Impact of Organizational Structure on Management - Essay Example

Management studies Contents Contents 2 Introduction 3 Discussion 3 Impact of organizational structure on culture 3 Impact of organizational structureon management 6 Impact of organizational structure on performance 9 Conclusion 11 References 13 Introduction This report is prepared with the aim of studying and evaluating the impact of organizational structure on organizational management, culture and performance. Organizational structure is one of the most influential concepts in organizations, irrespective of the level or type of operations of the organization. Organizational structure is the systematic architecture of the business functions, competences, talents, leadership and management. The concept of the structure of an organization has evolved as a basis for the organization of functions, operations as well as roles and responsibilities. Also, it includes the mechanisms of problems solving, integration and authority relationships. Thus, the structure of an organization acts as basic framework which facilitates many other aspects of the organization. These may include aspects like culture, management, productivity, efficiency etc. Since the organizational structure formally defines a framework in an organization, therefore, it may have major impacts on the management, culture and performance of the organization. Discussion Impact of organizational structure on culture Organizational structure and organizational culture are two highly researched concepts in the domain of organizational studies. Both those concepts are significant in this field because they are active influencers of performances and behaviours of the members of an organization as well as that of the whole organization (Schein, 2004). Organizational culture can be of two major types. The first type of organizational culture includes criteria like task and role cultures and reflects domination of work conditions over social structures. The second type includes people culture and power culture and reflects criteria like the domination of the social structures over the work conditions. The criteria of both these types of organizational culture can be combined to create the following matrix of organizational culture (Figure 1). Figure 1 (Source: Zheng, Yang and McLean, 2010). As in the case of organizational culture, organizational structures can also be categorized into different types according to their individual mechanisms and principles as given in Figure 2. Figure 2 (Source: Zheng, Yang and McLean, 2010). The simple model of organizational structure is used in small organizations. This reflects simplicity in cultural development and practices. Another important feature that this type of structure influences in the organization is the development of a flexible culture. It ensures the creation of a culture in which there is ample pro-activeness, leader orientation and scopes of adaptation. However, the specialization levels are low and labour distribution and work processes are often underdeveloped. Overall, this structure facilitates a high flexibility–low productivity organizational culture (Cameron and Quinn, 2011). The bureaucratic model of organizational structure is used by big companies. This model develops a culture that is highly rigid, efficient and task oriented. The productivity is high but employee satisfaction is often an identified problem because of centralized decision making systems. This type of organizational structure and organizational culture is often found in mature organizations. The professional model of organizational structure is comparatively rare and is found in the organizations which work with the use of sophisticated technologies. It is a non-flexible model and facilitates the development of a culture that is more open with a certain degree of empowerment provided to the employees. The adhocracy model of organizational structure is generally used in smaller organizations which use sophisticated and complex technologies. This structure creates a culture that has a high level of innovation, creativity as well as flexibility demonstrated in the different functions (Schabracq, 2009). It can be established from the above discussion that there are significant relationships between organizational structures and organizational cultures. The organizational structure often acts as a base and a support system for the development of the overall culture within the organization. Often a rigid structure leads to more stringent procedures and low employee empowerment. In this situation, the level of involvement among the employees is low and initiatives are often lacking. Also, a highly flexible structure which offers a high degree of autocratic decision making may lead to the development of an undesirable work culture in the organization. Therefore, the structure of an organization should be developed in a way that would support the development of a work culture and add value to the organization as well as help the organization to attain its short term and long term objectives. The structure of an organization often impacts the culture of the organization by influencing two main factors –one is the concentration and development of power among all levels of employees in the organization and another is the orientation of the organization towards people or tasks (Balthazard, 2006). An organization, in which a decentralized organizational structure prevails, may often use stringent mechanisms. Also, there exists a concentration of power in the hands of the management. In contrast, an organization in which a centralized organizational structure exists would use autocratic decision making and employee empowerment (Deal and Kennedy, 2011). Both these processes would help to develop different types of organizational cultures. A centralized organizational structure cannot support the development of an open work