Organizational Structure

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An ‘organisation’ is a business or industrial organisation set up with an objective to perform a manufacturing activity or to provide a service etc.

The term ‘Structure’ is highly abstract and illusive. However its existence is real and affects everyone in the organisation. It is the pattern in which various parts or components are inter-related or inter-connected. It establishes relationships among various positions and activities in the Organisation and because such positions are held by individuals, it prescribes relationships among people in the organisation.

“The organisation structure determines the shape of the enterprise. According to which the administrative and organisational decisions and developments take place.”

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According to Lounsbury Fish – “Organisation is one of the forces that affect the goal of the organisation. It is designed in such a manner as to serve as an instrument to accomplish the social goal. The extent to which an organisation is able to achieve its goal is, to a great extent, determined by its structure.

So a structure is developed to give the shape to a tentative idea at the initial stage. In the beginning the structure is very simple because the size of organisation is small. As the organisation expands it becomes complex and need planning and a systematic approach.”

Learn about:

1. Meaning and Definition of Organizational Structure 2. Concept of Organizational Structure 3. Elements 4. Steps 5. Factors 6. Forms

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7. Approaches 8. Organizational Procedures 9. Influence of Culture 10. Impact of Situational and Organizational Variables on the Organizational Structure Model.

Organizational Structure: Meaning, Definitions, Forms, Elements, Steps, Factors, Approaches and Dimensions


Contents:

  1. Meaning and Definitions of Organizational Structure
  2. Concept of Organizational Structure
  3. Elements of Organizational Structure
  4. Steps of Organizational Structure
  5. Factors of Organizational Structure
  6. Forms of Organizational Structure
  7. Approaches of Organizational Structure
  8. Dimensions of Organizational Structure
  9. Influence of Culture of Organizational Structure
  10. Impact of Situational and Organizational Variables on the Organizational Structure Model

Organizational Structure – Meaning and Definitions: Given by Lounsbury Fish, Alfred D. Chandler and Eastman Kodak 

It is a formal pattern of linkages between different jobs and departments within the organisation. It is usually depicted in an organisational chart as a wiring diagram which also indicates the reporting relationships. Formal here, implies the formal relationship created by the management which is specific and applicable to a particular function. Informal relationships which are formed because of commonality in interests also exist in organisations.

Enacting Strategy for Structure:

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The most important question that arises during the discussion relating to the relationship between strategy and structure is, “which comes first, strategy or structure.” Alfred D. Chandler, business historian, was the first to ask this question. In his book, ‘Strategy and Structure’, he has written about the precedence of strategy over structure. He studied the top twenty US firms and concluded that strategy governs structure. In other words, whenever organisations change their strategy, a change in structure usually follows –

Business environment is dynamic and there is a need to adapt to the changing environment. Companies devise various strategies to adapt to the changing business environment and structure plays a vital role in the implementation of these strategies. The problem here is that structures cannot be changed immediately when there is a change in strategy.

Hence, organisations have now realised the need for flat and flexible structures. Alfred Chandler’s work has been criticised by other management thinkers on the ground that it is not comprehensive. The relationship between structure and strategy is complex and hence, needs a broader view.

Structure may follow strategy but in many cases, changes in structure had changed or altered strategy. For example, Eastman Kodak was losing a lot of business to Fuji Photo between 1981 and 1985. The problem lay with the Eastman Kodak’s structure which did not allow it to implement a strategy whereby, it could compete with Fuji.

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In order to become more competitive, Eastman Kodak changed its structure, which in turn prompted a change in strategy. Eventually, Kodak began to regain its lost market share. Hence, whether structure follows strategy or vice-versa, a misfit between the two should be avoided.

According to Lounsbury Fish – “Organisation is one of the forces that affect the goal of the organisation. It is designed in such a manner as to serve as an instrument to accomplish the social goal. The extent to which an organisation is able to achieve its goal is, to a great extent, determined by its structure.

So a structure is developed to give the shape to a tentative idea at the initial stage. In the beginning the structure is very simple because the size of organisation is small. As the organisation expands it becomes complex and need planning and a systematic approach.”

