Organizational Design And Form Research Paper

For some writers, an organization design ‘emanates from an overall vision for the organization … (which) will give people the skills, direction and motivation to do the work necessary to achieve the strategic objectives’ (Nadler and Tushman 1997). For other writers, ‘structural designs are really rhetorical devices … (used by managers which) … are not so much descriptions but ideas about what kind of behavior is desirable in certain circumstances’ (Eccles and Nohria 1992). Still other writers note that some organizations try to avoid the use of formal designs and organization charts on the grounds that these can limit the range of behaviors that may be necessary to accomplish organizational goals (Mills 1993).

Many writers, implicitly or explicitly, conceive of designs as problem-solving devices (Eccles and Nohria 1992). For example, in moving beyond a position that there is one best design, contingency theorists have directed their attention over the years to identifying which designs are best suited to solving a variety of ‘problems’ such as the nature of the organization’s environment, strategy, technology, age, and size.

1. Classic Designs

Traditionally, much attention has focused on the prevalence of two organizational designs. A functional design is one that is organized into departments on the basis of the skills which individuals bring into an organization (marketing skills, production skills, accounting skills, etc). Miles and Snow (1984) suggest that identifying such a design served as a major breakthrough at the turn of the twentieth century in that it enabled organizations to grow and specialize, in terms of either particular markets or products. Such a design is suited to solving the ‘problem’ of stable environments in which the same goods or services are required repeatedly (e.g., the day-in-day-out delivery of a railway service). The functional design is usually hierarchically organized and focuses on ways of increasing the efficiency of delivering repetitive operations. Bedeian and Zammuto (1991) suggest that a number of advantages accrue to such organization designs. These include: retaining like interests and skills in specific departments, enabling simple communication among specialists, simplifying training and the efficient use of resources, measuring functional outputs, and enabling top management to retain strategic control over the whole organization. Disadvantages include: coordination across different functional areas, departmental rather than organizational orientation of staff, lack of development of broad management and business skills, interdepartmental conflict, low client satisfaction (as no one department has responsibility or accountability for the service or product), and the difficulty of organizational change if environmental or strategic circumstances change (since the organizational orientation is towards stability).

A divisional design—sometimes called an M-form (Multidivisional) design—is one suited to accommodate organizational growth, and market and product differentiation (Miles and Snow 1984). It is organized by divisions each of which is responsible for a particular output, be it product, market, or geographic area. The same function (e.g., marketing, research and development, and manufacturing) is likely to be found in more than one division so that each becomes specialized in orientation towards the particular product, market, or geographic area that it serves. Such a design is one which is suited to solving the ‘problem’ of more dynamic environments since an organization can, in theory, add a new division oriented towards a new product or service, or close down or sell nonperforming divisions as conditions change. Other advantages of the divisional design include: easy identification of divisional performance, greater coordination among functional areas as each has a similar orientation, greater attention to client needs, flexibility, and a broader business orientation. Disadvantages include: duplication, less communication among similar functional staff who are spread across different divisions, and a potential failure of staff to keep abreast of professional developments in their particular functional field (Bedeian and Zammuto 1991).

2. Design Variations

The matrix design breaks a classic organizing principle underlying the first two designs. This principle is what Fayol (1949) referred to as the scalar chain of command in which a single chain links the highest authority to the lowest rank. The matrix design breaks this principle by invoking dual lines of authority in which both functional and product managers share formal power and authority. Functional managers allocate staff into various project groupings, for which a product manager is responsible. At the end of a particular product or project, staff are reallocated into new groupings as the need arises. Staff, therefore, have dual reporting lines, one to their product manager and one to their functional manager. This design is one that is intended to solve the ‘problem’ of dynamic environments in so far as new project teams can be established or dissolved as required. The advantages of the matrix structure include the ability to meet new market demands, and to coordinate interdependent functional skills and requirements. Disadvantages are that some staff may have trouble coping with the insecurity and instability associated with such a structural arrangement which, in turn, ‘creates considerable confusion, stress, and conflict, and requires from its participants highly developed interpersonal skills and considerable tolerance for ambiguity’ (Mintzberg 1983).

In addition to these designs, Mintzberg (1983) identified three others. The simple structure typically is found in small organizations and is characterized by direct supervision and minimal technological systems with a dominating owner or entrepreneur having a wide span of control. The professional bureaucracy characterizes organizations such as accounting firms or hospitals that operate traditionally in relatively stable environments and utilize predetermined ‘solutions’ to client problems. The adhocracy often draws upon advanced technological systems and uses innovative, multidisciplinary teams to produce novel solutions to client problems.