culture. Similarly a decentralized organizational structure can only facilitate the development of a formal and strictly controlled organizational culture. There is a dependent relationship existing between structure and culture in every organization. While structure helps to institutionalize culture, the prevailing culture may force major changes in the implementation of the organizational structures. Thus, it can be identified that in order to ensure high performances and effectiveness, an organization should develop its structure and culture in a way that they co-exist in a harmonious relationship (Martin, 2002). Impact of organizational structure on management Organizational structure can be defined as a relationship that is built across different components in an organization. There are various forms of organizational structures and each of them has a significant impact on the management. It is a formal approach that is designed regarding relationship and task within a firm that motivates, control and set coordination amongst employees so as to achieve common goals. Organization structure is a framework for authority and task relationships. Management is an essential component of organizational operations. However this factor is greatly affected by organizational structure (Leopold, Harris and Watson, 2005). Hierarchy and line of control is established through this structural approach. Often organizations that possess flexible structure have better levels of communication established throughout the system. There are various types of control mechanisms that are set by an organizational structure. The four major kinds are centralization, formalization, outputs and cloning. In centralization approach the structure of the organization is such that decisions are only made by top management and there is lack of involvement of team members (Clegg, Kornberger and Pitsis, 2011). This framework enables the management to have a tight control over its team members and gives direction to all the employees which need to be strictly followed. However this form of rigid hierarchical structure creates unrest within an organization as management does dot not consult team members before strategic decision making. This approach is greatly noticed in Tata Group where the top management is the supreme authority and employees are not involved in decision making process. Formalization is another structural approach that guides the operations of management. There are certain policies in this approach that needs to be considered while making decisions (Martin. 2008). Outputs and cloning are greatly associated with those organizations that do not follow a structured approach. These are related to sharing goals and objectives with all the team members and involving every individual of the organization to take collective decision. Management effectiveness is dependent on the type of organizational structural being incorporated by a firm. For instance functional structure spreads the control of management over different areas in terms of position being occupied by an individual. As complexity of organizational structures increase it becomes more problematic for management to take effective decisions (White and Poynter, 2008). However it can be argued that there is no such impact that is created by organizational structure on management since the factor is an independent variable. The entire framework of the organization is set up by the management so it may be stated that performance of management is not greatly affected but to some extent management of workforce is affected by such structures. It often becomes difficult for a firm to manage employees whose structure is based on functional, geographical, matrix or hybrid structure. The major reason behind this is too many divisions within an organization spread the workforce and there is often deficiency in levels of communication and cooperation. Workforce conflict is at times an outcome of inappropriate organizational structure (Fairtlough, 2005). In such complex situations the efficiency level of management decreases as every department proposes their own point of view and that appears to be impossible to integrate. This effect of organizational structure on management was witnessed in Berger Nigeria Plc where the structure was so unorganized that top management was not able to resolve organizational conflict neither was able to make any strategic decision for future (Jelinek, 2010). It is essential that such structure should be adopted which is aligned with the business operations. As organizational structure has certain negative impacts on management it even possesses certain positive impacts which enhance organizational management. Often when a firm has multiple products or services to offer or is part of various business segments functional or geographical approach is most appropriate as in the case of Proctor and Gamble (Miles, 2013). The reason behind this is that it helps in proper management of workforce in relation to job position and allocated tasks. On the other hand it even helps to make faster decisions by management due to reduce level of complexity and more defined responsibilities. Impact of organizational structure on performance Organizational structure indicates the departmental structure, supervisory relationships and workflow pattern within a company. These things are significantly important for the performances of the organizations. Organizational structure focuses towards the job role and layout of the company and all these things are done on the basis of reporting pattern of relationship. Business performances of an organization are significantly dependent on the productivity and efficiency of the workforce and for managing the work force there must be a supervisor (Muehlen and Su, 2011). It is being noticed that flat organizational structure with less organizational hierarchy makes it easy for the