Organizational Structure And Design Essay

Contemporary Organizational Structures Essay

Several organizational structures exist in the business world but which one is more effective and efficient? This question is faced by many business owners. "Structure defines responsibilities, relationships and communication channels in an organization." (Payne, 2007).The best way to determine which structure might work is by doing benchmarking analysis to see what other companies chose for their structure and why. "Strategy needs to match structure if the organization is to achieve a competitive advantage. Structure affects an organizations internal communications and controls. Strategy is influenced heavily by culture" (Payne, 2007). The following companies. Microsoft, TD Ameritrade, Inc and Dell, have very different structures and yet they all function effectively. Conducting analysis of them helps to understand why.

Microsoft is a company that produces a set of software technologies for connecting information, people, systems, and devices. After studying the website of Microsoft I came to the conclusion that this company uses a flat structure. Reading about Board Committees, I've learned that Microsoft's Board has five committees an Antitrust Compliance Committee, an Audit Committee, a Compensation Committee, a Governance and Nominating Committee, and a Finance Committee, each of which is responsible for its group (division) companies activities, this helps me to conclude that this company uses a flat structure and its decentralized. Decisions are made within the division and reported directly to Board of Directors.

This company is a "virtual" for several reasons. Some of the reasons are Microsoft has offices world wide according to the Microsoft Worldwide Home page. It has offices in more than 90 countries ( I counted) and its customers can place an order over the internet, phone and by fax - in order for the company to be able to provide such services, it must have a network of outside specialists that all are linked and able to communicate with each other. "Organizations succeeding at virtual collaboration have designed appropriate business and knowledge processes, created thoughtful policies, and monitored process implications and outcomes. They understand the pace at which virtual collaboration is comfortably absorbed by the organization and have deployed the necessary infrastructure to support repeated successes" (Research and Markets, 2008). I believe Microsoft has dual-authority structure. It offers variety family products, such as office, windows, servers, developer tools, games, etc. All these products are supported by different groups though they are able to connect and communicate to each other easily, in other words two -boss employees of two different family groups might work together on a product to share expertise and recourses.

Microsoft has very complex network structural design that works...

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Table Of Contents


Classical Approaches to Organizational Structuring

Innovation-Driven Organizational Structures

Core Organization Structure Elements

Mechanisms for Organizational Coordination

The Design Parameters

Models for Grouping




In line with Taylor, Fayol, and Weber’s conceptualizations, traditional organization structures are essentially based upon the fundamentals of division of labor, need for supervision, and centralization or unity of command. Organizations following in the footsteps of these fundamentals may very well be regarded as effective as well as efficient, and are static (Takahashi & Takahashi, 2006).

Nonetheless, this framework would not work for organizations that practice a more complex, turbulent, and uncertain cultures like those working on innovation and uniqueness. This is because the framework for static organizations has rigid divisions and labor specializations, which do not fulfill the requirement of agility and flexibility required by innovative organizations. Here flexibility and agility not only limit to the employee performance, but also extends towards overall organization’s capacity to bend as per the newly rising demands and customer needs. Here innovations are being stressed-upon because in today’s world, the survival of any organization depends largely upon its capability to innovate and grow along; hence, to help organizations walkthrough these challenges, an affirmative role can verily be played by project teams, problem solving groups, and taks rotation that provide experience based learning, sharing of knowledge and increased interaction (Jensen et al., 2007). Despite the existence of a widespread retrospect on approaches for organizational structure that support organizational agility and flexibility to innovate – ultimately resulting in effectiveness - there still are quite a few companies out there that prefer going for the decision-making or coordination structures, and classical methodologies to address organizational goals; doing so eventually leads them to various challenges towards the attainment of organizational effectiveness and efficiency built upon innovation and competitive advantage which can be deemed most important organizational goal in the contemporary business environment (Worey & Lawler III, 2006).In an attempt to attain organizational efficiency and effectiveness in relation to innovation and operation management, companies tend to come up with their own – new – structures and methodologies that they perceive would tailor to match organizational needs and requirements; they base their structures and methodologies upon the preexisting literature available, assuming that their challenges towards effectiveness are similar to the ones documented. Hansen and Birkinshaw (2007) brought forward an integrated framework called the innovation value chain so as to analyze the various processes appointed by organizations – from the beginning to the end – across its various departmental levels so as to highlight the precise challenges and their location.

