Business Fuction Report, Organizational Structures

This report discusses issues on organizational structures in relation to modern and traditional large corporations and is covered as follows:

Introduction

Societies and market-directed economic systems manage the use of scarce resources for the production and distribution of finished goods and services to consumers and provide labor for these activities. If this is to be done smoothly an organizational structure is required in order to decide and oversee what goods and services and how much are going to be produced and distributed to whom, where, by whom and when. In order to do this an organizational structure is required. An organization’s structure is the divisions into which an organization has placed its labor force in order to achieve specific tasks and the coordination among those specific tasks; policies and procedure are enacted; and order of authority established in order to achieve efficiency. Traditionally, organizations have used different structures which have been successful to a certain degree. Other types of organizational structures are emerging as a result of the changing business, economic and social aspects and therefore a need to respond to them. This means that organization of large corporations in 1970s is different from the way they are organized today (Robbins 2005).

Characteristics of bureaucracies

A bureaucracy is a non elective formal organization that is charged with administrative, political or economic policy making in modern large scale ventures as described by the sociologist, Max Weber (Kroon 2004). These organizations have many characteristics that gear them towards achievement of their goals. A system of supervision and subordination is one of such characteristics. This means there are clear lines of hierarchical authority. The employees of the organization know, respect and take orders from their immediate superiors and those at the high hierarchical positions give directives to the people meant for and responsibilities fall under. Secondly, decisions are made basically through written rules records and communicated therefore wide use of written documents. Promotions and appointments in bureaucracies are based on achievement and qualifications for such positions are specialized. Lastly, labor in bureaucracies is highly specialized as experts are selected and trained for specific jobs and managers rotated to all divisions in preparation for managerial positions.

Key elements that define an organizations structure

An organization’s structure is defined by six key elements that either differentiate or integrate the tasks of an organization. There are three elements which differentiate the work of an organization in regard to dividing up the labor force, these are: horizontal differentiation where work is divided into tasks and sub tasks at the same level; vertical differentiation involves division of tasks along the levels of authority. An organization chooses either a structure with low vertical complexity or a tall structure with high vertical complexity; spatial differentiation structure is put in regard to the geographical location of different activities an organization is engaged in (Robbin 2005).

An organization can also be defined by the element of integration of work, which means the way work is coordinated and controlled, these include (Clayton et al 2006).

Formalization is a structure element where the organization regulates behavior by use of policies, rules, procedures and other documents. An organization can use high formalization by greater use of this or low formalization by less use of this, which shows management confidence in the employees as it characterizes modern organizations as opposed to traditional ones.

Centralization element is where the decisions are made within the places of authority in the organization. In organizations where decision making is left to the executive, it is highly centralized and decision making is consistent and consumes less time. In organizations where empowerment is the key characteristic, decision making is time consuming.

Standardization element defines an organization that has designed mechanisms that reduce uncertainty and unpredictability in its work.

Another key element is the span of management control. This refers to the number of employees under the one supervisor. If a company has narrow span management it means the subordinates under one supervisor or manager are few, which in turn translate to many levels in the hierarchy forming a tall pyramid. A company with wide span of management on the other hand means a manager is in charge of many subordinates creating a flat and rectangular structure (Robbin 2005).

Differences between mechanistic or organic structural models

A mechanistic structure is a representative of a corporation in the 1970s while emerging modern organizations can be said to be organic in structure. In terms of communication in the organization, a mechanistic use vertical communication is applied where subordinates receive directives and information is passed from subordinate to superiors. This is different in organic where no rank is considered as people in different ranks are in communication in a sort of consultation rather than a command.

In a mechanistic structure, knowledge is located exclusively at the top with regard to hierarchies and specific tasks are coordinated at the top. Unlike in mechanistic, in organic structures knowledge about commercial or technical things can be found anywhere in the organization and is given on the basis of when and where needed.

Control, authority and communication in mechanistic organization are top down though the hierarchies while in organic it is a network where interests of all are taken for granted.

Mechanistic organization’s values stress more on the loyalty of the employees to the organization and obeying the superiors as provision for membership. Organic put weight on the employees’ commitment to their tasks and ethics of technology in material development and expansion as opposed to loyalty.

Tasks are distributed through specialized differentiation where problems and tasks as whole are broken down and assigned to different people while in the organic employees contribute their specific knowledge and experience towards the common task (Clayton et al 2006).

Describe a matrix organization

This is an organization system that attempts to blend the functional and project organization systems by achieving the advantages of both systems. The functional system utilizes and develops technical skills and resources and also establishes a line of authority for decision making while project system ensures the performance of all activities so as to finish activities or projects in time. This organization structure uses two design principles: a chain of command that is based on the law of free business where the interests of shareholders are given the priority and as a part answer from issues arising from complex technology.

In this structure the functional manager implements vertical or line authority while project manager uses horizontal authority.

Large corporations today try to beat the alarm of multiheaded leadership characteristic of matrix organizations in order to achieve rapid adjustment of business while organizations in the 1970s would have used one of the two structures.

The goals of this organization are to achieve stability and meet the goals of the project which is charged to the functional management and secondly to integrate new technology for long term growth for which the project function is charged with (Bresnen 1990).