The term ‘Structure’ is highly abstract and illusive. However its existence is real and affects everyone in the organisation. It is the pattern in which various parts or components are inter-related or inter-connected. It establishes relationships among various positions and activities in the Organisation and because such positions are held by individuals, it prescribes relationships among people in the organisation.

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Definition- “The organisation structure determines the shape of the enterprise. According to which the administrative and organisational decisions and developments take place.”

It refers to the determination of entire organisation system of an enterprise. The policies of an enterprise determine the limits within which the enterprise has to work and progress. The organisation structure may be compared with an outline map of a building. The organisation structure is a frame work; it is a scheme of relationship in action. March and Simon has said -“Organisation structure consists of only these aspects or pattern of behaviour in the organisation that are static and change very slowly.”


Organizational Structure – Concept

An ‘organisation’ is a business or industrial organisation set up with an objective to perform a manufacturing activity or to provide a service etc. For this it employs various resources, employs managers and other operating employees. Now the next stage is how these are organised for locational and organisational set up, managerial set up, etc.

Thus, organisation structure is to decide and organise the locational, organisational and managerial set up in order to achieve the objectives of the organisation.

There are various aspects about the organisation structure, which will be better understood with the following living example of an organisation structure pertaining to a reputed organisation.

Here, we outline the details of the organisational set up of a reputed ‘manufacturing’, ‘engineering’ and ‘marketing’ organization:

1. Organisation is a limited company registered under the Companies Act, 1956 and is an Indian company. It has a corporate office.

2. Its activities are-

i. Manufacturing

ii. Self marketing of its products and services

iii. Engineering procurement and construction (EPC)

3. It has its objective-

i. To have sustained growth and prosperity

ii. To achieve market as a leader of market for its products and services

iii. To achieve the sustained growth and prosperity through satisfaction of customers –

a. Better quality and its continuous improvements

b. Optimum cost and

c. Better service to customers

d. Taking care of its employees for their welfare and growth.

4. It has its main manufacturing units at various locations.

5. It has also its special products manufacturing units

6. It has also few subsidiary units attached to it

7. It has its-

i. Marketing organisation at a central place for its head office and with many regional and branch sales offices spread over the country and also in a few places abroad.

ii. It has its in-house consultancy as well as design and engineering unit.

iii. It also has its large research and development unit with a central place for its main centre and with its sub-centres located at all its manufacturing units.

iv. It has its management and training institutes.

v. It has its –

a. Safety division

b. Environment protection and management division both at the central location as well as located at all units.

The above is the organisational structure for its various units at various locations.

As regards management organisation structure following details are available:

(i) It has its Board of Directors

(ii) It has a full time Chairman

(iii) It has functional/board level directors positioned at its corporate office.

(iv) It has a Chief Executive Officer of the rank of Managing Director/Director at all its manufacturing units and other units as stated in the organisational set up and its locations.

(v) It has officers at various levels at its corporate office and at its units.

(vi) It has created for each function a wing/department to be looked after by officers of various levels both at its corporate office and also at all its units.


Organizational Structure – Elements

The term “structure” is one of the main cognitive categories of each science, including Organization and Management. For instance, in Sociology we focus on the structure of social groups, referring to their internal diversity and their role in the analyzed population. In Physics, e.g., the crystal structure is examined, with regard to the arrangement of atoms or ions in the unit cells of a crystal.

J. Zieleniewski defines the structure as all the relations between the elements of a certain whole, or between the elements and the whole, viewed from a particular angle and for this reason referred to as the structure of the whole.

Its ideas follow that a structure may be considered from different point of views, which makes it possible to distinguish a number of structures from the same object, e.g., the age structure, vocational structure, etc. The concept of structure is defined similarly by M.J. Hatch, who explains that it refers to the relations between the parts of the organized whole.

Thus, the organization’s structure may be analyzed from the point of view of the current business climate or from the point of view of the events taking place in the organization.

Coordination mechanisms aim to integrate the organization’s operations. The larger the organization and the more complex tasks performed by it, the more significant these mechanisms are.

