The best approach to organizational design tailors it to a company’s strategic plans. The plans, meanwhile, follow from a company’s vision, which itself follows from the company’s mission. Mission is a business’ reason for being its purpose. Vision is a company’s ultimate accomplishment, the realization of the mission. All strategy tries to fulfill the vision, and the organizational structure should support that effort. For instance, a company that has decided to expand to overseas markets might organize itself into geographical divisions. Changes in strategy call for an updated structural design.
The business environment that employees work within cannot be ignored by organizational designers. An unpredictable, rapidly changing environment demands flexibility, adaptability and interdepartmental cooperation. In such a situation, a rigid, mechanized structure would stifle the agility and responsiveness of staff. Designers can instead build an organic, horizontal structure, which flattens management levels and decentralizes decision-making. A stable environment, meanwhile, allows for the controls, well-defined tasks and centralized authority found in the mechanistic structure with its vertical tiers of increasing power.
Small businesses with few people often have an overlap of roles, behave informally and don’t write a lot of rules. Since this organization arises organically, it would be a mistake to try to overlay a formal, mechanistic structure on it. Doing so would be an exercise in futility. Also, the unnecessary bureaucracy could get in the way of operations. Large organizations need more control and oversight. A mechanistic structure creates clear accountability and responsibility and is, therefore, suitable for companies with many employees.
At the beginning of a company’s life, its small size allows the organic structural qualities that encourage flexibility and responsiveness. As it matures and expands, a company begins to mechanize, adding rules, policies and procedures; closely defined tasks; extensive internal systems of control and command chains. In short, maturity gives rise to bureaucracy. The older the company, the more likely the bureaucracy has become unwieldy, presenting a barrier to innovation, adaptability and quick reactions. Organizational design should factor in the extent to which an older company needs to restructure itself to reduce its mechanized structure.
Some kind of technology is used to convert the resources into outputs in every organisation. Technology includes the knowledge, machinery, work procedures, and materials that convert the inputs into outputs. The technology used to manufacture the products decides the kind of the organization for the production system.
6. Life Cycle
The company life cycle also plays an important part in the development of an organizational structure. Business owners attempting to grow and expand their company‘s operations usually develop an organizational structure to outline their company‘s business mission and goals. Businesses reaching peak performance usually become more mechanical in their organizational structure. This occurs as the chain of command increases from the business owner down to frontline employees. Mature companies usually focus on developing an organizational structure to improve efficiency and profitability. These improvements may be the result of more competitors entering the economic marketplace.