Understanding Organizational Structure and Design

Posted on Oct 2, 2024 in Social sciences

Organizations

Organizations comprise people who share an interest in achieving certain objectives. To achieve these objectives, an administration must define and structure the roles of different members.

  • Public: Belong to the state.
  • Private: Belong to individuals.
  • Licit: Activity aligns with morals and decency.
  • Illicit: Activity is unlawful.
  • For-profit: Have an economic goal of profit.
  • Non-profit: Do not aim for profit; reinvest earnings into the organization.
  • Sole Proprietorship: Single owner.
  • Partnerships/Associations: Consist of two or more partners.

Purposes of Organizations

  1. Coordinate members to achieve collective effort efficiently and effectively.
  2. Store information to inform rule adoption.
  3. Establish a separate identity; no member is indispensable.
  4. Provide compensation and rewards based on performance.

Organizations as Systems

Organizations are like living organisms with survival needs, adapting to their context through interrelated processes. They are formed by independent parties that adopt behaviors and perform actions.

  • Survival Needs: Include integration of members, expansion, and market presence.
  • Independent Parts: Members, resources, problems, and sectors contribute to the organization’s purpose.
  • Conduct: The organization is viewed as a whole, not just individual members.

Organizational Culture

Organizational culture encompasses guidelines, behaviors (express or implied), knowledge, ideas, values, and customs within an organization, making it unique.

  1. Transmitted through study, observation, or experience.
  2. Passed from generation to generation.
  3. Shared by all members.
  4. Influences behavior.
  5. Adaptable to change.

Organizational Structure

Organizational structure is the framework used to conduct business. It is dynamic, flexible, and neutral.

  • Dynamic: Responds to needs, events, resources, markets, and individuals.
  • Flexible: Adapts to changes.
  • Neutral: Neither good nor bad; effectiveness depends on policies and management.

Structure analysis is needed when:

  1. Business strategy changes.
  2. Market regionalization is necessary.
  3. Existing roles and responsibilities hinder operations.
  4. Process and technology changes alter work methods.
  5. Resources are misused.
  6. Employee commitment is low.

Factors Shaping Organizational Structure

  1. Institutional goals.
  2. Capacity and constraints of professionals and owners.
  3. Economic size, resources, and physical dispersion.
  4. Environmental dimensions, competition, and change sources.
  5. Target market segment.
  6. Scope and sequence of functional steps.
  7. Work technologies.
  8. Functional work activities.
  9. Local, regional, or international operations.

Organizational Design

Organizational design involves choosing a strategy and aligning the operating model with processes, technology, and people.

  • Determinants: Customer needs, business strategy, technology, planning systems, and management controls.
  • Restrictive Factors: Resources, organizational culture, and human resources.

School of Scientific Management

Developed by Frederick W. Taylor in the early 20th century, this approach applied industrial engineering methods to eliminate waste in U.S. companies, focusing on worker tasks.

First Stage: Taylor found production was lower than possible. He advocated for incentives for higher production.

Taylor’s First Book:

  1. Pay high wages and maintain low production costs using scientific methods.
  2. Control production steps.
  3. Train employees to improve skills.
  4. Foster cooperation between management and employees.

Second Stage: Taylor focused on general administration while still considering worker tasks. He identified three business problems:

  1. Workers intentionally slowing production.
  2. Management’s lack of knowledge about work routines and times.
  3. Lack of uniformity in work techniques and methods.

Taylor’s Scientific Management System:

  1. Planning: Establish production methods based on scientific procedures.
  2. Preparation: Select and train workers based on skills.
  3. Control: Monitor work to ensure adherence to standards.
  4. Execution: Define roles and responsibilities for orderly activities.

Criticisms: Mechanistic approach, super-worker focus, microscopic view of man, lack of evidence, incomplete organizational approach, limited scope, prescriptive approach, and closed-system approach.

Classical Administration Theory

Developed in 1916 by Henri Fayol, this theory emphasizes organizational structure for efficiency.

Six Company Functions:

  1. Technical: Production of goods or services.
  2. Commercial: Buying and selling.
  3. Financial: Capital management.
  4. Accounting: Inventory records, etc.
  5. Security: Protection of goods and people.
  6. Administrative: Integration and coordination of other functions.

Five Functions of Administration:

  1. Planning: Envisioning the future.
  2. Organizing: Building the company structure.
  3. Directing: Guiding staff.
  4. Coordinating: Uniting efforts.
  5. Controlling: Verifying adherence to rules.

General Principles of Management: Division of work, authority, responsibility, discipline, unity of command, unity of direction, subordination of individual interests, staff remuneration, centralization, hierarchy, order, equity, tenure, initiative, and team spirit.

School of Human Relations

Developed by Elton Mayo, this theory prioritizes human and social aspects in organizations, reacting against the dehumanization of work. It emphasizes motivation, leadership, communication, group dynamics, and organizational types.

The Neoclassical School

This approach updates classical theory for modern administrative problems. It emphasizes practical application, reaffirms classical postulates, focuses on general principles, emphasizes objectives and results, and is eclectic.

Administration is about guiding, directing, and controlling a group to achieve a common goal.