FACTORS AFFECTING

ORGANIZATION DESIGN
2.1 INTRODUCTION
Technological advancement has brought about far-reaching changes in the
methods of work and also in the organisation design. Globalisation of market,
changing methods of production, economic instability etc. over the factors which
affect the organisation designing. It is in this context, the present unit seeks to
analyse this concept and to outline the principles and theories associated with it.
2.2 MEANING OF ORGANIZATIONAL DESIGN
The term organiational design! refers to how various parts of the organiation
and the distinct elements are brought together to make it. It considers both,
how these elements match together and ways in which they may be analyed
and improved.
The design aspects broadly include how the organiation is structured, the types
and numbers of "obs, and the processes and procedures used to#
handle and pass information$
make decisions$
produce results$
manage %uality$
&'
communicate information$
plan, develop and manage resources$
innovate and handle crises ()ushway and *odge, &++&,.
2.3 PURPOSES OF THE ORGANIZATION DESIGN
-roadly an organiation is designed to realie a number of ob"ectives. These
could be#
to support the organiation!s strategy. The structure should be designed in
such a way as to assure the realiation of the organiation!s goals and ob"ectives$
to arrange resources in the most efficient and effective way$
to provide for the effective division of tasks and accountabilities among
individuals and groups$
to ensure effective co-ordination of the organiation!s activities and clarify
the decision-making processes$
to enhance and elucidate the lines of communication up, down and across
the organiation$
to permit for the effective monitoring and review of the organiation!s
activities$
to endow with mechanisms for coping with change in markets, products and
the internal and external environments$
to aid the handling of crises and problems$
to help to motivate, manage and give "ob satisfaction to individual members
of the organiation$ and
to provide for management succession ()ushway and *odge, &++&,.
2.4 PRINCIPLES OF GOOD ORGANIZATIONAL
DESIGN
. good organiation design should go along with the following principles#
The various parts of the structure should be divided into specialist areas.
These specialist areas need to be interlinked.
The number of levels in the structure, sometimes referred to as the scalar
chain, should be as few as possible.
The span of control, i.e, the number of subordinates directly managed, will
vary according to the nature of the "obs and the organiation, but it should
not be so narrow that it results in a structure with too many levels, or too
broad to allow effective management.
There should be what has been described as unity of command. /or this the
reporting positions and authority need to be clearly defined.
0very post in the structure should have a clear role and add value to the
way the organiation functions.
The extent to which the organiation should be centralied or decentralied
will need to be determined by reference to a number of factors. These
include, the nature and type of industry, geographical dispersion, history,
environment, resources available etc.
The structure must be designed to take account of changes in the
environment, which can include the economy, legislation, markets, technological
developments, geography, cultural environment, and social environment.
Factors Affct!"#
Or#a"!$at!o" Ds!#"
U"%rsta"%!"#
Or#a"!$at!o"s
&&
2.& THEORIES OF ORGANIZATION DESIGN
-asically, there are two theories of organiation design # universalistic 1
contingency theories. The universalistic theory assumes that there is 2one best
way3 to organie. It means the maximum organiational performance comes
from the maximum level of a structural variable, for instance, specialiation
(Taylor, '456,. )lassical management is an earlier organiational theory that
argue that maximum organiational performance results from maximum
formaliation and specialiation and it is therefore a universalistic type of theory.
7imilarly, neo-human relations is also an earlier universalistic type of
organiational theory, which claims that organiational performance is maximied
by maximiing participation (*ikert, '48',.
)ontingency theory differs from all such universalistic theories in that it sees
maximum performance as resulting from adopting, not the maximum, but rather
the appropriate level of the structural variable that fits the contingency.
Therefore, the optimal structural level is seldom the maximum, and which level
is optimal is dependent upon the level of the contingency variable.
. contingency is a variable that moderates the effect of an organiational
characteristics on organiational performance. .t the most abstract level, the
contingency approach says that the effect of the variable on another depends
upon some third variable. The third variable moderates the relationship between
two variables and can therefore be called a moderator of the relationship or a
conditioning variable of the relationship (Galtung '486,. In the contingency
theory of organiations, the relationship is between some characteristic of the
organiation and effectiveness. Thus the contingency factor determines which
characteristic produces high levels of effectiveness of the organiation (or some
part of it, such as a department of individual member,.