The major coordination mechanisms include:

i. Regulations and procedures,

ii. Schedules,

iii. Horizontal communication.

Three types of relations may be present in the organization perceived as a socio-technical system:

i. Between people,

ii. Between people and objects,

iii. Between objects.

The concept of the social structure of the organization is understood as the relations between the social elements of the organization, such as- work posts, a department or a division.

According to M. Weber, the organization’s social structure is formed as a result of:

i. Division (distribution) of power within the organization,

ii. Division of work between the organization members,

iii. Coordination and integration of the organization elements and actions of its members.


Organizational Structure – 9 Main Steps

The following steps are necessary for the setting up of a proper organizational structure in an office:

1. Identifying the work to be performed – It is necessary to identify all the activities to be performed to achieve organizational objectives. The activities are classified into various categories. The total activities are divided into a number of functions and sub-functions. The various activities are to be performed in a coor­dinated manner to achieve the target.

2. Division of work – The total work-load of the organization is to be divided into various functions and sub-functions. These functions may be called purchasing, production, correspondence, accounting, adver­tising, financing, staffing, marketing, etc. The main object of the division of work is to specialize individuals into different functions.

3. Grouping of similar activities – It is essential to group similar activities. Thereafter, related activities are grouped together in one department. Each department is placed under the charge of a departmental man­ager. The activities relating to different functions are covered under different departments.

4. Assignment of duties – The next step is to appoint suitable persons for various jobs. Each group of activ­ities is assigned to a position most suited for it. The assignment of duties should be appropriate, taking into consideration the qualification and experience of the individual. For example, the purchase manager is assigned the duties relating to purchase of goods, the accounts manager relating to accounting, and so on.

5. Delegation of adequate authority – Delegation of authority is an important managerial practice of get­ting things done through others. It enables managers to distribute their work-load to others. It is difficult for a manager to fulfill his responsibilities without adequate authority. Delegation lessens the burden of top exec­utives and facilitates quick decisions relating to various matters.

6. Defining responsibility relationship – It is necessary to define the relationship between two or more per­sons who have been working together for a common goal. Each individual should know who is his superior, from whom he has to take instructions, and to whom he has to report. Similarly, a superior should know what authority he has over his subordinates.

7. Providing proper physical facilities – It is essential to provide proper infrastructural facilities (such as quality materials, proper machines, a good plant layout, etc.) to individuals for getting their work done in the best possible manner. The absence of any such factor may disrupt the production and adversely affect the morale of the employees.

8. Proper coordination – It is necessary to coordinate the activities of different individuals and groups so that they do not overlook the overall organizational goal. Coordinated efforts of individuals can ensure the attain­ment of organizational goals in an efficient manner.

9. Proper communication – Every organization has its own channels and methods of communication. Effective communication is vital for success in management. The channels of communication may be formal, informal, upward, downward, or horizontal. Integration in all activities can be achieved through a proper communication system.


Organizational Structure – 5 Major Factors

An efficient organisation must have a healthy structure.

While taking a decision on structure we must take the following factors into consideration:

Factor # 1. Departmentation:

The division of main functions of an enterprise is the first step of an organisation structure. The classification is termed as Departmentation or Departmentalisation.

The departmentalisation is a classification of functions of an enterprise which may be done on the basis of either of the following:

(a) Functional Basis

(b) Process Basis

(c) Regional Basis

(d) Production Basis

(e) Market Basis

(f) Numerical Basis.

Factor # 2. Determination of Operating Responsibility:

After the classification responsibilities are determined there is a positive correlation between the responsibility and authority. Without an authority, responsibility is rendered meaningless and without responsibility authority is a barren land on which nothing could grow.

Of course responsibility and authority flow from general policies already laid down but a decision like centralisation and decentralisation can be taken here and then within the frame work of the policies and programme responsibility and authority may be determined.

Factor # 3. Facilitating Units:

After the determination of responsibility and authority follows a decision on “Units” in which the whole enterprise is classified.

“Units” – with the help of which the organisation Acts and Attains its objectives, may be classified and organised either on the basis of –

(a) A department or

(b) A section or

(c) A committee.