In practice, organizations may use a combination of designs. For example, a hybrid model may combine elements of functional and divisional designs where an organization retains central control over human resources, strategy, etc., but decentralizes to different divisions’ control over marketing, production, sales, etc. Also, the classic work of Lawrence and Lorsch (1967) showed that within well-performing organizations, departments may be structured differently depending upon the nature of their contact with the environment. For example, in both stable and dynamic environments production departments may be relatively insulated and/organized on mechanistic lines. However, research and development departments, being more closely oriented to the market and the environment, may be structured more flexibly in dynamic environments, compared with those operating in stable environments. They used the term differentiation to refer to the extent to which departments are designed and structured differently within the one organization, and integration to refer to the process of unifying departmental activities to accomplish organizational goals.

3. Internal Control And Coordination Mechanisms

Thompson (1967) argued that the coordination of activities for a given design varies according to the interdependence of work components or departments. He used the term, pooled interdependence, to refer to situations where each part of the organization is relatively independent. Where, in serial fashion, one part needs to act in order for another part of the organization to perform its actions, then this is termed sequential interdependence. Reciprocal interdependence occurs when an output for one part becomes an input for another part, whose work then becomes the input for the first part.

Adapting the work of March and Simon (1958), Thompson (1967) argued that different types of coordination are required in each instance. Standardization (internally consistent rules and routines which direct the activities of each section towards the outcome of the whole) is appropriate to pooled interdependence. Planning is a useful coordination mechanism for sequential interdependence. Mutual adjustment occurs through communication and feedback devices and is most likely to be found where situations are novel and unpredictable and where reciprocal interdependence is required.

More generally, Galbraith (1974) argued that as task uncertainty increases so does the need for lateral design mechanisms for achieving coordination. In order of increasing uncertainty, he pointed to the use of direct contact among staff (where problems are solved jointly), the use of specialized liaison roles (which can assist communication between departments), task forces representing different departments (in order to address a common, specific problem), cross-functional teams (which are longer-term in nature and consider a variety of problems common to different departments), integrating roles (such as program or product managers who liaise across different functional departments to achieve required outcomes), and managerial linking roles (which have formal position and budgetary power attached to them).

4. Contemporary Challenges To Classic Designs

The contingency notion that the structural form should reflect key contingencies underlies a still-growing literature that is advocating the replacement of classic structures by ‘new organizational forms.’ The core argument is that new ways of organizing are necessary if organizations are to perform effectively in ‘hypercompetitive environments’ (D’Aveni 1994) characterized by rapid and unpredictable environmental change, intensified competition, and short product life cycles.

In such an environment it is argued that organizations need to be flexible, fast moving, and innovative. However, classic modes of organizing commonly are associated with a number of characteristics that are represented as being inconsistent with these demands. Formalization, that involves the specification of formal rules and procedures, inhibits flexibility. Centralization that involves an emphasis on the location of decision-making authority at the higher levels of the hierarchy, reduces discretion at the ‘customer interface.’ Standardization of procedures may be inconsistent with the needs of diverse and fragmented markets. Size is an important variable because decisions about growth traditionally have been driven by an assumption that bigger is better. This is appropriate where economies of scale are all-important but can become an impediment when speed of response and customization become paramount.

Classic modes of organizing also have been characterized by boundaries, both within organizations and between organizations and key players in their environment. Within organizations, an emphasis on departmental or divisional boundaries inhibits the ability to organize around value-delivering processes. Similarly, maintaining a clear boundary between ‘inside the organization’ and ‘outside the organization’ may be an impediment when organizations compete using market-based, rather than hierarchy-based relationships.

5. Characteristics Attributed To New Organizational Forms

An extensive array of new organizational forms has been advocated as appropriate to hypercompetitive conditions. These include: the network organization, the virtual organization, the intelligent organization, the boundaryless organization, the reconfigurable organization, the self-managing organization, and the centerless organization.

Despite the diverse nomenclature, certain core elements pervade these prescriptions. These include flatter structures (fewer levels in the hierarchy, wider spans of control), less rigid boundaries between functions, greater use of networks and alliances, and disaggregation into smaller business units.

What remains to be seen is whether the utilization of new forms of organizing involves the replacement of, or coexistence with, characteristics associated with classic designs.

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