.s much of the contingency theory research has studied organiational
structure this tradition is referred to as structural contingency theory. 7tructural
contingency theory contains three core elements that together form its core
archetype.
First, there is an association between contingency and the organiational structure.
Second, contingency determines the organiational structure, because an
organiation that changes its contingency then, in conse%uence, changes its
structure.
Third, there is a fit of some level of the organiational structural variable to
each level of the contingency, which leads to higher performance, whereas
misfit leads to lower performance. This fit-performance relationship is the heart
of the contingency theory paradigm. It provides the theoretical explanation of
the first two points.
2.' (E) FACTORS AFFECTING ORGANIZATION
DESIGN
The selection of an appropriate design is reliant upon several factors.
9owever the primary factors that often affect organiation design are # sie,
environment, strategy, and technology. Table ' identifies some indicators for
each of the four primary factors.
&:
Ta*+ 1, Factors !" Or#a"!$at!o" Ds!#" Dc!s!o"s
Factors I"%!cators
7ie *arge 7mall
0nvironment ;egree of complexity
;egree of dynamism
7trategy and Goals *ow cost
;ifferentiation
/ocused
Technology Task interdependence
I. S!$ a"% Or#a"!$at!o" Ds!#"
7ie is a main contingency factor that affects several aspects of structure.
The sie contingency refers to the total number of employees who are to be
organied.
7ie as a key structural variable is sub"ect to two schools of thought. The first
approach, often called the 2bigger is better3 model, presupposes that the perunit
cost of production decreases as the organiation grows. In effect, bigger
is said to be more efficient. The second approach i.e. 2small is beautiful3
revolves on the law of diminishing returns. This approach asserts that
oversied organiations and subunits tend to be beleaguered by costly behavioral
problems. *arge and impersonal organiations are said to trigger apathy and
alienation, with resulting problems such as turnover and absenteeism. Two
strong promoters of this second approach are <eters and =aterman, the
authors of the best-selling In Search of Excellence
>ecent research hints that when designing their organiations, managers should
stick to a middle ground between 2bigger is better3 and 2small is beautiful3
because both models have been oversold. In reality, a newer viewpoint says
complexity, not sie, is the central issue. . meta-analysis of :' studies
(Gooding and =agner III, '4?@, conducted between '4:' and '4?@ that related
organiational sie to performance found#
*arger organiations (in terms of assets, tended to be more productive (in
terms of sales and profits,.
There was 2no positive relationship between organiational sie and
efficiency, suggesting the absence of net economy of scale effects.3
There was ero to slightly negative relationship between subunit sie and
productivity and efficiency.
. more recent study examined the relationship between organiational sie
and employee turnover over a period of 8@ months. Turnover was unrelated
to organiational sie.
Striving for Small Units in Big Organizations , In summary, bigger is not
essentially better and small is not essentially beautiful. 9ard-and-fast numbers
regarding precisely how big is too big or how small is too small are hard to
obtain. The best that managers can do is check the productivity, %uality, and
efficiency of divisions, departments, and profit centers.
Factors Affct!"#
Or#a"!$at!o" Ds!#"
U"%rsta"%!"#
Or#a"!$at!o"s
&5
Act!-!t. A
In your opinion, whether a small or big organiation is more effectiveA Give
reason for your stand.
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II. E"-!ro"/"t a"% Or#a"!$at!o"a+ Ds!#"
Brganiations, as open systems, need to receive various inputs from the
environment and to sell various outputs to their environment. Therefore, it is
important to comprehend what the environment is and what elements are likely
to be important.
The environment of an organiation may be defined as general or specific. The
general environment is the set of cultural, economic, legal-political, and societal
conditions within the areas in which the organiation operates. The specific
environment constitutes its owners, suppliers, distributors, government agencies,
and competitors with which an organiation must interact to grow and survive.
. firm, typically, much more concerned over the composition of its specific
environment than of its general environment.
E"-!ro"/"ta+ Co/0+1!t.
