Organization Structure
Factors Defining Organization Structure
Structure is mainly impacted by the following factors:
Strategy
Size
Technology / Degree if routineness
Environment
Structure Follows Strategy - 1987 John Scully moved Apple from an adhoc, isolated research team system under Steve Jobs to a consolidated research and innovation team system that involved marketing and manufacturing early in the product development process. This was done to meet the fierce competition from IBM. The revised strategies – avoid false starts in product research, develop coherent families of products, introduce more products to the market, define new markets etc etc…. Change in strategy driven with change in structure.
Organizations generate, as they move from simple to complex (products, customer segments, peripherals) high inter-unit interdependence, thus require greater degree of co-ordination amongst these units. Org Structure acts as a complex co-ordination device formed of specialized units, based on functions performed.
Organization Size – As more operative people join a growing organization, taking advantage of economic benefits of specialization leads to horizontal differentiation or departmentalization. As intragroup efficiencies increase, the inter-unit relationships may suffer as each group focuses on its own goals. Management thus seeks remedy through higher vertical differentiation (creating layers) accompanied by integration of functions under common heads.
Like-wise growth may also result in spatial or geographic differentiation.
Increased complexity limits top management’s ability to directly supervise and control activities. This control is then made-up-for by formalization or putting into place of robust rules, procedures and processes. Layering in turn distances the top management from direct operations, driving the need to delegate decision making to levels closer to operations.
Thus as size increases, organization structure needs to adapt to ensure efficiency and
Structure is mainly impacted by the following factors:
Strategy
Size
Technology / Degree if routineness
Environment
Structure Follows Strategy - 1987 John Scully moved Apple from an adhoc, isolated research team system under Steve Jobs to a consolidated research and innovation team system that involved marketing and manufacturing early in the product development process. This was done to meet the fierce competition from IBM. The revised strategies – avoid false starts in product research, develop coherent families of products, introduce more products to the market, define new markets etc etc…. Change in strategy driven with change in structure.
Organizations generate, as they move from simple to complex (products, customer segments, peripherals) high inter-unit interdependence, thus require greater degree of co-ordination amongst these units. Org Structure acts as a complex co-ordination device formed of specialized units, based on functions performed.
Organization Size – As more operative people join a growing organization, taking advantage of economic benefits of specialization leads to horizontal differentiation or departmentalization. As intragroup efficiencies increase, the inter-unit relationships may suffer as each group focuses on its own goals. Management thus seeks remedy through higher vertical differentiation (creating layers) accompanied by integration of functions under common heads.
Like-wise growth may also result in spatial or geographic differentiation.
Increased complexity limits top management’s ability to directly supervise and control activities. This control is then made-up-for by formalization or putting into place of robust rules, procedures and processes. Layering in turn distances the top management from direct operations, driving the need to delegate decision making to levels closer to operations.
Thus as size increases, organization structure needs to adapt to ensure efficiency and