Before taking a decision on the basis of the formation of facilitating units –

(i) The need for and extent of co-ordination,

(ii) The span of management,

(iii) The equality of functions, and

(iv) Proper attention on all activities are considered and then a decision to form and organise a unit is taken.

Factor # 4. Provision for Top Management:

Since a corporation is an artificial person therefore, a decision with regards to the person should have to be taken carefully. The top management generally represents this artificial and legal person.

The Top management as per the requirement of the laws may either be – (a) the Board of Directors, or (b) the Managing Director or (c) the Chief Executive alone.

Factor # 5. Continuity or Perpetuity:

The organisation structure once taken shape should continue for a longer period without sacrificing its flexibility character. The factors which have to be taken into consideration before taking a final structural decision lead to a balanced development of the enterprise.


Organizational Structure – 4 New Forms

The distinctions between management and labor have become blurred. There is a shift from individual to joint accountability because more group members have the same information for decision-making. More work is being performed in task force team and project-oriented work groups. Organizations are becoming more flexible, adaptive and porous. New forms of superior-subordinate relations and rotating leadership roles require different managerial skills.

There are four new forms of interest:

1. Unbundled corporations

2. Network organizations

3. Cellular organizations, and

4. Respondent organizations.

Form # 1. Unbundled Corporations:

Unbundled corporations employ a portfolio or a conglomerate approach towards their peripheral business units. Units are retained or divested as per their profitability and risk criteria. An example is Johnson & Johnson which has 190 autonomous operating companies in 51 countries and has had over 100 consecutive years of profitability. In unbundled organizations, many of the traditional support services of bureaucracies are outsourced to consultants and vendors.

Some of the HR functions like training, compensation and payroll can be outsourced to vendors in order to redeploy resources to more profitable alternatives.

Form # 2. Network Organizations:

One of the driving forces for network organizations is the need to outsource the activities that other companies, consultants, or joint ventures partners can perform better or more quickly. The term virtual organizations are used to describe similar types of organizations in which there is heavy reliance on outsourcing and a critical need for speed. Membership in network organizations may include companies from throughout the world.

The managerial requirements in network organizations include:

(i) Referral skills,

(ii) Partnering skills, and

(iii) Relationship management.

Form # 3. Cellular Organizations:

A form organization consisting of a collection of self-managing firms or cells held together by mutual interest is a cellular organization. A cellular organization works on the principle of self-organization, member ownership and entrepreneurship. Each cell within the organization not only shares common features and purposes with its sister cells but also function independently.

Cellular organizations are characterized by small, autonomous groups that largely self-govern and can grow, reproduce and form relations with other units. The cellular organization has an inward focus for knowledge exchange within teams or units coupled with boundary spanning across cells and in to the market place in order to gain access to external sources of knowledge while at the same time harboring inside knowledge for creative and competitive benefits.

It has more knowledge exchange within subunits. This form is most suited for research forms where more varied approaches to knowledge development and access are needed across the sub units.

Form # 4. Respondent Organizations:

The respondent organization is essentially an entrepreneurial corporation that exists by filling niches to supply customized services to unbundled corporations. In such corporations, decision-making is retained at the level of the central entrepreneurial figure. However these corporations have high failure rates. Some of the today’s Internet players are respondent corporations.


Organizational Structure – 3 Important Approaches: Process, Result and Decision 

Dr. P.F. Drucker, the management guru, identifies three types of analysis to be used while designing the corporate structure. These are- activity analysis, decision analysis and relation analysis. Other way is to talk in terms of approaches to organisational structure designing.

These are:

1. Process approach

2. Result approach and

3. Decision approach.

Approach # 1. Process:

The emphasis laid under process approach while designing an organisation structure, are- (a) Identification of various activities for implementing strategy. (b) Avoiding duplication in performance of activities. (c) Synchronised performance of all activities.

That is, different organisational structures or units may be created based on the activities to be undertaken, their relationships depending on the sequence of activities performed by these units, their relative position depending on the relative significance of the activities performed by them.

