Matching Structure with Environment
To understand what organization structure is all about, we need to study the composition of the body of an organization itself. Basically, it is a hierarchical concept of subordination of entities that collaborate to ensure the success of the common goal. The structure is best depicted using organizational chart in which allocation of responsibilities have been assigned to respected individual or departments. The established and solid structure can only be determined if consideration is given on the purpose of the organization establishment and the environment that governs the organization.
There are four determinants of an organization’s structure; namely, strategy, size, technology and environment. Each determinant plays a decisive factor on what type of structure is going to be formed by an organization. The term strategy deals with the mechanism on achieving the objective of the organization. Structure must follow the strategy. Innovation which can be depicted as organic model, cost minimization which can be pictured as mechanistic model, and imitation which uses both combinations of organic and mechanistic models are the three dimensions of strategy. Size as the second determinant refers to the number of employees in the organization. Growing in size will need reconsideration of the current structure or extending the structure. The term technology means the application of technological advancement in ICT to transfer inputs into output efficiently and effectively. Environment is strictly dealt with the institutions or forces outside an organization that potentially affect the organization’s performance. We have learnt that social, technology, economics and politics factors are the external forces which are crucial in business decision making. Thus, this STEP factors can also be linked to the environment determinant.
Ensuring the right determinant alone will not contribute to the right formation of the organization structure unless the management is able to manage the right span of control. The span of control is one of the six-key elements of organization structure. It refers to the number of subordinates that a manager directs. It also has a direct beating upon the number of levels in an organization, which is a measure of the length of the organization’s lines of communications. Still, there are some annoying factors on the applicability of the span of control. The first factor is on the geographical location. This means that if the branches of a business are widely dispersed, then the manager will find it difficult to supervise each of them, as such the span on control will be smaller. The second obstacle is the capability of workers. If workers are highly capable, and do not require much supervision and can be left on their own, eg: Theory Y type of people, need not be supervised much as they are motivated and take initiative to work as such the span of control will be smaller. Similarity of task is the third factor in which the task that the subordinates are performing are similar. As a result, the span of control can be wider, as the manager can supervise them all at the same time. However, of course the capability of the supervisor also has to be taken into consideration.
The other five-key elements of organizational structure are work specialization, departmentalization, chain of command, and centralization/decentralization. Work specialization shows how tasks are divided into separate jobs. Departmentalization groups jobs based on function, product, geography, process, process and customer. Chain of command represents the unbroken line of authority that extends from the top to the lowest. Centralization or decentralization dichotomies of organizational structure specifically defines where decisions are made. Centralization is the process by which the activities of an organization, particularly those regarding planning decision-making, become concentrated within a particular location and/or group. However, there has been a marked trend toward decentralization in business decision making. Decentralization means delegation of decision-making to the subunits of an organization. Decentralization is most effective in organizations where subunits are autonomous and costs and profits can be independently measured. The benefits of decentralization include: (1) decisions are made by those who have the most knowledge about local conditions; (2) greater managerial input in decision-making has a desirable motivational effect; and (3) managers have more control over results. The costs of decentralization include: (1) managers have a tendency to look at their division and lose sight of overall company goals; (2) there can be costly duplication of services; and (3) costs of obtaining sufficient information increase.
Globalization brings with it a short-lived kind of environment. Changes occurs very often and unpredictable. Hence, in matching the environment, the management has to apply the appropriate and contemporary organizational designs. Three of the designs are common and the other two are new. The common designs are termed simple structure, bureaucracy and matrix while the two new designs are known as virtual organization and boundaryless organization. Simple structure has low degree of departmentalization, wide span of control, centralized, and little formalization. Bureaucracy focus on specialization and formalize rules and regulations. Matrix means a dual line of authority that combines functional and product departmentalization. Usually, an employee has two bosses in matrix structure. A good example of a virtual organization is a company whose headquarter and branches are stationed in different regions or states or countries. Internet becomes their most important way of communication. The philosophy behind boundaryless organization is to eliminate barriers or noise as found in communication. It is technological form of organization.
In brief, in order to match the right structure with the environment, one has to carefully assess the three key dimensions of an organization's environment: capacity, volatility, and complexity. An organization’s environment is composed of those institutions or forces that are outside the organization and potentially affect the organization’s performance. These typically include suppliers, customers, competitors, government regulatory agencies, public pressure groups, and the like. The capacity of an environment refers to the degree to which it can support growth. Rich and growing environments generate excess resources, which can buffer the organization in times of relative scarcity. Abundant capacity leaves room for an organization to make mistakes, while scarce capacity does not. The degree of instability in an environment is captured in the volatility dimension. Where there is a high degree of unpredictable change, the environment is dynamic. This makes it difficult for management to predict accurately the probabilities associated with various decision alternatives. At the other extreme is a stable environment. Finally, the environment needs to be assessed in terms of complexity; that is, the degree of heterogeneity and concentration among environmental elements. Simple environments are homogeneous and concentrated. Environments characterized by heterogeneity and dispersion are called complex. Organizations that operate in environments characterized as scarce, dynamic, and complex face the greatest degree of uncertainty.