0nvironmental complexity is an estimate of the magnitude of the problem and
opportunities in the organiation!s environment. This is identified by three
main factors# the degree of richness, the degree of interdependence, and the
degree of uncertainty stemming from both the general and the specific
environment.
a, E"-!ro"/"ta+ R!c2"ss
/or business, a richer environment means the economic conditions are
improving, customers are spending more money, and suppliers (such as banks,
are willing to invest in the future of the organiation. . richer environment is
also filled with more opportunities and dynamism, i.e., the capability for change.
The organiational design must enable the company to be proverbial with these
opportunities and capitalie on them. The opposite of richness is decline.
b, E"-!ro"/"ta+ I"tr%0"%"c
The link between external interdependence and organiational design is often
restrained and indirect. The organiation may choose powerful outsiders by
including them. /or instance, many large corporations have financial
representatives from banks and insurance companies on their boards of
directors. The organiation may also ad"ust its overall design strategy to absorb
or safeguard the demands of a more powerful external element.
c, U"crta!"t. a"% 3o+at!+!t.
0nvironmental uncertainty and unpredictable volatility can be particularly
damaging to large bureaucracies. The obvious organiational design response to
uncertainty and volatility is to go for a more organic form. 9owever at the
extremes, that ensures flexibility and is more adaptive to environment movement
toward an adhocracy may be important.
&@
Us!"# A++!a"cs 42r E"-!ro"/"ta+ Factors Do/!"at
In high-tech areas, such as robotics, semiconductors, and advanced materials
(ceramics and carbon fibers,, a single company often lacks all the knowledge
essential to bring new products to the market. In this case, the organiational
design must go beyond the boundaries of the organiation and enter into an
inter-firm alliances, which means announcing cooperative agreements or "oint
ventures between two independent firms. In Capan, alliance amount well
established firms in many industries are %uit common. The network of
relationship is called a Keiretsu.
Keiretsu is a Capanese word which, translated literally, means headless
combine. It is the name given to a form of corporate structure in which a
number of organiations link together, usually by taking small stakes in each
other and usually as a result of having a close business relationship, often as
suppliers to each other. The structure, fre%uently likened to a spider!s web
was very much admired in the '44+s.
Act!-!t. 5
In recent years strategic emphasis is laid upon "oint ventures or corporate
alliances. =rite the rationale behind it.
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D!ffr"t!at!o" a"% I"t#rat!o", T2 La6r"c a"% Lorsc2 St7%.
In their classic text, Organization and Environment, 9arvard researchers
<aul *awrence and Cay *orsch explained how two structural forces
simultaneously disintegrate the organiation and combine it together. They
cautioned that an imbalance between these two forces could hold back
organiational effectiveness.
;ifferentiation occurs through division of labor and technical specialiation.
Integration occurs when specialists cooperate to achieve a common goal. In
the *awrence and *orsch model, integration can be achieved through various
combinations of the following six mechanisms# (', a formal hierarchy$
(&, standardied policies, rules, and procedures$ (:, departmentaliation$
(5, committees and cross-functional teams$ (@, human relations training, and
(8, individuals and groups acting as liaisons between specialists. =hen
*awrence and *orsch studied successful and unsuccessful companies in three
industries, they concluded that# As environment complexit increased,
successful organizations exhibited higher degree of both differentiation
and integration!
Act!-!t. C
;o you find any evidence of integration in your current (or last, place of
employment A.
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Factors Affct!"#
Or#a"!$at!o" Ds!#"
U"%rsta"%!"#
Or#a"!$at!o"s
&8
D."a/!s/
;ynamism relates to the stability or instability of the environment. 7everal
authors have identified dynamism as one of the ma"or environmental
contingencies of organiations ()hild '46@$ ;uncan '46&$ Thompson '486,.
;ess and -eard ('4?5, emphasie that dynamism is not simply the rate of
change, which itself could be constant, thereby rendering the environment
predictable, but rather the degree of unpredictability. .s they state, 2;ynamism
should be restricted to change that is hard to predict and that heightens
uncertainty for key organiational members3. This corroborates the significance
of uncertainty as a strategic element of dynamism.
It is presumed that when the task and environmental uncertainty contingency
is low, the mechanical structure and when the task and environmental
uncertainty contingency is high, an organic structure produces high
effectiveness.
