Key Concepts of Organizational_design

Key Concepts of Organizational Design

Fructuoso U. Rama Jr.

MMPBL/550: Creativity, Innovation, and Organizational Design

April 11, 2011

An integral part of organizational theory is organizational design; oftentimes it is important to reshape management structure and change organizational culture to achieve organizational goals. Organizational design comes in several types, which an organization can employ and implement, but an organization must be aware of the advantages and disadvantages that come with it. Regardless of which organizational structure is in place, one must keep in mind that the organization has to be organized and well designed to be successful. When selecting structure suitable for the organization, the management must complete several processes and must keep in mind that as the company experiences growth, the more complex organizational design becomes. In this paper, the topics are the importance of design choices, organizational structures, relationship between strategy, structure, and process in organizations, and the relationship between organizational design and decision-making process. Organizations exist in a changing and uncertain environment, and constantly deal with problems and new challenges. Therefore, managers must understand the concepts involving organizational designs if companies want to prosper, survive, and perform effectively.

Importance of Organizational Design Choices

Organizational design enhances employee satisfaction, develop financial performance, and improve customer satisfaction hence, competitiveness for the organization. Galbraith (2002) stated, "The framework for organization design is the foundation on which a company bases its design choices" (p. 9). This framework includes sequence of design policies that management controls and influenced by employee's behavior; these policies are tools that management uses to mold the behaviors and decisions of the organization successfully. Galbraith (2002) discussed the star model types of organizational design framework, which consist of strategy, structure, processes, reward, and people or human resources policies (Galbraith, 2002).

Strategy – it is like a blueprint of company's success. "It is important in the organization design process because it establishes the criteria for choosing among alternative organizational forms. Each organizational form enables some activities to be performed well while hindering others" (Galbraith, 2002, p. 10). Structure - it establishes the authority and control in the organization. Structure is important because it offers the organization with different structure policies such as specialization, shape, distribution of power, and departmentalization. Specialization is the job expertise required to accomplish a task, shape is the number of people in each department, distribution of power refers to the vertical and lateral movement of within the department to manage issues, and departmentalization refers to the foundation for creating departments at different levels of the structure (Galbraith, 2002). Processes – it is the operating actions of the organization. Vertical and lateral processes provide the organization with planning, budgeting, interactions with customers, and serves as the prime mover in organizational management (Galbraith, 2002). Reward - "The purpose of the reward system is to align the goals of the employee with the goals of the organization. It provides motivation and incentive for the completion of the strategic direction" (Galbraith, 2002, p. 12). Reward systems are effective only if combined with the other design choices. People - this part of the model rule over the human resources policies that simultaneously develop people and organizational capabilities. Human resources policies produce talented people required by the strategy and structure of the company (Galbraith, 2002).

Successful production and innovation are a sign of a good organizational design but the appropriate design choices comes from the organizational structure that has been established.

Organizational Structures

Several types of organizational structures are available for a company to adopt. Organizational goals and objectives are achieved when the organizational skills and capabilities are controlled through organizational structure (Jones, 2004). Most organizations adopt divisional structure vice the traditional hierarchal because it solves and manage problems resulted from products produced in different locations for different customers. Divisional structure presents organizations with manageable and compact subunits within the company (Jones, 2004). In