Introduction
Designing an organizational structure is critical to managers and selecting the correct model, which fits your businesses core competencies and assets, can be a challenge. In reality, as any business evolves, chances are the organization will take on several of the below, outlined, organizational design models. Why is organizational design important? It is at the heart of how your business will function, determines how business decisions will be made, how many managers/employees a company will have and how it will conduct business. Without some form of organization design, whether traditional or contemporary, it will be difficult to focus your company and your human assets to maintain a competitive edge over the competition.
The Idea in a Nutshell
The organizational design of a company reflects its efforts to respond to changes, integrate new elements, ensure collaboration and allow for flexibility. Organizational design models have evolved over time due to several factors including technological advances, research of historical data regarding profitability of past companies and market changes. Traditional organizational design models include; simple structure, functional structure and divisional structure. Contemporary design models include; team structures, project structures and boundary less organizations. All have their distinct advantages and disadvantages which we will explore further.
The Top Ten Things You Need to Know About Organizational Design Models
1. Simple structures are typical for businesses in the early stages of development. They usually have one primary decision maker (owner/president) responsible for decisions in all functional areas. Span of control or number of employees overseen by one individual is greater than in other design models and very few rules exist.
2. Functional structures quite simply group occupational classes together. For instance, all HR professionals work together while all accountants have their own department. Operations exist in their own world while payroll acts independently of the other groups. This model encourages technical expertise and reduces duplication of activities.
3. Divisional structure is a design model that group specific business groups together. Perhaps those in the same industry (e.g. oil & gas) form one group while construction makes up another, separate business unit. This is typical in large companies that serve more than one industry and/or that have grown dramatically through merger and acquisitions.
4. Team structures assign specific work “teams” which are comprised of employees for different functional groups, to complete work tasks/projects in the manner they feel is best. Employee empowerment is the key and while freedom exist with little direct oversight, each team is completely responsible for the work of their group is assigned.
5. Project structures assemble teams of employees with specific skill sets and assets to work from project to project. The teams form and disband as work requires and this type of structure usually eliminates the bureaucracies of large organizations, specifically slow decision making processes. When one project is completed, employees move on to the next project, never returning to formal departments.
6. Boundaryless organizations have no limitations from horizontal, vertical or external boundaries. Walls are broken down and little actual structure exists between external customers, internal departments or functional groups and even vertical organizational levels of management. Work specialization is minimized thereby reducing departmentalization allowing creativity and most importantly employee empowerment.
7. Organizational designs today should support employees in doing their work flexibly but also effectively and efficient. Balancing these two items is at the heart of many touch decisions of managers in today’s organizations. The question should be which design model would best compliment your organization and be competitive by efficient work and cost savings while maintaining the best employees and talent possible, which can mean flexible work schedules.
8. Connecting employees in this new age of technology is crucial to maintain qualified resources. Gone are the days of all hours worked must be at the office and under the boss’s nose. Today, thanks to advances in the web and virtual programs, employees can be just as effective from home on the couch or in another state while visiting family.
9. Learning organizations know how to shake and roll. They are jumpers and earth shakers, experts at adapting to changes in the business environment and market fluctuations. Employees continuously evolve with advancements in technology and industry best practices continuously improving their ability to make decisions that keep the companies competitive advantage over the competition.
10. Most every company in today’s day and age are itching to go global. How does that affect organizational design? Well, greatly. While some models will work anywhere, cultural differences are at the heart of whether the organizational design you choose for your organization’s internationals locations will fail or succeed. Authority is valued differently in different areas of the world and freedom, acceptance, even colors make a difference. Did you know the color pink is unacceptable to men in China and could dramatically affect your marketing campaign? A CEO located in the United States certainly would more than likely be unaware of the offense of that color; however a project structured team, handling the business in China would have made that catch, altered the marketing strategy and perhaps saved the company thousands.
The Video Lounge
The above video clip does a great job in laying out several of the different options for organizational design. Functional, Product, Customer, Geographical and Matrix designs are all discussed in details and the speaker even gives on pro and one con per design choice.
My Take
Organizational design is still a paramount concept in business today. In fact, a company cannot exist except to be organized in one of the above mentioned ways. Selecting the right design model and recognizing when the organization has outgrown the one you choose first are critical to your success as a manager. Study them carefully and research competitors in your industry but do not be afraid to lead the way.
References
CliffsNotes.com. What is organizational design? 20 Jul 2010.
http://owl.English.Purdue.edu/owl/resource/560/01/
Contact Info: To contact the author of “Top Ten Management on Organizational Design,” please email Dustin Lane Dier at Dustin.Dier@selu.edu or Dustin.Dier@yahoo.com.
BIOGRAPHY
David C. Wyld (dwyld.kwu@gmail.com) is the Robert Maurin Professor of Management at Southeastern Louisiana University in Hammond, Louisiana. He is a management consultant, researcher/writer, and executive educator. His blog, Wyld About Business, can be viewed at http://wyld-business.blogspot.com/. He also serves as the Director of the Reverse Auction Research Center (http://reverseauctionresearch.blogspot.com/), a hub of research and news in the expanding world of competitive bidding. Dr. Wyld also maintains compilations of his student’s publications regarding management concepts (http://toptenmanagement.blogspot.com/), book reviews (http://wyld-about-books.blogspot.com/) and international foods (http://wyld-about-food.blogspot.com/).
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