The design of an organization’s structure is one of the most important tasks that managers are responsible for. In order to design a structure that can achieve success in today’s fast-paced and competitive global market, managers must take into consideration multiple factors, all of which have tremendous impact upon the organization. The organizational structure of a company is one of the most important factors in its success, and a necessity in order to integrate multiple assets within an analytical framework (Susniene, 2008). Just as in a building, if the foundation is weak, the structure will be weak and vulnerable. Organization structure is a tool that managers use to harness resources for getting things done.
The human resources function is an essential component to of organizational design (Mobrman, 2007). Several studies have been conducted on the growing importance of human resources within the organizational structure (About Human Resources, 2007). As the science behind human resources continues to grow, so does the area of responsibility that it incorporates. The science of redesigning jobs and fitting them to the individual employee is one field that is expanding rapidly. There are certain companies which do not have proper human resource departments suffer greatly from official disorder, and the lack of management in concerning office activities.
The organizational environment is the second factor considered when designing an organizational structure (Lysonski, Levase, & Lavenka, 1995). This link between structure and environment has been noted by both the Contingency and Systems theory (Punnoose, 2007). Increased globalization has made this factor even more important, as the expanding amount of data available has created an extremely dynamic environment (Ogbonna & Harris, 2003, Echols & Neck, 1998).
Both Englehardt & Simmons (2002) and Echols & Neck (1998) agree that flat, decentralized structures support the dynamic environment of today. The flexibility that comes with an expansive lower level decision-making process is also a tool that helps the organizational structure succeed (Kubrak, Kovall, Kavaliauskas, & Sakalas, 2007, Martinson & Martinson, 1994).
The third factor considered when designing an organizational structure is technology (Sehanovic & Zugaj, 1997). With continual advances in information technology (IT), managers must be willing to rethink their managing concepts, reshape their organizations, and embrace and implement IT (Gudonavicius & Savanevicience, 2008, and Bens, 2007). Those companies that miss technology-based opportunities struggle to catch-up (Brown, Chervany, & Reinicke, 2007). Incorrect implementation of IT changes and failure to take into the account the cost of creating real options in sequential IT investments, have left multiple companies struggling to keep up with the ever changing market (Collis & Montgomery, 2008, Esty & Rushing, 2007,Beneroch, Kauffman, & Shah, 2007).
The fourth factor that must be considered when designing an organizational structure is strategy. Strategy is the organizational factor that involves deciding what goals to pursue, and determining how, as an organization, to pursue those (Robbins & Judge, 2007, Jones & George, 2006). In the dynamic environment caused by globalization, an organization’s strategy must continually be changing to increase its competitive advantage (Strumickas & Valancience, 2008). A recent strategy employed by several companies has been project management, which allows companies to integrate their corporate strategies with project initiatives (Stankevivius & Zdanyte, 2008).
To be successful in today’s world, organizations must quickly respond to a competitive and continuous changing environment. In most cases that means being innovative, reinventing themselves’ and changing many of the established ground rules of their own industry. Organizational leaders can’t allow their staff to settle and be content with ideas of the past. Organizations must challenge its management staff to embrace change while continuing to look for ways and methods to improve. In many instances, an organization’s structure can impact the degrees of its successes. For instance, an organization with a decentralized structure, which has open communication system, tends to be more innovative.
Organizations that are more highly centralized with most of the decisions being made at the upper level, tend to be much slower in their actions because of decisions that are handed down from level to level, where as the decentralized organizations tend to react faster because it empowers its employees and allows them to make decisions at all levels of the organization. An organizational system that is being used world wide by many organizations is that of the cross-functional team.
This team concept brings together employees from various functional units within the division and it enables them to implement and integrate new ideas more rapidly, because of the upfront teamwork that limits the amount of trial and error normally associated with change. The cross-functional team approach provides an upfront opportunity to research the impact decisions will have on each functional area and modify them accordingly.
Structural change toward decentralization should change the performance of certain organizational tasks (indeed, even the selection of tasks); the technology that is brought to bear (e.g., changes in accounting procedures); and the nature, numbers, and/or motivation and attitudes of people in the organization. Any of these changes could presumably be consciously intended; or they could occur as unforeseen and often troublesome outcomes of efforts to change only one or two of the variables.
Similarly, the introduction of new technological tools—computers, for example—may effect changes in structure (e.g., in the communication system or decision map of the organization), changes in people (their numbers, skills, attitudes, and activities), and changes in task performance or even task definition, since some tasks may now become feasible of accomplishment for the first time. Changes in the people and task variables could presumably branch out through the system to cause similar changes in other variables. A categorization and evaluation of several approaches to organizational change approaches that differ markedly in their degree of emphasis.
Applied efforts to change organizations by changing structure seem to fall into four classes. First, structural change has been the major mechanism of the “classical” organization theorist. Out of the deductive, logical, largely military-based thinking of early non-empirical organization theory, there evolved the whole set of now familiar “principles” for optimizing organizational performance by optimizing structure. These are deductive approaches carrying out their analyses from task backwards to appropriate divisions of labor and appropriate systems of authority. These early structural approaches almost always mediated their activities through people to task.
One improves task performance by clarifying and defining the jobs of people and setting up appropriate relationships among these jobs. Operationally one worried about modifying spans of control, defining non-overlapping areas of responsibility and authority, and logically defining necessary functions. In fact, almost the only assumptions that were made were legalistic and moralistic ones: that people, having contracted to work, would then carry out the terms of their contract; that people assigned responsibility would necessarily accept that responsibility; that people when informed of the organization’s goals would strive wholeheartedly to achieve those goals.
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