Jakaria Dasan
School of Business and Economics
Universiti Malaysia Sabah
There are four determinants of an organization’s structure; namely, strategy, size, technology and environment. Each determinant plays a decisive factor on what type of structure is going to be formed by an organization. The term strategy deals with the mechanism on achieving the objective of the organization. Structure must follow the strategy. Innovation which can be depicted as organic model, cost minimization which can be pictured as mechanistic model, and imitation which uses both combinations of organic and mechanistic models are the three dimensions of strategy. Size as the second determinant refers to the number of employees in the organization. Growing in size will need reconsideration of the current structure or extending the structure. The term technology means the application of technological advancement in ICT to transfer inputs into output efficiently and effectively. Environment is strictly dealt with the institutions or forces outside an organization that potentially affect the organization’s performance. We have learnt that social, technology, economics and politics factors are the external forces which are crucial in business decision making. Thus, this STEP factors can also be linked to the environment determinant.
Ensuring the right determinant alone will not contribute to the right formation of the organization structure unless the management is able to manage the right span of control. The span of control is one of the six-key elements of organization structure. It refers to the number of subordinates that a manager directs. It also has a direct beating upon the number of levels in an organization, which is a measure of the length of the organization’s lines of communications. Still, there are some annoying factors on the applicability of the span of control. The first factor is on the geographical location. This means that if the branches of a business are widely dispersed, then the manager will find it difficult to supervise each of them, as such the span on control will be smaller. The second obstacle is the capability of workers. If workers are highly capable, and do not require much supervision and can be left on their own, eg: Theory Y type of people, need not be supervised much as they are motivated and take initiative to work as such the span of control will be smaller. Similarity of task is the third factor in which the task that the subordinates are performing are similar. As a result, the span of control can be wider, as the manager can supervise them all at the same time. However, of course the capability of the supervisor also has to be taken into consideration.
The other five-key elements of organizational structure are work specialization, departmentalization, chain of command, and centralization/decentralization. Work specialization shows how tasks are divided into separate jobs. Departmentalization groups jobs based on function, product, geography, process, process and customer. Chain of command represents the unbroken line of authority that extends from the top to the lowest. Centralization or decentralization dichotomies of organizational structure specifically defines where decisions are made. Centralization is the process by which the activities of an organization, particularly those regarding planning decision-making, become concentrated within a particular location and/or group. However, there has been a marked trend toward decentralization in business decision making. Decentralization means delegation of decision-making to the subunits of an organization. Decentralization is most effective in organizations where subunits are autonomous and costs and profits can be independently measured. The benefits of decentralization include: (1) decisions are made by those who have the most knowledge about local conditions; (2) greater managerial input in decision-making has a desirable motivational effect; and (3) managers have more control over results. The costs of decentralization include: (1) managers have a tendency to look at their division and lose sight of overall company goals; (2) there can be costly duplication of services; and (3) costs of obtaining sufficient information increase.
Globalization brings with it a short-lived kind of environment. Changes occurs very often and unpredictable. Hence, in matching the environment, the management has to apply the appropriate and contemporary organizational designs. Three of the designs are common and the other two are new. The common designs are termed simple structure, bureaucracy and matrix while the two new designs are known as virtual organization and boundaryless organization. Simple structure has low degree of departmentalization, wide span of control, centralized, and little formalization. Bureaucracy focus on specialization and formalize rules and regulations. Matrix means a dual line of authority that combines functional and product departmentalization. Usually, an employee has two bosses in matrix structure. A good example of a virtual organization is a company whose headquarter and branches are stationed in different regions or states or countries. Internet becomes their most important way of communication. The philosophy behind boundaryless organization is to eliminate barriers or noise as found in communication. It is technological form of organization.
In brief, in order to match the right structure with the environment, one has to carefully assess the three key dimensions of an organization's environment: capacity, volatility, and complexity. An organization’s environment is composed of those institutions or forces that are outside the organization and potentially affect the organization’s performance. These typically include suppliers, customers, competitors, government regulatory agencies, public pressure groups, and the like. The capacity of an environment refers to the degree to which it can support growth. Rich and growing environments generate excess resources, which can buffer the organization in times of relative scarcity. Abundant capacity leaves room for an organization to make mistakes, while scarce capacity does not. The degree of instability in an environment is captured in the volatility dimension. Where there is a high degree of unpredictable change, the environment is dynamic. This makes it difficult for management to predict accurately the probabilities associated with various decision alternatives. At the other extreme is a stable environment. Finally, the environment needs to be assessed in terms of complexity; that is, the degree of heterogeneity and concentration among environmental elements. Simple environments are homogeneous and concentrated. Environments characterized by heterogeneity and dispersion are called complex. Organizations that operate in environments characterized as scarce, dynamic, and complex face the greatest degree of uncertainty.
Jakaria Dasan
School of Business and Economics
Universiti Malaysia Sabah
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