Companys Employment of the Correct Type of Organizational Structure - Term Paper Example

Organisational Structure and the Contingencies of Size, Technology and Structure Impact upon It Introduction Organisational structure describes the procedures that are used to decide on the different levels of authority in a business organisation. Organisational structure includes the description of each task or responsibility in an organisation, and the personnel that are tasked with overseeing the different responsibilities. A corporation or even small business enterprise will clearly delineate its organisational structure in the hope of achieving its long-term as well as short-term objectives. A corporation can use different kinds of organisational structure. Some of these include the functional structure, the divisional structure, and the geographical organisational structure. The divisional type of organisational structure is usually implemented in corporations or businesses that have distinct functional units. The geographical model, on the other hand, is mostly implemented by multinational corporations with branches in different nations. The functional model is created to correspond with each job’s responsibilities within an organisation. Categories of Organisational Structure There are different corporate factors that can be improved with a company’s employment of the correct type of organisational structure. Some of these include: Centralisation- This factor has to do with an organisation’s system of hierarchy. In most corporations, there are supervisors, senior executives, managers, operating officers, and the president of the corporation or its chief executive officer (Dessein and Santos 2006). Job Descriptions- In the formation of an organisation’s internal structure, the creation of job descriptions, when the best type of structure is used, can contribute towards the implementation of corporate goals as well as the individual progress of employees. For organisations to become successes, it is necessary for them to realise internal equity. Salary- Implementing the correct organisational structure can also help companies to be able to determine the right salary ranges for different levels of jobs (Dessein, Garicano and Gertner 2010). This is because the establishment of the structure allows for the consideration of different salary ranges. This ensures that the allocated salaries correspond with financial budgets as well as corporate financial goals. Expansion- The use of the correct organisational structure allows for an organisational to be able to expand and develop further (Gomez-Mejia, Balkin and Cardy 2008). This expansion could be in form of additional operational divisions, and management levels. The use of the correct type of organisational structure can benefit a business greatly. In terms of managerial influence, for instance, the use of the wrong organisational structure can result in weak management. This will further adversely affect productivity as the bad decisions made by a senior executive have a rippling effect as they are transmitted to junior levels, resulting in negative outcomes even in the most simple of tasks (Greson and Drazin 2007). The use of the most suitable organisational structure is also important because it prevents structural flaws. The use of the wrong organisational structure will inevitably result in communication flaws because information is not well transmitted. It could also cause serious delays in communication in big organisations where the orders from the executive management do not reach the middle management in good time. This will also negatively affect productivity. The use of the wrong organisational structure can also hamper or discourage workers’ productivity (Ticoll 2004). This is because the use of the wrong structure results in a ‘bottle-neck’ situation where corporate bureaucracy stops the progress of ideas (OReilly and Tushman 2004). For instance, if a worker has a good idea and sends a suggestion to the management, the lack of clear channels for communicating due to a backlog of requests could delay the discovery and implementation of the suggestion- which would also adversely affect productivity (Jacobides 2005). A good organisational structure will also be central to the further development or advancement of a corporation because it will sustain open communication and coordination channels as well as a strong internal structure. Varieties of Organisational Structure There are different factors that are used to determine the organisational structure that a company will employ. In cases where the company in question is relatively small in size, a formal structure may not be needed as the personnel will be able to meet on a regular basis. In regards to a large organisation, however, there are usually numerous decisions that have to be made in different operational levels. This means that the corporation has to have a system in which it allocates different responsibilities for assorted functions. For any company, the most fitting organisational structure will depend on its revenue, workforce, location of its business, technological systems being used, and size (Lumpkin and Dess 2004). Organisational structure has evolved over the years in nations such as the United States where different theories on the subject were formed. The thriving economy that was experienced in 20th century America helped to create the background in which many structural theories were formed. When business industry first shifted to mass production, innovative business scholars such as Henri Fayol and Frederick Taylor came up with business principles which would ensure that companies operated with the greatest efficiency (Omidi 2007). Max Weber’s principles of bureaucracy in industry were also studied