Mechanistic versus Organic Organizations . landmark organiation design
study was reported by a pair of -ritish behavioral scientists, Tom -urns and G
D 7talker. In the course of their research, they drew a very instructive
distinction between what they called mechanistic and organic organiations.
Dechanistic organiations are rigid bureaucracies with strict rules, narrowly
defined tasks, and top-down communication. Brganic organiations are flexible
networks of multitalented individuals who perform a variety of tasks.
Importantly as illustrated in Table &, each of the mechanistic-organic
characteristics is a matter of degree. Brganiations tend to be relatively
mechanistic or relatively organic.
Ta*+ 2, C2aractr!st!cs of Mc2a"!st!c a"% Or#a"!c Or#a"!$at!o"
C2aractr!st!c Mc2a"!st!c Or#a"!c
Or#a"!$at!o" Or#a"!$at!o"
Task definition and knowledge re%uired Earrow$ technical -road$ general
*inkage between individual!s contribution Fague or indirect )lear or direct
and organiation!s purpose
Task flexibility >igid$ routine /lexible$ varied
7pecification of techni%ues, obligations, 7pecific General
and rights
;egree of hierarchical control 9igh *ow (self-control
emphasied,
<rimary communication pattern Top-down *ateral (between
peers,
<rimary decision-making style .uthoritarian ;emocratic$
participative
0mphasis on obedience and loyalty 9igh *ow
So7rc, "urns and Stal#er $%&'%(
T.0s of E"-!ro"/"t
/igure ' illustrates the basic classification of task environments. The four
2pure3 types of task environments are # uniform-stable, varied-stable, uniformunstable,
and varied-unstable.
The simplest organiation design can be effective in a uniform)stable
environment (box ',. .lthough the environment is relatively stable, these firms
do face some uncertainties because of competitors! actions, customers!
changing preferences, and potential substitutes for their products and services.
&6
The varied)stable environment (box &, poses some risks for managers and
employees, but the environment and the alternatives are fairly well understood.
The environment is relatively stable, but employees may need considerable
training and experience to understand it and make it work.
The uniform)unstable environment (box :, re%uires managers, employees, and
organiation designs to be flexible. >apid response to sudden changes in market
demand or technologies means that companies need organiation designs that
allow for considerable flexibility and speed in allocating resources to new
product.
The varied)unstable environment (box 5, represents the most challenging
situation for an organiation because the environment presents numerous
uncertainties. This environment re%uires the most managerial and employee
sophistication, insight, and problem-solving abilities.
Factors Affct!"#
Or#a"!$at!o" Ds!#"
D#r of D."a/!s/
Lo6 U"crta!"t. Mo%rat U"crta!"t.
G /ew environmental factors exist. G Dany environment factors exist.
G /actors are similar to each other G /actors are not similar to each other.
G /actors remain basically the same G /actors remain basically the same
0xample# 7alt manufacturers, <rinting 0xample # >egistrars! offices in
firms universities Gasoline refiningH
distribution firms
Mo%rat+. H!#2 U"crta!"t. H!#2 U"crta!"t.
G /ew 0nvironment factors exist. G Dany environmental factors exist.
G /actors are similar to each other G /actors are not similar to each other.
G /actors are continually changing. G /actors are continually changing.
0xample# /ast-food firms consumer 0xample# Telecommunications firms
products firms -iotechnology firms.
Uniform Varied
D#r of Co/0+1!t.
F!#7r 1. 5as!c T.0s of Tas8 E"-!ro"/"ts
U"sta*+ Sta*+
D!ffr"t!at!o"
Strat#.
Cost La%rs2!0
Strat#.
Strat#!c Tar#t
Narro6
U"!97"ss Lo6 Cost
F!#7r 2, Portr:s Strat#!c Mo%+
Foc7s% Strat#.
U"%rsta"%!"#
Or#a"!$at!o"s
&?
III. Strat#. a"% Or#a"!$at!o" Ds!#"
Brganiational strategy refers to the way the organiation positions itself in its
setting in relation to its stakeholders, given the organiation!s resources,
capabilities, and mission. -asically two types of strategies are popular at
present# *eneric and +ompetence) based strategies!
G"r!c Strat#!s
These are in terms of cost focus and product focus. .ccording to Dichael
<orter, companies need to differentiate and place themselves differently from
their competitors in order to build and sustain a competitive advantage.