This process approach helps in improving the coordination of the functions that cut across several departments namely planning, budgeting and the like. However, this approach works well in similar organisations that focus on one or lesser number of related products. In case of increase in the size of the organisation or diversification in other fields, this approach is not suitable.

Approach # 2. Result:

Under conditions where strategy innovation is the basic need, this is the most suitable approach. This approach involves four steps in designing an organisational structure.

These are- (a) Business definition on the basis of potential areas of market Opportunities. (b) The Objectives that are to be attained are to be established, (c) Determining the requirements of skills that lead to success, (d) Determining the degree of authority depending on the degree of authority depending on the degree of decentralisation needed in decision-making.

This approach works well where the organisation has one or very few market opportunities. This structural design is to be structured on the basis of SBUs in case the organisation has several clusters of market opportunities that are uncommon yet the firms want to encash on them.

A SBU is thought as a clustering of discrete product or market units based on some significant common strategic elements. This approach makes available the diversified companies with an attractive rationale for organising what they do and for review the strategic performance of different such operating units.

Approach # 3. Decision:

This approach seeks answers to certain unique set of questions on the basis of which a structure can be designed.


Organizational Structure – 3 Main Dimensions: Specialization, Coordination and Formalization

The organizational procedures define the course of operations in the organization that is the division of activities and duties, the obligatory participation of their executors, the manner of conduct in relation to ensuing situations, as well as determining the information flow. The procedures which concern the manner of performing the particular individual functions or tasks are in the form of instructions, i.e., description of activities and the order in which they are to be carried out.

From the perspective of the organizational procedures in the business, its structure may be portrayed by means of three main dimensions which characterize its regulatory functions:

Dimension # 1. Specialization:

The manner and level of labour division within the business. The main feature of the organization’s structure constitutes the basic criterion of specialization. However, as organizations are complex, often in practice a lot of criteria is simultaneously taken into account.

These criteria are frequently hierarchized into ones of major, minor and little importance. Also, the criteria may coexist and lead to increased diversity of division of responsibility in the organization.

For instance, the functional divisions, such as financial or personal, may accompany the operational divisions separated with regard to the product or market criterion. In practice, it is necessary to select the specialization criterion at each management level.

Dimension # 2. Coordination:

Specified way of cooperation between the particular organizational units. In most businesses, hierarchy is responsible for modelling according to the coordination principle – the more or less flat pyramid of relationships.

The vertical superior – subordinate relationships are increasingly often accompanied by the horizontal relationships which merge the employees into teams, task and project groups responsible for introducing, permanently or temporarily, so-called horizontal managers (project manager, product manager).

Coordination may also be based on the information flow mechanisms and be independent from any structural solution. A simple procedure of coordinating operational relationships between various service teams, and also between the advanced planning and control system, may constitute such mechanism.

Mechanisms of this type increase the efficiency of the undertaken operations and the flexibility of the vertical and horizontal relations in the business. Thus, along with the structure, they form a lasting entirety, which is ultimately considered an information tool facilitating the decision-making process.

Dimension # 3. Formalization:

The degree of accuracy in the process of defining the functions and relationships. Many businesses draw up rules and regulations where they describe – in general or detailed account – the organization’s structure, the functions within, interrelations between particular organizational units, and often even the employees’ duties and scope of responsibility.

Formalization is a certain tool which ensures a temporary preservation of the framework of the organization’s operation. Two factors violate this mechanism: the external forces influencing the organization and forcing it to adapt structurally, and the internal forces, i.e., organization’s members who fight with each other in order to gain power. Due to the above reasons, many a time the organization charts are the expression of one’s intention, instead of the illustration of the actual state. Formalization may emphasize the tasks which should be performed by people employed on different posts.

Then, it remains within the mechanistic logic labour division, in which everybody is perceived as an executor operating in the strictly limited area and is prohibited (under threat of violating the logic of the entire organization) from crossing the set borders. Formalization may also underline the organization’s mission and its goals.

At that time, the responsibility of each organization’s member for accomplishing its overall goals is defined. Formalization understood in this way is closer to the logic of the organic vision of the organization, which assumes that within the defined responsibility each organization’s member is free to choose the tasks necessary to achieve their mission.