and used. Max Weber emphasised on the importance of ascribing power or responsibility to actual positions within organisations instead of to the personnel that were entrusted with those jobs (Hansen and Nohria 2004). Taylor’s business theory of scientific management was also considered to be one of the most important theories in the determination of organisational structure. Henri Fayol’s business principles, which emphasised on the importance of authority, task specialisation, chain of command, and job separation, were intended to support the use of the vertical structure in organisations. The use of Organisational Structure in Different Organisations In the business environment, different organisations use different kinds of structures. One commonly used type of organisational structure is the formal or traditional type of structure. This structure is characterised by the existence of functional departments, high job specialisation, centralised authority, and narrow control spans. In companies that make use of bureaucratic structures, there is a propensity to emphasise on task specialisation even as the company develops further (Daft 2007). This means that managers are tasked with the responsibility of determining the factors that will be used to group jobs into different divisions. For instance, all accounting jobs in a company can be put in a single department. In such vertical organisational structures, it is the top management that will be tasked with the responsibility of making final decisions. A informal organisational structure is more decentralised and allows for decision-making responsibilities to be distributed across the board. How Size impacts on Organisational Structure Companies use organisational structures to determine their procedures of communication. This is done through the use of different strategies, regulations, and policies which affect every person within the organisation. Small organisations and big corporations will use different policies and regulations to achieve communication objectives. Small or average sized companies do not generally have big and complex structures (Najafbeygi 2011). In addition, the business entrepreneur in such firms can perform all the necessary duties, or may hire a small staff to do so. Big corporations have many more diversified tasks which are overseen by a large workforce. This means that the larger corporations will need a more complex outline for their organisational structure. Another reason for more sophisticated organisational structures is the existence of numerous workers who are skilled in different levels. In organisations where there are specialised operations, there is a need for the use of the traditional organisational structure. The size of an organisation will inevitably affect the type of organisational structure that is used because increased size is usually marked by formalisation and increased specialisation initiatives in a corporation (Collis, Young and Goold 2007). This means that there will be the recurrence of operations within the company- which is a reality that makes standardisation processes more suitable. There are other ways in which size affects organisational structure. In big organisations, employees are affected in different ways from the workers of small enterprises. Employees of large business corporations tend to protect themselves from the effects of their complex environments by subdividing into different departments such as marketing or production (Scott and Davis 2007). This means that size can affect an organisation’s operations both in terms of vertical as well as horizontal differentiation, which is a structural quality. When small or average sized organisations grow larger or develop, their structures are usually compelled to change in order to accommodate the changes that are happening. In all businesses, structural complexity results from the specialisation of corporate operations (Mihm, Loch, Wilkinson, Dennis and Bernardo 2010). The specialisation process in an organisation is inevitably accompanied by extra man power and more in-depth divisions of labour. Large business corporations usually create hierarchical structures that are meant to further improve control and supervisory functions, formalise workplace behaviour, and implement output standardisation. Big organisations also tend to have larger business units in different departments. When corporate positions are specialised, divisions in departments are more likely to be further differentiated in order for them to be more easily manageable. This essentially proves that when operations are streamlined for more efficiency in large organisations, it is likely that there will also be bigger departmental units to oversee all operations. Another characteristic of large organisations is the repetition of duties (Nazem 2010). In many big corporations, there are likely to be the predictability of repeated behaviors. This makes it easier for the organisation to make use of formalisation of procedures. How Technology impacts on Organisational Structure The 21st century has seen an increase in technological advancements in the business sector. Technology has resulted in the increase of business knowledge, skills, and the use of more efficient computerised services. This increase in technology has forced organisations to implement new learning systems and use improvisations in order to make the most of the new development opportunities (Majidi 2011). This is a function that benefits the formation of the correct organisational structure. Different types of organisational structures are created to make it easier for organisational personnel to deal with complexities, handle uncertainties, and synchronise inter-dependent organisational duties or tasks (Nasurdin, Ramayah and