Brganiations have attempted to build competitive advantages in various ways,
but three underlying strategies appear to be essential in doing so# low cost,
differentiation, and focused. These strategies are shown in /igure &.
Low Cost
. low-cost strategy is based on an organiation!s ability to provide a product or
service at a lower cost than its rivals. The organiation!s design is functional,
with accountability and responsibility clearly assigned to various departments.
Differentiation
. differentiation strategy is based on providing customers with something that is
uni%ue and makes the organiation!s product or service distinctive from its
competition. .n organiation that chooses a differentiation strategy typically
uses a product organiation design whereby each product has its own
manufacturing, marketing, and research and development (>1;, departments
Focused
. focused strategy is designed to help an organiation target a specific niche
within an industry, unlike both the low-cost and the differentiation strategies,
which are designed to target industry-wide markets. .n organiation that
chooses a focused strategy may utilie any of a variety of organiation designs,
ranging from functional to product to matrix to network, to satisfy their
customers! preference
Co/0t"c.;5as% Strat#!s
.lthough the list of generic strategies provides a %uick general guide for many
senior managers, it is apparent that a firm needs the skills and abilities to get
the most out of the intended generic strategy. 0ventually, the firm may develop
specific administrative and technical competencies to achieve the purpose. .s
middle and lower-level managers bring about minor modifications and
ad"ustments to solve specific problems and capitalie on specific opportunities,
they and their firms may learn new skills. These skills may be recognied by
senior management and give them the opportunity to ad"ust, modify, and build
upon a generic strategy to develop a so-called competenc strateg. In the
process of building upon its capabilities, the firm may actually move generic
strategies andHor combine elements of two generic strategies.
7trategic choice refers to the idea that an organiation interacts with its
environment instead of being totally determined by it. In other words,
organiational leaders should take steps to define and manipulate their
environments, rather than let the organiation!s fate be entirely determined by
external influences.
The notion of strategic choice can be traced back to the work of .lfred
)handler in the early '48+s. )handler!s proposal was that structure follows
strategy. 9e observed that organiational structures should follow the growth
&4
strategy developed by the organiation!s decision makers. -ut the Dodel
gained popularity only in '46&, when -ritish sociologist Cohn )hild re"ected the
environmental imperative approach to organiational structure and proposed
strategic choice model based on behavioral rather than rational economic
principles. .ccording to the strategic choice model , an organiation!s structure
is determined largely by a dominant coalition of top-management strategists.
.s /igure : illustrates, specific strategic choices or decisions reflect how the
dominant coalition perceives environment constraints and the organiation!s
ob"ectives. These strategic choices are tempered by the decision minor
modifications and ad"ustments to solve specific problems and capitalie on
specific opportunities, they and their firms may learn new skills. These skills
may be recognied by senior management and give them the opportunity to
ad"ust, modify, and build upon a generic strategy to develop a so-called
competenc strateg. In the process of building upon its capabilities, the firm
may actually move generic strategies andHor combine elements of two generic
strategies.
In summary, strategy influences structure and structure influences strategy.
7trategic choice theory and research teaches managers at least two practical
lessons. /irst, the environment is "ust one of many co determinants of
structure. 7econd, like any other administrative process, organiation design is
sub"ect to the byplays of interpersonal power and politics.
I3. Tc2"o+o#. a"% Or#a"!$at!o" Ds!#"
Two important technological contingencies that influence the type of
organiational structure are the variet and analzabilit of work activities.
,ariet refers to the number of exceptions to standard procedure but can occur
in the team or work unit. Analzabilit refers to the extent that the
transformation of input resources to outputs can be reduced to a series of
standardied steps.
Factors Affct!"#
Or#a"!$at!o" Ds!#"
Or#a"!$at!o"a+
O*<ct!-s
Strat#!c
%c!s!o"s
/a% *.
%o/!"a"t
coa+!t!o"
E"-!ro"/"ta+
co"stra!"ts
Or#a"!$at!o"a+
Str7ct7r
Or#a"!$at!o"a+
ffct!-"ss
Dc!s!o"
/a8rs:
0rso"a+
*+!fs=
att!t7%s=
-a+7s= a"%
t2!cs
Tar#t /ar8ts
Ca0!ta+
so7rcs>7ss
H7/a" rso7rcs
Tc2"o+o#.