Figure 4.4 presents the business’s “bureaucratic space” with regard to interrelations of the above mentioned dimensions.

The distance from the point of coordinate origin means the growing level of the structure’s bureaucracy. For example- S1 structure is characterized by loose coordination, a low level of formalization and highly advanced specialization. Such an arrangement of qualities may present the structure of the consulting or construction office. In turn, the characteristics of S2 structure are: close coordination, high level of formalization and the average level of specialization. It may be a structure of, e.g., a public service company.

The level of the structure’s bureaucracy is expressed by its possibility and ability to adapt to the transformations occurring in the environment. The higher the level of bureaucracy, the lesser the flexibility and adaptiveness of the structure.

K. Mrela puts forward a proposal to define the organizational structure by means of five dimensions:

a. Configuration dimension which illustrates the structure of the organizational roles and posts, i.e., location, number and type of departments, units, work posts, as well as the management levels in the organization chart.

The measure of configuration is the level of vertical and horizontal division and location of the organizational roles and posts, defined by the following:

i. Accumulation (levels) of the structure, i.e., the span of control of the management levels between the person who directly performs the assigned task and the chief executive of the organization,

ii. Flattening of the structure, that is the number of parallel management departments (distinguishing the units and work posts within the departments) and the span of control at the particular management levels.

b. Centralization dimension which determines the internal structure of power in the institution that is allocating the decision-making powers necessary for attaining the organization’s goals at the particular hierarchy levels. Division of power is measured by the degree of concentration (or dispersion) or the degree of dependence of the particular levels in performing the organization activities.

c. Specialization dimension which is characterized by – resulting from the division of labour the degree of limiting the discretion (“narrowing”) of the organization members in performing the organizational tasks and duties.

This dimension is determined by the specific character of the functions and roles, the scope of organizational operations contracted out to the external entities, the separation of duties into particular departments, units and work posts (horizontal specialization) and the division of tasks in terms of superior – subordinate arrangement (vertical specialization).

d. Standardization dimension which determines how typical the operations and conduct are; it results from the system of uniform and respected practices adopted in the organization.

It comprises:

i. Standardization of procedures which regards the typical operations which regularly occur in the organization,

ii. Standardization of roles, which is understood as assigning a particular meaning to the roles by the organization, it also defines the scope of requirements – qualifications for the specific posts, possibilities of rewarding staff for fulfilling their official duties, etc.

e. Formalization dimension regards the system of models and regulations which restricts, norms and adapts the conduct in the organization. Formalization describes how both the integrity and the pattern of conduct in the organization are planned and regulated, for example in the company bylaws.

Formalization may be measured only by the range and the degree of accuracy and stringency of regulations concerning the behaviour of the particular organization members.

Figure 4.5 illustrates the model of the above presented multidimensional approach to analysis of the characteristics of the organizational structure.


Organizational Structure – Influence of Culture

A belief that structure is a popular and simple “mechanism” which requires only to be appropriately adapted to economic and technological conditions imposed on the organization is both false and hazardous.

The conducted research has indicated a considerable impact that the cultural differences in many countries have on the businesses’ organizational structures.

For example- the Japanese businesses are significantly different from the European ones, which, in turn, greatly differ from the African businesses. Also, considerable disparities occur between the European businesses themselves.

In many regions, and even neighbouring countries, the beliefs, social norms, lifestyles, that is the cultural values, are diverse. These differences can be observed in the way individuals and groups join into the businesses’ life and they perceive work relations.

Cultural differences originate in the history of a given country, its path of economic, social and cultural growth, as well as in its religion and beliefs.

Distinctness of different cultures is often found between the countries characterized by a new or old statehood, prevalence of the statutory or case law, Catholic or Protestant tradition – all above determinants have an influence on the businesses’ structures.

These structures are influenced, via culture, by the entirety of institutional factors, i.e., economic system (e.g. liberalism or interventionism), political system (democracy or authoritarianism), and administrative system (federalism or centralization).

Furthermore, they may also be affected by family upbringing or an education system. These institutions define the ways of establishing interpersonal relations which are subsequently transferred to work relations.

