Organizational structure and design Essay Example | Topics and Well Written Essays - 2000 words

Organizational structure and design - Essay Example Organizational structure refers to the division of labor and the methods of coordination, communication, work flow, and power-sharing that exist in an organization. It is the formal arrangement of jobs within an organization. An organizational structure reflects the organization's culture and power relationships. Organizational design is the process of creating and modifying organizational structures. Organizational structures are frequently used as tools for change. Structures establish new communication patterns and align employee behavior with the corporate vision. The two fundamental processes or ingredients in organizational structure:Coordination: When groups divide work among themselves, it is required to co-ordinate their efforts towards the same objectives. Coordination is achieved through various mechanisms like informal communication, formal hierarchy and standardization.Span of control refers to the number of employees who can be effectively and efficiently managed by a s upervisor. The span of control has an inverse relationship to the number of layers of hierarchy. The presence of informal communication and standardization can widen the span of control by reducing the need for direct supervision. A wider span of control is ideal when employees perform similar tasks or when the work teams are self-directed and possess specialized knowledge. It helps in reducing overhead costs and puts the top management in direct contact with the needs of the customers. Larger organizations that depend on hierarchy for coordination develop taller structures. 2) CentralizationCentralization is the concentration of decision-making activities around a particular location, generally the top management. In a small organization, the founder takes most of the decisions himself but as the organization grows, organizations tend to become decentralized and decision-making authority is spread throughout the organization. 3) Formalization Formalization is the degree to which jobs within an organization are standardized and the extent to which employee behaviour is guided by rules and procedures. A low degree of formalization means that there are fewer restrictions on how employees do their work. Formalization exists in old companies and large organizations, and is encouraged by external influences like government safety regulations and strict accounting practices. Formalization increases efficiency but may reduce organizational flexibility in case of a non-routine situation which requires customized action. Mechanistic and organic structures McDonald's has a mechanistic structure, which means that it has a rigid and tightly controlled structure, and is characterized by a narrow span of control and high degree of formalization and centralization, and hence all tasks are well defined and can only be altered with the permission of the top management. A company with an organic structure is highly flexible and adaptive, which is characterized by a wide span of control, decentralized decision making, little formalization and an open communication network. An organic organization has a fluid team-based structure, in which the tasks vary according to the needs of the situation. Thus, a mechanist structure is only suitable in stable environments with routine tasks. 4) Departmentalization Departmentalization, also called the organizational chart, specifies how employees and their activities are grouped together. Hence, it is the process of grouping activities into departments. Division of labour creates specialists who need coordination. This coordination is facilitated by departmentalization. There are five types of departmentalizati