Tota+ 97a+!t.
/a"a#/"t
Corrct!- act!o"
F!#7r 3, T2 R+at!o"s2!0 5t6" Strat#!c C2o!c A"% Or#a"!$at!o"a+ Str7ct7r
So7rc, Kreitner, -obert and Kinic#i, Angelo $%&&.(, Organizational "ehavior, Ir/in
0c*ra/)1ill, 2SA
U"%rsta"%!"#
Or#a"!$at!o"s
:+
7ome "obs are routine, meaning that employees perform the same tasks all of
the time and rely on set rules (standard operating procedures, when exceptions
do occur. .lmost everything is predictable. These situations, such as
automobile assembly lines, have high formaliation and centraliation as well as
standardiation of work processes. =hen employees perform tasks with high
variety and low analyability, they apply their skills to uni%ue situations with little
opportunity for repetition. >esearch pro"ect teams operate under these
conditions. These situations call for an organic structure, one with low
formaliation, highly decentralied decision-making authority, and coordination
mainly through informal communication among team members.
9igh-variety and high-analyability tasks have many exceptions to routines, but
these exceptions can usually be resolved through standard procedures.
Daintenance groups and engineering design teams experience these conditions.
=ork units that fall into this category should use an organic structure, but it is
possible to have somewhat greater formaliation and centraliation due to the
analyability of problems.
T2o/0so":s -!6 o" t2 I/0act of Tc2"o+o#.
Thompson ('486, argues that task and technology are ma"or contingency
factors of organiational structure. 9e offers a typology of types of technology
and their respective organiational structures. Three different types of
technologies are distinguished# mediating, long)lin#ed, and intensive. These
correspond to three types of task interdependence between organiational
subunits# pooled, se3uential, and reciprocal!
0ediating technolog refers to the linking of customers, such as a bank
linking lenders and borrowers, and involves pooled interdependence. <ooled
independence means that two organiational subunits (e.g., branches of a bank,
have not direct connection, so that their interdependence is indirect, residing in
their both drawing resources from some central pool.
4ong)lin#ed technolog refers to se%uential interdependence where task . is
the input to task -. 7e%uential interdependence means that the subunits have a
direct connection, so that the output of one subunit is an input to the other subunit.
Intensive technologies use varying techni%ues according to feedback from the
ob"ect worked upon ./or example, a hospital using various diagnostic and
treatment techni%ues according to the condition of the patient, and involve
reciprocal interdependence. >eciprocal independence means that the subunits
have a two-way connection, in which the output of each subunit is an input to
the other subunit, so that they transact back and forth in an unpredictable manner.
The three types of interdependence (pooled, se%uential, and reciprocal, are
each fitted by varying degrees of mechanistic or organic structures. Thus task
interdependence can be considered to be a contingency of organic structures.
4oo%6ar%:s -!6 o" t2 I/0act of Tc2"o+o#.
Coan =oodward proposed a technological imperative in '48@ after studying
'++ small manufacturing firms in southern 0ngland. 7he found distinctly
different structural patterns for effective and ineffective companies based on
technologies of low, medium, or high complexity.
0ffective organiations with either low or high-complexity technology tended to
have an organic structure. 0ffective organiations based on a technology of
medium complexity tended to have a mechanistic structure. =oodward concluded
that technology was the overriding determinant of organiational structure.
:'
7ince =oodward!s landmark work, many studies of the relationship between
technology and structure have been conducted. Infortunately, disagreement
and confusion have prevailed. . statistical analysis of those studies bring about
the following conclusions.
The more the technology re%uires interdependence between individuals andHor
groups, the greater the need for integration (coordination,.
.s technology moves from routine to non-routine, subunits adopt less formalied
and JlessK centralied structures.
2.? OTHER FACTORS
H!stor.
The organiation!s present structure may have developed over a number of
years, as functions have been added, changed or deleted. Bbviously, the older
the organiation, the more significant history is likely to be. It is also more
likely to have determined the current structure if there have been relatively
little pressures on the organiation to adapt to changing circumstance, either
because it has monopolistic power or because the industry in which it operates
is relatively slow-moving.
