project manager is assigned to oversee the project, with power shared equally between the project manager and functional managers. This approach combines the best aspects of functional and productized organizations but can be challenging to maintain due to the delicate sharing of power.

In a strong/project matrix, the project manager takes on primary responsibility for the project.

Functional managers play a role in offering technical knowledge and allocating resources when required. In terms of organizational structure, the flat model is often seen in small companies like entrepreneurial start-ups and university spin offs. As companies expand and become more intricate and hierarchical, there is typically a

shift towards a more expanded structure with increased levels and departments. Nevertheless, there are exceptions where certain organizations, like Valve Corporation, Eighth, Inc., and Signals, choose to maintain a flat structure even as they grow larger, opting to eliminate middle managers.

All the mentioned organizations, including technology firms, law firms, accountancy companies, and GAP surgeries, operate in the field of technology. Software developers and senior lawyers are highly skilled professionals who enjoy a significant level of autonomy within their respective organizations. Law firms, generally structured as partnerships, provide a relatively high degree of independence for senior lawyers compared to hierarchical bureaucracies. Similarly, other professional organizations like accountancy companies and GAP surgeries are often structured as partnerships. In the past, growth often led to a bureaucratic structure being adopted.

Although still applicable in former Soviet Republics, China, and many governmental organizations worldwide, the Shell Group exemplified a traditional bureaucracy that was top-heavy and hierarchical. It consisted of multiple layers of command and duplicate service companies in various regions, causing Shell to be resistant to market changes and unable to expand and progress. The failure of this structure prompted the company to undergo a restructuring process and transition to a matrix organization.

The matrix structure developed by Struck is an effective strategy used by many large organizations. This structure combines functional and product divisions, with employees reporting to two leaders. Struck also promotes a collaborative environment, empowering employees to make decisions and providing training to develop various skills. This multinational design is common among global companies like Procter & Gamble, Toyota, and Milliner.

The structure described can be viewed as a more intricate version of the matrix,

since it ensures coordination between products, functions, and geographic areas. Over the past decade, it has become evident that globalization, competition, and demanding customers have led many companies to adopt flatter, less hierarchical, more fluid, and even virtual structures. One of the 20th century's newest organizational structures is the team, which can encompass the entire organization in small businesses. Teams can have both horizontal and vertical orientations.

The quality of organizational structure is determined by the collective competencies of teams. Whole Foods Market, the largest natural-foods grocer in the US, exemplifies this through its autonomous profit centers. Each store consists of approximately 10 self-managed teams, with team leaders at both the store and regional levels. Even larger bureaucratic organizations can find advantages in adopting a team-based approach.

Companies like Xerox, Motorola, and Demolisher's are actively using teams to perform tasks. Another modern structure is the network, where business giants risk becoming inefficient in their ability to act and react. In contrast, network organizations outsource any function that can be done better or cheaper. Managers in these structures mainly spend their time coordinating and controlling external relationships, often using electronic means. H&M, for example, outsources its production to a network of 700 suppliers, with the majority located in low-cost Asian countries.

H&M, without factories, has the advantage of being flexible in reducing costs, in line with its low-cost strategy. Recent advancements in complex networks theory have shown management opportunities for product design and development, as well as innovation challenges in markets and industries. A virtual organization is closely connected with both suppliers and customers, making it difficult for business managers to distinguish between the two in

terms of processes within the organization.

The virtual organization is a unique type of boundaryless organization. According to Heeders, Deadlier, Hansson, and Love (1999), it does not exist in a physical form but rather is enabled by software. The virtual organization operates within a network of alliances, utilizing the Internet. This allows the company to be globally active and become a market leader in its niche, even with a small core. Anderson states that the cost of accessing niche goods is significantly decreasing due to the unlimited space available on the Web.

Although not selling in large quantities, there are numerous niche products that, together, generate a significant profit. This is what contributed to the success of the highly innovative Amazon.com. Key Elements in Organizational Design include: 1. Work Specialization: instead of one individual completing an entire job, it is broken down into steps where different people specialize in completing specific parts. 2. Differentiation: grouping jobs based on a common basis.

Every organization has its own unique method of classifying and grouping work activities. These differentiations can be categorized into five common forms: 1. Functional Differentiations, which groups jobs based on the functions performed. This method can be applied in various types of organizations depending on their specific goals. Some positive aspects of this type of differentiation include efficiencies gained from combining similar specialties and individuals with shared skills, knowledge, and orientations, as well as improved coordination within the functional area. It also allows for in-depth specialization.

Poor communication across functional areas remains an issue. There is a limited understanding of organizational goals. Product Differentiation involves grouping jobs by product line, with each manager

being responsible for a specific area based on their specialization. This allows for expertise in specific products and services and brings managers closer to customers. However, it also results in duplication of functions. Geographical Differentiation is another factor to consider.