Classical Approaches to Organizational Structuring

The traditional organizational structures based on the widely known classical school of organizations – built upon theories proposed by Fayol, Ford, Taylor and Mintzberg called Machine Bureaucracy – are signified by virtue of ” can be signified by either large-scale production of standard products in assembly lines, or by the production of a more diversified range of products but in a relatively smaller level of integration in operations;these organizational structures may be effective under the predictable and consistently growing markets, but would turn out to be largely ineffective under markets where there are uncertainties, and / or the company is involved in innovative production (Zarifian, 2001).

From the classical perspective mentioned earlier, organizational structures are assumed to have optimal efficiencies, and are thought to operate under constant environmental variables that are not changing. Scholars contend that an organizational structure can only be deemed optimal if it can sustain its efficiency and effectiveness under a variety of situations (Takahashi & Takahashi, 2006). Nonetheless, classical approaches to organizational structures also signify them on the basis of certain identified attributes like division of labor, horizontal and vertical specialization, behavioral formalization, need for supervision, and authority and control. But addition of these attributes into an isolated / separate unit directly affect classical organizations in an ineffective and inflexible manner, making it too slow in comparison (Mintzberg, 2003).

The prime motive of these organizations is to maximize their efficiency levels and to purify their effectiveness – in utilizing economies of scale, resources, and large-scale production of standard level products, which are basically the core characteristics of an environment that is stable and has a lower level of competition.

Nonetheless, in economies where the sectors are growing consistently, the only strategy that can be applied for the attainment of a sustainable competitive advantage is through having a diversified portfolio, for service providing firms, manufacturing firms, and those engaged in innovation. Organizations operating under the classical approach under such a competitive paradigm would not be able to survive anymore, particularly such organizations can no longer sustain the increased demand for flexibility and agility in decision making, do not encourage mutual – informal – cooperation among employees, and fail to distill development of knowledge and individual learning, which are about the most significant ingredients of developing an effective organizational structure (Zarifian, 2001; Takahashi & Takahashi, 2006; Jensen et al., 2007).

Innovation-Driven Organizational Structures

In terms of effectiveness of design, the organizations that encourage and fortify the establishment and working of R&D procedures, and the knowledge and skills gained through an increased coordination, interaction, and practice between cross-functional employees can be regarded as the most successful (Jensen et al., 2007).

As elaborated earlier, classical approach to forming organizational structures is not as effective for those organizations that tend to have a superior performance in terms of products/services, and frequently innovate their products/services and key procedures to ensure long term sustainability and competitive advantage.

To address the needs of such progressing organizations, there is a need to appoint a more agile and flexible approach towards organizational structures, so that organizations can bend as and when required as per the business/market needs. This approach may also be called an adhocratic or organic structure, and permits the retrieval of knowledge and skills through direct engagement in practical experiences, coordination, and interaction, consistently capitalizing on the organizational capacity (Jensen et al., 2007). Such an organizational structure would also help organizations to demonstrate readiness to change in situations, as highlighted by Zarifian (2001) – interpreting to be the ability to cope with the inevitable uncertainties in the business environment, and unforeseen circumstances which are common for organizations that are committed towards the attainment of growth and productivity consistently.

Unfortunately, no organizational structure paradigms have – as of yet – been established to cater such transitioning organizational environments – like the ones elaborated by Worley and Lawler III (2006). However, among all the cited authors in this essay, there seems to be a mutual consensus upon the fact that an effective organizational structure is one where there exists adequate flexibility and agility, greater level of coordination and interaction among employees, and an increased investment and interest towards research and development.

Mintzberg (2003), in one of his most prominent contributions on organizational configurations considers “Adhocracy” as being strictly adhering to the delivery of innovation and competitive advantage. His statements are contrary to the classical approaches, and seems to have a great level of distance from the approaches of unity of command, planning and control systems, and high behavioral formalization. His framework may be best defined as:

- Existence of ad-hoc based project teams and an organic type structure;
- Non-adherence to a high degree of formalization;
- Strong adherence to the horizontal labor specialization built around individual formal knowledge;
- An existence of a mutual cooperation among organizational teams regardless of formal coordination;
- Products/processes are not standardized or formalized
- Existence of decentralization for inter and intra team decision making activities.

According to Jensen et al. (2007) organizations where there is an increased practice of establishing knowledge on practical experience and sharing of knowledge through interaction, the following characteristics are demonstrated and usually present, which are also in line with Mintzberg’s adhocratic structure:


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