organizations to come up with different innovative ideas which results supreme business performances (Neely, 2007). Apple is an significant example of this kind of flat organization structure which has been able to maintain their successful business performances with the help of flat organizational structure (Jelinek, 2010). With this flat organization structure Apple has been able to increase its revenue in 2013. In 2012 the revenue of the company was US$ 156.508 billion and in 2013 it became US$ 170.91 billion. This figure is clearly indicating that on basis of supreme innovation and creativity the organization is performing significantly well (Burton, Eriksen, Håkonsson and Snow, 2006). Their business operations are being maintained by the flat organizational structure. It is being noticed that organizational structure are being created according to the size and numbers of functional department of the organizations. In case of bureaucratic organization like Federal Reserve of USA, organizational structure is long and there are lots of hierarchy. In this kind of organization performances are significantly dependent on the different policies, standards, routines and procedures. To manage all these factors, elaborated organizational structure is required. Performance management systems of the organization are deeply related with the organizational structure. Organizational structure of the Wal-Mart is cost effective which helps the organization to reduce their over head costs significantly and to gain profitability. In the year 2004, KONE a prominent name in the field of elevator industry were facing issues related with organizational structure and was hampering the business performances in European markets, the company changed their organization structure in the European region (Senior, 2009). Previously the organization had three operational areas in the market but for the improvement of the business the organization came up with an organizational restructuring and they divided the area into two parts and those two parts were central and north Europe. With the help of that organizational restructuring it succeeded to earn good revenue. In 2013 revenue of the organization was €6.9 billion. Organizational structure guides the whole operational system of a company (Mills, Bratton and Forshaw, 2006). It decides the relationship between the top level management and bottom level management of the employee. In case of flat organizations employees can easily share their ideas with the top level managements. In these kinds of organizations employees are motivated to come up with different innovation and creativity, which impact the result of business performances. Functional structure of the organization is created to supervise the performance of different functionalities of an organization. Divisional structures are generally created in the case of large scale organizations. These organizations have large geographical coverage and are very difficult to manage the performances with flat organization structure. Matrix is also an organizational structure which is the combination of both functional and divisional structure. These kinds of organizational structure are generally being used in the multinational organizations. World’s largest fast food chain MacDonald’s has maintained hierarchal structure. The organization has 31,000 outlets across the world. The organization serves 47 million customers on daily basis. With the help of this hierarchal structure the organization has been able to manage their business performances consistently. It has helped the organization to do the business profitably across the world. Due to this elaborated organizational structure the company was able to focus towards the different small business issues and impacted the bottom-line of the organization in a positive way (Kortmann, 2012). In 2013 revenue of the organization was US$ 28.1057 billion which is higher than 2012. Organizational structure can be the decisive factor for the business performances of the companies as proper organizational structure can mobilize the valuable resources of the companies and can improve the performances. Conclusion Thus, it can be identified that organizational structure and organizational culture are mutually existing and interrelated phenomenon. The structure of the organization can significantly facilitate the development of the overall culture. A change in the structure of an organization can also create changes in the existing culture within the organization. Also, the organizational culture impacts the design as well as the implementation of the organizational structure to a high extent. The structure of an organization works as a base for the institutionalization of the concept of culture and plays a major part in reflecting the values, attitudes and norms practiced in an organization. Organizational structure can thus be stated as an approach that sets relationship between different job roles and duties. It has a significant impact on management both in positive as well as negative aspects Management is related to making effective decisions, resolving issues and handling the entire workforce. However the structural approach that has been incorporated by an organization defines the level of efficiency of management. In workplace environment where formalized or rigid structure has been adopted there is often conflict amongst team members. All the above examples are clearly indicating that organizational structure has significant impacts on the business performances of the company. It also indicated that performances of the companies are defiantly dependent on the pattern of the organizational structure. Proper organizational structure provides control over the business performances of the companies and it guides organizations towards the profitability. References Balthazard, P., 2006. 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