C7sto/rs a"% Mar8ts
The organiation structure is also affected by the type of market and customers
it serves, and in a customer-responsive environment this should be one of the
main determinants of structure. If the organiation is providing services to a
broad range of customers in a large number of locations, it may need to have
many branch officers, as do -anks, the <ost Bffice and so on.
The advantages of a customer-based structure are as follows.
meeting customers! re%uirements is more likely to lead to long-term success
for the organiation$
it gives a clear focus to the organiation$ and
it enables an emphasis to be put on the re%uirements of different customers
groups, thereby improving overall service %uality.
The main disadvantages are as follows#
there is a need to keep a close eye on market re%uirements which could
re%uire a lot of research$
to be responsive to customer re%uirements the organiation needs to be very
adaptable so that it can respond %uickly to change$
in many cases the provision of different services for different customer
types may not allow for the most effective use of resources or for
economies of scale$
it may not always be economical or profitable for the organiation to provide
some of the services re%uired by customers, yet failure to do so will result
in loss of goodwill$ and
in some environment, the need to provide services outside normal working
hours or around the clock will mean that shift working, stand-by and call-out
arrangements will need to be introduced which will affect the way the
organiation is structured
Procsss
The processes used within the organiation also affect the structure. .
production line process consists of a number of distinct tasks carried out by
Factors Affct!"#
Or#a"!$at!o" Ds!#"
U"%rsta"%!"#
Or#a"!$at!o"s
:&
people specialiing in those tasks at different stages of the process. The
underlying principle behind this approach is that specialiation means people can
develop high skills and speed, resulting in high output at low cost. There are
of course disadvantages to this approach, primarily in terms of maintaining the
motivation and morale of production line operatives. The advantages of
organiation of the basis of process or technology are that#
it allows for task specialiation which means that people can develop a high
degree of skill#
the emphasis on the outputs from a particular process can result in high
productivity$
the structure is easy to understand and manage and there is likely to be
little ambiguity in the outputs to be achieved$
a structure that is driven by the organiation!s processes is likely to re%uire
less supervisory input$ and
processes that are particularly dirty, noisy or haardous can be grouped
together.
The main disadvantages are that#
there is a risk that by concentrating on processes the organiation could lose
sight of the inputs re%uired$
there is a greater need for the company!s various processes to be integrated
to ensure that they work towards the company!s overall ob"ectives$ and
there is less focus on the customer.
Po0+
<eople in the organiation affect the structure in a number of ways. 7tructures
do not "ust appear, they are the result of people!s views and beliefs and their
approach to managing the organiation. The structure is also be affected by
the types of "obs and people within the organiation. 7tructures with a large
number of professionals are more likely to involve team working, and therefore
to be relatively flat compared with an organiation that has to accommodate a
range of "obs from the production line operative to the chairman.
Go#ra02.
The geographical spreading of an organiation affects its structure mainly
because of its need to be near raw materials or customers,. =here there is a
significant degree of geographical distribution, there is likely to be more need
for careful co-ordination and control than with a single site location.
=hen there is a strong need to provide products or services within a particular
geographical area, the organiation may be divided into regions or areas, with
each being a fully self-contained, miniature version of the parent organiation.
In many cases, understanding the particular needs and re%uirements of the local
area is of sufficiently fundamental importance for location to be the most
significant factor in organiation design.
The advantages of a geographically based structure are#
>esponsiveness to local needs$
It makes firm able to provide a complete service at one location$
. degree of autonomy can provide for more efficient decision-making and
increase "ob satisfaction$ and
The organiation can recruit locally based staff$ it can facilitate the training
and development of managers who can %uickly gain varied experience in
smaller branch offices before moving to larger "obs.
::
Pro%7cts a"% Sr-!cs
The structure may be determined by the particular products and services
provided. *arge and diverse organiations have separate divisions because they
are dealing with very different products and services. 7imilarly, the <ost Bffice
has separate organiations for the various services it provides such as mail
delivery (>oyal Dail,, parcel delivery (<arcel force, and counter services (<ost
Bffice )ounters *imited,.
The advantages of product specialiation are that#
it provides a focus on a specific area and encourages the development of
expertise in the provision of that product or service$ and
it is likely to provide a service that is more responsive to customer
re%uirements.
