Question 20

The structure of an organisation can have both negative and positive impacts on its overall performance in a given environment. With reference to the mechanistic-organic continuum, show how the key principles governing organisational design and structure can be used to explain the types of organisational structures that are found in differing business environments.

Organisational structure determines how the roles, power and responsibilities are assigned, controlled and coordinated, and how information flows between the different levels of management in an organisation. Organisational design is a strategy that defines how a company unifies its departments and individuals in order to achieve goals.

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Basic organisational design revolves around two organisational structures, mechanistic and organic. A mechanistic organisation is a rigid and tightly controlled structure, while an organic organisation is highly adaptive and flexible. The key principles in organisational design are work specialisation, departmentalisation, chain of command, span of control, centralisation and decentralisation, and formalisation.

Work specialisation was viewed as a way to divide work activities into separate job tasks. An organisational structure that is mechanistic is highly specialised and bureaucratic. This is beneficial to the organisation, because it helps the organisation to be more efficient, and it helps employees to know their specific tasks. On the other hand, work specialisation can cause a negative impact on the organisation, since employees may get bored and demotivated after having to repeat the same tasks consistently. This will result in low productivity and low quality of the product. However, organic organisations are more team based, because of the level of flexibility that is being required from them.

Departmentalisation is the basis by which jobs are grouped together in an organisation. It is another key principle that is necessary within an organisation. Organisations that are mechanistic have a rigid departmentalisation. This positively impacts the organisation since the jobs are grouped together to help the organisation to be more effective and efficient. It also has negative impacts of poor communication across functional areas and a limited view of organisational goals. Organisations that are highly organic uses cross functional teams. This can be defined as a work team composed of individuals from various functional specialties. Organisations benefit from these cross functional teams, because employees from different functionalities are able to deliver work improvement ideas.

The chain of command are important ways of maintaining control in organisations. They are authority, responsibility and unity of command. In an organisation, managers need to consider when organising work, because employees need to know who to report to when they encounter a problem. Thus, managers need to apply a chain of command within the organisation. In a mechanistic structure that is tightly controlled, there is a clear chain of command, since a bureaucratic system is in place. This, therefore, causes employees to follow a lot of rules and are expected to be under the authority of their manager. In contrast, organisations with an organic structure has little or no direct supervision, because it requires employees to be flexible. This allows employees to feel comfortable.

The idea of span of control is that managers should directly supervise no more than five to six individuals. The span of control for a mechanistic organisation is narrow. The manager to employee relationship is small, since employees require more supervision. This, however, can be costly to organisations. Managers salaries are usually high and the more middle level managers that are required to control the employees within the organisation, the higher the payroll will be. This can cause a reduction of profit for the organisation. An organic structure that uses a wider span of control will operate a smaller payroll with the same amount of employees, since they require less managers to manger the organisation.

Centralisation and decentralisation are structural decisions about who makes decisions – upper level managers or lower-level employees. Centralisation is the degree to which decision making takes place at upper levels of the organisation. If top managers make key decisions with little input from below, the organisation is more centralised and mechanistic. On the other hand, the more that lower-level employees provide input or actually make decisions, the more decentralised and organic they will be.

Formalisation refers to how standardized an organisation’s jobs are and the extent to which employee behaviour is guided by rules and regulations. In a mechanistic structure, formalisation is high, while in an organic structure formalisation is low.

An organisations structure should support the strategy. If the strategy changes, the structure also should change. An organisation’s size can affect its structure up to a certain point. Once an organisation reaches 2,000 employees, it’s fairly mechanistic. An organisation’s technology can affect its structure. An organic structure is most effective with unit production and process production technology. A mechanistic structure is most effective with mass production technology. The more uncertain an organisation’s environment, the more it needs flexibility of an organic design.

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