Advantages of matrix organization

• Efficiency in deployment of resources as specialists can engage in more than one project.
• The organization is well oriented to adapt to changing and uncertain conditions.
• The structure facilitates realization of innovative solutions to multifaceted problems due to cross-functional and interdisciplinary environment that results.
• The goals of the individuals and the business are achieved as time, costs and performance are balanced.
• It also provides greater opportunity for individuals to develop their careers as they gain experience from a wide variety of activities and employees in the lower cadre are given more opportunities to be involved in decision making.

Just as the system has advantages it also has some demerits

• It facilitates double line of authority which can lead to conflicts
• The power balance between the two functions can bring about problem such as competition between function managers and project managers rather than team work.
• The structure can create a stressful environment for both the managers and their subordinates in regard to role conflict, indistinctness in roles and overload of responsibilities (Kroon 2004 & Bresnen 2005).

Factor that favor different organizational structures

• The age of the organization where older organizations are more formalized in their behavior.
• The size of the organization where larger organizations are more complex in structure, formal in behavior and large in units covered.
• Technical system which may be more regulated or more advanced.
• The environment in which they operate can be dynamic or complex leading to rise of organic structure for the former and more decentralized for the later.
• The power the organization has influences the structure. External control will lead to a centralized and formalized structure while internal power leads to a rise in an organic and less formal structure. (Clayton 2006).

Characteristics of a virtual organization

A virtual organization is an organization whose members are located in different geographical locations and are brought together by a long lasting common interest and correspond and organize their work through information technology (Ahuja & Carley 1998). Example of such a group is an academic and research organization comprising of members from different institutions of learning who voluntarily join in research on an issue of concern and common interest. These organizations create a network of structures which become institutionalized over time unlike traditional organizations which establish hierarchical and centralized systems and use formal communication.

A virtual organization is characterized by high level of informal communication which is individual, peer oriented and interactive. Sharing of information and organization of their work is through electronic mails and face-to-face meetings.

There is disregard for hierarchy in virtual organizations. Sharing of information through emails and other information technology has allowed for communication in lateral manner where any member can contact the other freely. Here resources and expertise are allocated to the issues at hand and the projects they are undertaking in a decentralized manner.

There are also no laid down organizational structure rather they are emergent. Free communication and sharing of information has encouraged an informal organization and the status and role of the members does not influence the channels of communication, however, it influences the information processing needs of individual members. This network structure creates patterns of information flow that are in contrast to formal structures.

Lastly, there is a sense of community that arises in virtual organizations. This stems from reciprocity relationships and communications as members exchange favors on the assumption of groups cohesiveness or stability. These people are brought together by a long lasting common interest and so when one colleague asks for a favor it is likely to be granted as there is expectation of returning the favor some other time in future when need arises (Ahuja & Carley 1998).

Why managers want to create a boundaryless organization

‘Boundaryless organization’ is a phrase coined by the General Electric’s Jack Welch to mean an organization that culturally, geographically and organizationally is more porous in order for employees to be more interactive to enable work to be done efficiently and effectively (Allen 2003). Information technology has allowed for instantaneously available information from different parts of an organization, which is tailored to meet the needs of the users across geographical and time zones and organizational structures. This structure removes barriers that are there in older organizations such as vertical horizontal and external obstacles.

Managers want to create a boundaryless organization so that they can reduce processing time and streamline back office activities. Managers also are in favor of a boundaryless organization because with applications such as STP and Web Services information flow is improved a lot and this reduces operational costs while at the same time increasing effectiveness and efficiency. They are also able to achieve high level integration and coordination in the organization. The organization structure is also made more flexible and therefore able to adapt to changes.

A boundaryless organization also ensures empowerment of employees as they work in teams through training and advancement that is geared towards its goals and mission. This increases productivity as they are able to respond quickly to market demands, provide quality services, decision-making abilities and problem solving.

It also allows for informal communication network between employees. This leverages information thereby creating a competitive advantage by use of informed and knowledgeable employees (Robbin 2005).

Behavioral implications of different organizational designs

Job satisfaction in structures that encourage work specialization is low. In bureaucracies employees are recruited and trained experts in one field and do the same kind of job everyday. This brings about monotony and lack of challenge and therefore less job satisfaction.

Employees turn over is high in bureaucracies as workers seek and move to more rewarding and challenging jobs. This is bad for the organization as it spends a lot of resources in recruitment and training of new workers.

In organizations that structural designs encourage participation in decision making for all employees at all levels high job satisfaction is experienced. This motivates employees to work even better in their tasks leading to increased productivity (Robbin 2005).

References

Ahuja, M., K & Carley, K., M 1998, Network Structure in Virtual Organizations. Journal of Computer-Mediated Communication Online, Vol 3, no. 4, pp. 52-63. Web.

Bresnen, M 1990, Organizing construction: project organization and matrix management, Chapman and Hall Inc. New York.

Brown, A 2003, ‘The ‘boundaryless’ Organization,’ Financial-I Online, December 2003, no. 1, pp. 55-68. Web.

Clayton, B., Betaman A., Brown, M. & Harris R 2006, Organizational Culture and structure. Consortium Research Program. Web.

Kroon, J 2004, General Management. Creda Communications, South Africa.

Robbins, P. S 2005, Organizational behavior, Prentice Hall Inc. New York.