Following the example of American management, it is based upon the cultural values which are far from the generally accepted models. American business schools encourage competition among individuals, accepting the risk and striving for personal success.

These values constitute the main basis for the structure of a business which is divided up into profit-making centers and which adopts the management by objectives or by exceptions. The presented organization model is being portrayed in every fine book on Management as one that is possible to be implemented in any diversified business.

In Latin culture countries (Southern Europe, Latin America) the managers’ behaviour often causes the change of direction of the determinants’ order and the adopted relationship strategies (alliances or state monopolies), which enable the organization to be perceived as a protective cocoon, and not a tool for a market competitive battle and for risk-taking.

If cooperation is more beneficial than competition, structures of little diversification are preferred which are based on functions rather than on products. These structures should have a transparent, in terms of hierarchy, integration mechanism and a high level of bureaucracy.

In these countries respect and importance often rely on the individual’s formal competences (diplomas, membership in specific professional associations) rather than on their fine performance in the organization.

The structure is developed from the angle of defining the tasks which are to be done by the specialists, and not from the angle of objectives to be achieved by managers. Therefore, each manager becomes a master of a particular territory and should defend its borders.

The relations between these managers are defined by the hierarchy pyramid. Each horizontal information exchange poses a threat for the further operation of the organization as it violates the official business communication channels.

Any non-standard integration mechanisms (e.g. appointing product or project managers) are hardly understood and reluctantly accepted. The idea to double the communication channels in any form is regarded as heresy.

The inflexibility complicates the process of evolutional adaptation to the turbulent environment. In order to implement changes a rapid and shocking structural revolution is needed.

Japan is also struggling with implementing the universal structural models. The structure of the Japanese business management may seem to be highly centralized, however, in fact, the entire decision-making process is being carried out at the lower and middle level.

The roles assigned to the particular groups of organization members, as well as the specific goals to be attained and the types of rewarding, penalizing and motivating systems are precisely and accurately formalized. Given such a high level of formalization, the fact that there are no clearly marked borders of the particular divisions and departments is surprising.

This leads to great possibilities of communicating by alternative channels. Such an approach to the management system is both highly participatory and repressive. In case where every individual is strongly devoted to the set organization’s goals which have absolute priority over personal goals, this structure is limited to energy channelling.

There is no need to precisely assign particular areas to managers as it is done in the Latin countries, nor to create the structural mechanisms under pressure of individuals as in the American management. In Japan each individual naturally and totally spontaneously identifies themselves with the goals of the organization.


Organizational Structure – Impact of Situational and Organizational Variables on Organizational Structure Model

The model of the business organizational structure is influenced by several variables:

1. Strategy:

Strategy and structure ought to be interrelated. The organizational structure should follow from the strategy, which means that in case of a major change in the business strategy, its structure must be also modified.

2. Organization Size:

In the large businesses, the divisions of labour as well as the vertical and horizontal diversification are greater. In addition, there are more rules, regulations and practices than in a small business. It should be emphasized that this is not a linear dependence and that the impact of an organization size diminishes as the business is growing. Structure of a small business is relatively simple.

A manager is within easy reach of employees and he/she rarely delegates to them the decision-making powers. However, the organization’s growth requires including a middle level of responsibility between the manager and the lower-level employees, along with the functions assigned to it, and with its goals, methods and powers.

3. Technology:

The more routinized the technology, the more standard the structure is. According to J. Woodward, distinct relations between the size of production batches and the business structure are observed. The business efficiency is directly related to mutual adaptation of technology and structure.

The past experience leads to a conclusion that technology forces the business to divide tasks and to coordinate particular units which are responsible for their achievement. The diversity of activities and their mutual dependence allow for numerous possibilities of shaping the structural forms.

4. Environment:

Transforming the organizations into lean, fast-acting and flexible ones constitutes an example of the operation of the dynamic market forces, such as-

i. Growing competition,

ii. Fast advancement of innovation,

iii. Increasing customer demands,

iv. Growth of globalization processes, etc.

Environmental characteristics which influence the organizational structure allow the business to exist and to develop regularly.


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