Problem/Solution Paper: Riordan

Key Concepts of Organizational Design

Organizations today are faced with unique challenges that threaten their survival as a result of continuous change in the environment forcing businesses to react to the demands of those changes. Businesses today are realizing that the once powerful centralized bureaucracies associated with steep hierarchies that once dominated the industries have long been outdated and replaced with a learning environment which enables employees to express themselves in order to bring new and creative ideas to the organization. As a result, the concept of organizational design is becoming an integral part of the structuring process in today’s organizations which will be detailed throughout this discussion. This analysis presents the reader with an explanation of the importance of various organizational design choices. The characteristics, advantages, and disadvantages of various organizational structures are offered to explain to the readers the process in its entirety. The relationship between strategy, structure, and process in organizations is assessed. The analysis of the relationship between organization design and decision-making processes is also given.

Importance of Organizational Design Choices

“Organizational design is the structure through which an organization allocates people and resources to tasks and establishes the authority relationships that control activities and seek to achieve goals” (Lean Advancement Initiative, 2005). In order for an organization to work at its maximum, energizing leadership coupled with a strong organizational structure and design is crucial (Leadership-and-Motivation-Training.com, 2007). The importance of organizational design choices is vital in that ignoring the signs usually results in organizational decline.

Making wise decisions concerning the design of an organization will allow the organization to deal with contingencies that are put in place to prohibit these issues from reoccurring. A strong organizational design builds the foundation for an organization’s structure by creating more value within the organization which leads to competitive advantage for the company. Strong organizational design choices will also assists the organizations ability to become a more efficient and innovative environment. “Organizational design involves difficult choices about how to control-that is, coordinate organizational tasks and motivate the people who perform them-to maximize an organization’s ability to create value” (Jones, 2004, p. 1).

In an effort to design a learning environment that fosters creativity, an organization may decide to consider only highly creative individuals however, if the existing environment is not adequately designed those highly creative employees will lose interest and employee morale and productivity will continue to decrease as a result. Wise organizational decisions are choices that are fully aligned and share the same vision focusing on the issues plaguing the business.

In order for an organization to create a successful design, a culmination of people and equipment should be proposed to work towards a more technical environment. High performance organizational design choices would also entail designing a flat organization structure “that has few levels in its hierarchy” (Jones, 2004, p. 6). The organization would also be more principle based rather than rule based which is more evident in a centralized environment. Finally, wise decision choices lead towards an environment committed towards constant training and learning. These organizational design choices once implemented, will create a stable foundation for the actual organizational structure.

Organizational Structures

“An organizational structure is the pattern or arrangement of jobs and groups of jobs within an organization” (Organizational Structure, 2007). To ensure long-term success a suitable organizational structure recognizes and addresses the interest of employees and the business of the organization. “As an organization grows, employees increase in number and begin to specialize, performing widely different kinds of tasks; the level of differentiation increases; and coordinating employees’ activities becomes more difficult” (Jones, 2004, p. 4).

One characteristic of an organizational structure is to divide the various tasks of the organization into specialized jobs. Here the organization begins to form the units within the organization known as departments for employees who specialize in a particular area. This will ensure that the proper employees are placed in the appropriate department.

Another basic characteristic of an organizational structure is to implement a hierarchy of authority to determine various levels of control. The size and height of the structure is determined by the number of levels included in each hierarchy. “An organization in which the hierarchy has many levels relative to the size of the organization is a tall organization” (Jones, 2004, p. 6). An organization that consists of too many hierarchical levels suffers from miscommunication which can affect the organization’s profitability. As the company grows, the manager span of control is increased in order to control the number of subordinates a manager manages directly (Jones, 2004, p. 25). At the upper-level executive’s discretion, he or she may decide whether to increase or decrease the manager’s span of control in order for the managers to control the subordinates and delegate tasks successfully.

A characteristic of organizational structure that can be used to solve the issues concerning too many managerial levels is known as decentralization. The decentralization process calls for fewer managers. “When authority is decentralized, the authority to make significant decisions is delegated to people throughout the hierarchy, not concentrated at the top” (Jones, 2004, p. 37). During the decentralization process the organization attempts to flatten the organizational structure in order to lessen the amount of hierarchical levels in a tall organizational structure to assign control and authority to lower level managers. These processes are all contingent on the various type of organizational structure implemented by the organization.

Within the various organizational structures exists many advantages and disadvantages that offer organizations a variety of alternatives. These structures are known as functional structure, product structure, market structure, geographic structure, and matrix structure. The functional structure