After reading the materials related to the basic ways organizations are structured (functional, divisional, matrix, horizontal, hollow, modular, and virtual), respond to the following:
- Identify and describe how one of the basic organizational structures was either successful or unsuccessful at your present or former organization, or an organization you are familiar with. What were the key factors for determining the level of success or failure for this structure?
- Select a different basic organizational structure for the organization you identified above and predict its level of success or failure. Explain your rationale.
An organization is defined as a system of consciously coordinated activities or forces of two or more persons. All organizations share the following factors: coordination of effort, a common goal, division of labor, and a hierarchy of authority. These factors represent the organization's structure. Traditionally, managers have maintained the hierarchy of authority by adhering to the unity of command principle.
An organizational chart is a graphic representation of formal authority and the division of labor relationships. It indicates the hierarchy of authority, division of labor, span of control, and line and staff positions. Span of control refers to the number of people reporting directly to a given individual. That authority rests with the line managers. A closed system is a relatively self-sufficient entity; that is, it is closed to the surrounding environment, while an open system must constantly interact with the environment to survive.
A learning organization is one that proactively creates, acquires, and transfers knowledge, and one that changes its behavior on the basis of new knowledge and insights. Learning organizations actively try to infuse their organizations with new ideas by scanning their external environments. New knowledge is transferred throughout the organization and behavior is changed as a result.
Traditional organizational designs include: functional structures (in which work is divided according to function); divisional structures (in which work is divided according to product, customer type, or location); and matrix structures (in which there are dual reporting structures, based on product and function). Additionally, organizations may be designed horizontally, with cross-functional teams responsible for entire processes. Furthermore, organizational design may be used to reduce barriers between organizations, create hollow organizations that outsource functions, modular organizations that outsource the production of a product's components, or represent virtual organizations that temporarily combine the efforts of members of different companies in order to complete a project.
British researchers Burns and Stalker found that mechanistic (bureaucratic, centralized) organizations tended to be effective in stable situations. In unstable situations, organic (flexible, decentralized) organizations were more effective. These findings underscored the need for a contingency approach to organization design. Figure 17-4 in your textbook illustrates four ways to assess organizational effectiveness, which can be used in varying combinations. No single approach is appropriate in all circumstances or for all organizations. The first approach, goal accomplishment, is the most widely used. Key organizational results or outputs are compared with previously stated objectives. Effectiveness is measured by how well the organization meets or exceeds its goals. According to the second approach, resource acquisition, an organization is effective if it acquires necessary factors of production. The internal processes criterion deems the organization effective if information flows smoothly and if employee loyalty, commitment, job satisfaction, and trust predominate. Finally, the strategic constituencies satisfaction approach considers the happiness of key strategic constituencies to be the appropriate effectiveness criterion. A strategic constituency is any group of people with a stake in the organization's operation or success. These strategic constituencies generally have competing or conflicting interests and it is up to management to balance the opposing demands.
Organizational decline represents a decrease in an organization's resource base, where resources can be money, talent, customers, or innovative ideas. Decline is almost unavoidable unless deliberate steps are taken to prevent it; this is possible if one recognizes the early warning signs of decline. However, the time to prevent organizational decline is when everything is going right. According to the contingency approach to organization design, organizations are more effective when they are structured to fit the demands of the situation. This process requires assessing the degree of environmental uncertainty and the using various organization design configurations to achieve an effective fit with the environment.
In our first learning activity, we will discuss the seven basic organizational structures, and how these can be effective in our workplaces.