Organizational Structural Issues

The study of the structuring of work organizations is a developing field. It was a major interest to classical theorists such as Fayol, Urwick and Brech. It was a source of inspiration for Weber’s theory of bureaucracy and it is a major theory of complex organization – the contingency school. In this article I will discuss the practical issues of structure facing modern organizations, and identifies the most important options that are currently available.

As Lawrence and Lorsch have pointed out most organizations are in a state of tension as a result of the need to be both differentiated and integrated. Once an organization has grown beyond the point when the owners can exercise direct control, then some degree of differentiation, or specialization, is inevitable. Thus, most organizations have to face up to a number of crucial issues, about the kind of structures that will best sustain the success of the enterprises. The most frequent issues are:

To what extent one should encourage the specialization of roles?

What degree of standardization should be imposed on the behavior and methods, or to put another way what degree of discretion should be given to individual job holders?

How much formality should be encouraged?

How many levels of authority should be established?

To what extent should decision-making be centralized or decentralized?

There is no perfect answer to any of these questions, but there are number of possible options, which, taken together can produce an optimum design for an organization. These factors will be considered shortly. First of all I shall look more closely at the key issues, commencing with the question of specialization.

Specialization

Specialization is concerned with the division of labor within an organization. It serves to break down the total mission of an organization into a number of subordinate objectives. which in turn give rise to tasks of various kinds. It is essentially a disintegrating process. This process acts initially by grouping key activities in the organization, and subsequently allocating roles and tasks to individuals.

Specialization by grouping activities can be achieved in several different ways. The most frequent method is that of functional specialization. In this case, tasks are linked together

on the basis of common function. So, all production activities or all financial activities are grouped into a single function which undertakes all the tasks required of that organization. A typical functional organization would have the follows:

The Top position in this organization is the Managing director. Then it is functionally organized into Production Manager, Marketing manager, Accounting and Administration Manager and Personnel Manager. Production is then grouped into production control, Purchasing, and Quality control. Marketing is grouped into Sales, Marketing Research and Advertising. Accounting and administration is grouped further into Financial Accounting, Cost Accounting, Management Accounting and Information and Technology Function. Under personnel manager the activities are grouped in to Employee services, Industrial Relations, Training and Development, payroll and manpower planning.