Organizational Structure

MBA 621

Organizational Structure

Organizational structure plays an important role in day-to-day functions of an organization. The delegation of authority, work specialization, and employee reporting framework are some of the elements that help determine what the organizational structure should be. An efficient structure will facilitate decision making and smooth the span of control or scope managers have over operations.

The first and most common structure type that managers would choose for a manufacturing firm when cost-minimizing is the primary strategy would be the form of bureaucracy. Preferred especially when highly routine activities produce volumes of identical products, a bureaucratic organizational structure allows for efficient production through high formalization and standardized operations. Also common in mass production companies is the separation of work activities into specific departments. This separation allows for inexpensive labor costs because employees are only specialized in one area or functional department therefore requiring less overall knowledge and talent to perform it successfully. The cost of middle and lower level managers is also reduced due to the centralized decision making process.

Mintzberg in 1979 stated that “Organizations having a pure bureaucratic structure tend to be old, large, and regulated”. When an industry or environment in which an organization is working becomes completely static, the bureaucratic type of structure may work perfectly well. The problem is, however, that it is rare to find any modern economic market that will remain completely static. So in the scenario presented, a mechanistic model with rigid departmentalization and high specialization may be successful in the short term of the business life, but eventually the tall hierarchy will become outdated.

In order to properly design a structure for the production business described in the case we would definitely need more knowledge about the company such as the amount of rules and regulation associated with production of their goods, the number of employees they have, certain external influences, and the degree of routine-ness found in daily operations. Regardless of type of business we operate in; certain principles will remain the same. Obviously, the structure must comply with the strategy. The whole structure should be divided into specialty areas but the number of levels should be as low as possible. The number of employees managed should vary in accordance with the nature of their functions and no doubts should exist over whom an employee should report to. And most importantly, the structure should be designed to allow changes in the operating environment.

To compete effectively, the company must avoid becoming operated by a top-down approach in which considerable direction and control are used and departmental barriers develop restricting communication and productivity. In an era of rapid change and high technology, companies will need to shift accountability from the use of rigid, centralized management controls and must instead focus on streamlining operations, and empowering workers with the knowledge, skills and resources to do their jobs.

It is important to remember that the structural design we choose will inevitably affect performance and satisfaction.

So together with what little we know about this commodity producing company and the knowledge we have regarding typical structures and design; we must develop a structure that matches a low cost, customer oriented strategy, and will positively contribute to company performance. In efforts to avoid problems such as conflicting department concerns, inefficient problem solving and low employee moral a team structure option may be used. In a team structured environment the need for middle management will be eliminated and replaced by special and generally knowledgeable team leaders. This system allows for a smooth interaction between departments and a better flow of information. Also in a team structured environment, employee satisfaction is