Every organization has one (or at least, every organization should). If an organization’s structure is a means by which that organization achieves its objectives, then strategy and structure should be closely linked.
An innovation strategy is one that emphasizes the introduction of major new products and services. A company like 3M or Apple could be characterized as organizations who would adopt innovative strategies. Ideally, an organic, loose organizational structure is more appropriate to support an innovative strategy.
As an organization grows, however, it becomes increasingly difficult to manage without more formal work assignments and some delegation of authority. Therefore, large organizations develop formal structures. Tasks are highly specialized, and detailed rules and guidelines dictate work procedures. Interorganizational communication flows primarily from superior to subordinate, and hierarchical relationships serve as the foundation for authority, responsibility, and control. The type of structure that develops will be one that provides the organization with the ability to operate effectively. That’s one reason larger organizations are often mechanistic—mechanistic systems are usually designed to maximize specialization and improve efficiency.
Organization life cycle
Organizations, like humans, tend to progress through stages known as a life cycle. Like humans, most organizations go through the following four stages: birth, youth, midlife, and maturity. Each stage has characteristics that have implications for the structure of the firm.
Birth: In the birth state, a firm is just beginning. An organization in the birth stage does not yet have a formal structure. In a young organization, there is not much delegation of authority. The founder usually “calls the shots.”
Youth: In this phase, the organization is trying to grow. The emphasis in this stage is on becoming larger. The company shifts its attention from the wishes of the founder to the wishes of the customer. The organization becomes more organic in structure during this phase. It is during this phase that the formal structure is designed, and some delegation of authority occurs.
Midlife: This phase occurs when the organization has achieved a high level of success. An organization in midlife is larger, with a more complex and increasingly formal structure. More levels appear in the chain of command, and the founder may have difficulty remaining in control. As the organization becomes older, it may also become more mechanistic in structure.
Maturity: Once a firm has reached the maturity phase, it tends to become less innovative, less interested in expanding, and more interested in maintaining itself in a stable, secure environment. The emphasis is on improving efficiency and profitability. However, in an attempt to improve efficiency and profitability, the firm often tends to become less innovative. Stale products result in sales declines and reduced profitability. Organizations in this stage are slowly dying. However, maturity is not an inevitable stage. Firms experiencing the decline of maturity may institute the changes necessary to revitalize.
Strategy determines a course of action to direct various organizational activities. It makes plans to co-ordinate human and physical resources to work towards a common objective. Strategy is pre-requisite to organization structure and also follows it. The relationship between strategy and organization structure is depicted as follows:
Strategies to diversify product lines or markets require decentralized transition as decision-making is done at wider level and strategies for organizations working in stable environment. Where managers do not diversify their operations, require a centralized organization.
The technology for manufacturing goods and services also affects the organization stricture.
In case of mass production technology, mechanistic organization structure is more appropriate, while in case of continuous production or small-scale production technology, the appropriate from is organic structure. This is because mass production technologies involve standardization and specialization of work activities and continuous or unit production technologies require low levels of standardization and specialization.
Organization structure defines work, groups it into departments and appoints people to run those departments. People at different jobs must possess the skill, knowledge and efficiency to accomplish the related tasks.
Activities performed by people who transform organizational plans into reality are known as tasks. Various task characteristics are:
(a) Skill variety:
It is the extent to which creativity and variety of skills and talents are required to do a task.
People with high degree of task varieties (for example, a dress designer) perform tasks that increase their intellectual ability and give them high job satisfaction.
(b) Task identity:
Whether to produce a product in whole or in parts determines its task identity. When a product is produced as a whole, it has greater task identity.
People performing tasks with high task identity y (for example, a computer programmer) perform various job functions related to that task from beginning to the end, derive job satisfaction out of their work and feel motivated to repeat those tasks.
(c) Task significance:
The importance of task affecting the well-being or lives of people working inside and outside the organization determines significance of the task.
People performing tasks with high task significance, i.e., tasks which positively affect the well-being and safety of others (for example, a traffic police inspector), feel satisfied with their job performance and perform work of high quality and esteem.
Whether or not an individual plans the task on his own determines autonomy of the task.
It determines the extent to which a person enjoys t freedom of performing various
Job activities and determines the steps or procedures to carry them out. People who are responsible for all the functions and schedules related to a job (for example, a project manager) hold accountability for that job and enjoy greater autonomy with respect to that task and derive greater job satisfaction.
It is the information that people receive about successful completion of their task.
Questions like who makes decisions-top managers or lower-level managers, how information flows in the organization so that decision-making is facilitated, affect the organization structure.
Centralized decision-making powers give rise to mechanistic structures and decentralized decision-making processed give rise to organic or behavioral structures.
- Informal organization:
Informal organizations are and outgrowth of formal organizations. Social and cultural values, religious beliefs and personal likes and dislikes of members which form informal groups cannot be overlooked by management.
A group known as Aston Group conducted research on firms of different sizes and concluded that as firms increase in size, the need for job specialization, standardization and decentralization also increases and organizations are structured accordingly.
Organization structure cannot ignore the effects of environment. Organizations must adapt to the environment, respond to incremental opportunities and satisfy various external parties such as customers, suppliers, layout unions etc.
In case of stable environment where people perform routine and specialized jobs, which do not change frequently, a closed or mechanistic organization structure is appropriate.
- Managerial perceptions:
Organizations where top managers perceive their subordinated as active, dynamic and talented entrepreneurs, prefer organic form of structure, If they hold negative opinion about their subordinates, they prefer mechanistic organization structure.