The disadvantages are that#
too much focus on the product may overlook customers! real needs$ and
it may not make the best use of the organiation!s resources.
2.@ ORGANIZATIONAL EFFECTI3ENESS
Brganiations are constructed to be the most effective and efficient social units.
The actual effectiveness of a specific organiation is determined by the degree
to which it realies its goals. The efficienc of an organiation is measured by
the amount of resources used to produce a unit of output. Butput is usually
closely related to, but not identical with, the organiational goals. /or instance,
/ord produces automobiles (its output,, but its goal seems to be profit-making.
The unit of output is a measurable %uantity of whatever the organiation may
be producing.
Brganiational effectiveness can have a broad meaning that includes efficiency,
profitability ()hild '46@,, employee satisfaction (;ewar and =erbel '464,,
innovation rate (9age and ;ewar '46:,, or patient well-being (.lexander and
>andolph '4?@,. Brganiation effectiveness can be defined as the ability of the
organiation to attain the goals set by itself (<arsons '48',, or by its ability to
function well as a system (Luchtman and 7eashore '486,, or by its ability to
satisfy its stakeholders (<feffer and 7alancik '46?$ <ickle and /rieddlander
'486,.
In its annual Dost .dmired )orporations survey, Fortune Dagaine applies the
following eight effectiveness criteria#
%uality of management.
%uality of productsHservices.
innovativeness.
long-term investment value.
financial soundness.
ability to attract, develop, and keep talented people.
responsibility to the community and the environment.
wise use of corporate assets.
/or a better understanding of this complex sub"ect, four generic approaches to
assessing an organiation!s effectiveness may be considered. These
effectiveness criteria employ e%ually well to large or small and profit or not-forprofit
organiations. Doreover, the four effectiveness criteria can be used in
various combinations (>efer /igure :,.
Goa+ Acco/0+!s2/"t, Goal accomplishment is the most widely used
effectiveness criterion for organiations. Mey organiational results or outputs
are compared with previously stated goals or ob"ectives. <roductivity
improvement, involving the relationship between inputs and outputs, is a
common organiation-level goal.
Rso7rc Ac97!s!t!o", This second criterion related to inputs rather than
outputs. .n organiation is deemed effective in this regard if it ac%uires
necessary factors of production such as raw materials, labor, capital, and
managerial and technical expertise.
I"tr"a+ Procsss, 7ome refer to this third effectiveness criterion as the
2healthy systems3 approach. .n organiation is said to be a healthy system if
information flows smoothly and if employee loyalty, commitment, "ob
satisfaction, and trust prevails. Goals may be set for any of these internal
processes. 9ealthy systems, form a behavioral standpoint, tend to have a
minimum of dysfunctional conflict and destructive political maneuvering.
Strat#!c Co"st!t7"c!s Sat!sfact!o", Brganiations both depend on people
and affect the lives of people. )onse%uently, many consider the satisfaction of
key interested parties to be an important criterion of organiational
effectiveness. . strategic constituency is 2any group of individuals who have
some stake in the organiation-for example, resource providers, users of the
organiation!s products or services, producers of the organiation!s output,
groups whose cooperation is essential for the organiation!s survival, or those
whose lives are significantly affected by the organiation3 ()ameron. '4?+,.
7trategic constituents or stakeholders can be identified systematically through a
stake holder!s audit. . sta82o+%r a7%!t enables management to identify all
parties significantly impacted by the organiation!s performance.
Danagers need to identify and seek input from strategic constituencies. This
information, when merged with the organiation!s stated mission and philosophy,
enables management to derive an appropriate combination of effectiveness
criteria. The following guidelines are helpful in this regard#
the goal accomplishment approach is appropriate when 2goals are clear,
consensual, time-bounded, measurable ()ameron, '4?8,.
the resource ac%uisition approach is appropriate when inputs have a
traceable impact on results or output The internal processes approach is
appropriate when organiational performance is strongly influenced by
specific process (e.g., cross-functional teamwork,.
the strategic constituencies approach is appropriate when powerful
stakeholders can significantly benefit or harm the organiation.
The key thing to remember is 2no single approach to the evaluation of
effectiveness is appropriate in all circumstances or for all organiation types