Organizational Structure and Design

The way an organization is designed and structured can have significant effects on its members and its ability to execute its strategy. In this module we will try to understand those effects and analyze the behavioral implications of different organizational designs.
An organizational structure defines how job tasks are formally divided, grouped, and coordinated. According to Robbins and Judge (2014) managers need to address six key elements when they design their organization’s structure:
Work specialization—the extent to which activities are subdivided into separate jobs.
Departmentalization—the basis on which jobs will be grouped together.
Chain of command—the people to whom individuals and groups report.
Span of control—the number of individuals that a manager can direct efficiently and effectively.
Centralization and decentralization—the locus of decision-making authority.
Formalization—the extent to which there will be rules and regulations to direct employees and managers.
A simple, but classical, classification of organizational designs focuses on mechanistic versus organic design. The mechanistic design is characterized by extensive departmentalization, high formalization, a limited information network, and centralization. The organic design is characterized by low formalization, flat hierarchy and the use of cross-hierarchical and cross-functional teams, free flow of information, and decentralization. Each design has advantages and disadvantages. For example, a mechanistic design is good for keeping the costs of standardized products or services down, but it inhibits innovation and creativity. Read this short summary comparing mechanistic and organic organizational structures:
Mechanistic vs. Organic Organizational Structure: Contingency Theory (2014) BusinessMate.Org http://www.businessmate.org/Article.php?ArtikelId=44
A more sophisticated look at organizational structure considers the different ways that work is organized and coordinated to best fit the organization’s mission and objectives. Common forms are divisional structures, functional structures, team-based or process structures, and flexible structures. The key learning here is that the structure selected should match the organization’s strategy—or it will be very difficult for the organization to be successful.
The following reading explains these different structures, reviews their advantages and disadvantages, and suggests the strategic considerations for when each should be used. Though this article is on the older side, it is still right on target.
Anand, N. & Daft, R. L. (2007). What is the right organizational design? Organizational dynamics, 36, 329-344. retrieved from http://faculty.cbpp.uaa.alaska.edu/afgjp/PADM610/What%20is%20the%20Right%20Organization%20Design.pdf
There are newer names for the types of structures discussed by Anand and Daft in the section of their article titled Era 3. This updates the terminology in the article above, though all of the forms Anand and Daft discuss are still common today. The virtual organization and the boundaryless organization are among these new structures. The virtual organization is a relatively small, core organization that outsources major business functions. The boundaryless organization has teams instead of departments, and aspires to have as flat a hierarchy as possible.
Organizational Culture
Have you ever observed how some organizations just seem to be shining stars in their fields, even if the product or service they produce is not that much different from their competitors? Have you noticed that it seems that they are the ones who are the most successful? Did you ever wonder why? Read the following material on organizational culture for some insights into what culture is, what it does, how it is formed, and how it is taught to newcomers in the organization. This reading is available in the Trident University Library.
Denison, D., Hooijberg, R., & Lane, N. (2012). Building a high-performance business culture. Leading Culture Change in Global Organizations: Aligning Culture and Strategy. (pp. 1-23), Hoboken, NJ, USA: John Wiley & Sons.
This material on organizational culture type may be particularly helpful as you prepare your Module 4 SLP assignment:
McNamara, C. (2000) Organizational Culture. Adapted from the Fieldguide to Organizational Leadership and Supervision. Free Management Library. http://managementhelp.org/organizations/culture.htm
Combining Culture and Structure
Designing an organization’s structure involves more than just shifting boxes and lines on an organizational chart. Mootee (2012) offers several critical tests when considering the adequacy of designing an organization’s structure:

1. The Future Test: Does the design reflect the needs for how a company plans to compete in the future?
2. The People/Culture Test: Does the design adequately reflect the motivations, strengths and weaknesses of employees?
3. The Competitive Advantage Test: Does the design allocate sufficient management emphasis to the strategic priorities?
4. The Power Test: Does the design provide the desired allocated power to groups/individuals that is linked to the strategic value of the unit or functions?
5. The Agility Test: Is the design adaptable and swift to respond to future changes? (p. 1)

It makes intuitive sense that organizational culture and organizational structure should affect each other. Indeed, the way work is coordinated, the way hierarchies are designed, and the way communications are channeled should align with the norms and values of the people who work there. If they do not, there will be tension and conflict between the way people feel comfortable working and the structures that force work to be done in a different way. The following article is an excellent and compelling analysis of why management should consciously insure that culture and structure support each other so that the organization can function as smoothly and effectively as possible.
Janicijevic, N. (2013). The mutual Impact of organizational culture and structure. Economic Annals 58(198). Retrieved from http://www.doiserbia.nb.rs/img/doi/0013-3264/2013/0013-32641398035J.pdf