Yeoh 2006). The very aspects of interdependence and complexity are characteristic of modern technology. To cope with technological advancements, many big businesses today are invested in the implementation of structural flexibility. In any small or large corporations, different types of technology can be employed to improve the business. They could introduce simple operations such as the utilisation of personal computers or purchase state-of-the-art machinery to make the production process more efficient (Rajan and Wulf 2006). Either way, this introduction of technology would be accompanied by significant changes in organisational structure. According to Brews and Tucci (2004) a business enterprise’s size will always affect its choice of corporate structure. For example, large firms such as multinational corporations that employ between 2,000 and 100,000 tend to have more regulations to observe, increased work specialisation, and vertical as well as horizontal differentiation. According to a research documented by Alonso, Dessein and Matouschek (2008) there are special relationships between an organisation’s size and its production runs. This means that it could actually be claimed that an organisation’s effectiveness is usually tied to the way in which its structure corresponds with its level of technological advancement. In the majority of large organisations, there are three types of technologies that demonstrate different levels of complexity. These include unit production, mass production, and process production. Usually, more routine technology practices are indicative of mechanistic or standardised types of organisational structures. However, business corporations that make use of technologies that cannot be described as being routine are more likely to implement organic organisational structures. Conclusion Organisational structures mainly serve to improve the co-ordination of tasks as well as improve communication between different work levels in organisations. However, the fact is that it cannot be claimed that there is one particular structure that best ensures that organisations meet their corporate objectives. The best way for organisations to ensure that they use their preferred organisational structure well is through creating informal or formal mechanisms that can handle any potential coordination issues. Examples of formal mechanisms are retreats, periodic staff meetings, standard operating procedures, interdepartmental task forces, and corporate regulations. Informal mechanisms include organisational or corporate design, and staff parties or lunches. References Alonso, R., Dessein, W. & Matouschek, N. (2008) ‘When does coordination require centralisation?’ The American Economic Review, vol. 98, no. 1, pp. 145–179. Brews, P.J. & Tucci, C.L. (2004) ‘Exploring the structural effects of internet-working’, Strategic Management Journal, vol. 25, no. 5, pp. 429–452. Collis, D.J., Young, D. & Goold, M. (2007) ‘The structure, size, and performance of corporate headquarters’, Strategic Management Journal, vol. 28, no. 4, pp. 383-405 Daft, R.L. (2007) Organisation theory and design, Thomson/South-Western, New York. Dessein, W. & Santos, T. (2006) ‘Adaptive organisations’, Journal of Political Economy, vol. 114, no. 5, pp. 956-995. Dessein, W., Garicano, L. & Gertner, R. (2010) ‘Organising for synergies’, American Economic Journal: Microeconomics, vol. 2, pp. 77-114. Greson, C. & Drazin, R. (2007) ‘Equifinality: functional equivalence in organisation design’, Academy of Management Review, vol. 22, pp. 403-428. Gomez-Mejia, L.R., Balkin, D.B. & Cardy, R.L. (2008) Management, McGraw-Hill-Irwin, Boston. Hansen, M.T. & Nohria, N. (2004) ‘How to build collaborative advantage’, MIT Sloan Management Review, vol. 46, no. 1, pp. 22–31. Jacobides, M. G. (2005) ‘Industry change through vertical disintegration: how and why markets emerged in mortgage banking’, Academy of Management Journal, vol. 48, no. 3, pp. 465-498. Lumpkin, G.T. & Dess, G.G. (2004) ‘E-business strategies and internet business models: how the internet adds value’, Organisational Dynamics, vol. 33, no. 2, pp. 161–173. Majidi, A. (2011) ‘The effect of organisational structure on performance of the police training department’, Journal of Managers Training, vol. 7, no. 12, pp. 78-85. Mihm, J., Loch, C., Wilkinson, H., Dennis, H. & Bernardo, A. (2010) ‘Hierarchical structure and search in complex organisations’, Management Science, vol. 56, no. 5, pp. 831-848. Najafbeygi, R. (2011) Organisation and management, Islamic Azad University Publication, Tehran, Iran. Nasurdin, M.A., Ramayah, T. & Yeoh, C. B. (2006) ‘Organisational structure and organisational climate as potential predictors of job stress: evidence from Malaysia’, International Journal of Commerce & Management, vol. 16, no. 2, pp. 116-129. Nazem, F. (2010) ‘The relationship between organisational climate and productivity of managers in the relief committee and the appropriate model of management’, Journal of Educational Leadership and Management, vol. 11, no. 3, pp. 112-120. Omidi, A. (2007) ‘The relationship between organisational structure and creative staff managers of the physical education organisation’, Management Journal, vol. 6, no. 14, pp. 45-51. OReilly, C. A. & Tushman, M. L. (2004) ‘The ambidextrous organisation’, Harvard Business Review, vol. 82, no. 4, pp. 74–82. Rajan, R.G. & Wulf, J.M. (2006) ‘The flattening firm: evidence from panel data on the changing nature of corporate hierarchies’, Review of Economics & Statistics, vol. 88, no. 4, pp. 769-773. Scott, W.R. & Davis, G.F. (2007) Organisations and organising: rational, natural, and open system perspectives, Pearson, Upper Saddle River, NJ. Ticoll, D. (2004) ‘Get self-organised’, Harvard Business Review, vol. 82, no. 9, pp. 18–20. Read More