Why do structures differ?

by Sree Rama Rao on September 2, 2008

One extreme we’ll call the mechanistic model. It’s generally synonymous with the bureaucracy in that it has extensive departmentalization, high formalization, a limited information network (mostly downward communication) and little participation by low level members in decision making. At the other extreme is the organic model. This model looks a lot like the boundary less organization. It’s flat, uses cross hierarchical and cross functional teams, has low formalization, possesses a comprehensive information network (using lateral and upward communication as well as downward), and involves high participation in decision making.

With these two models in mind, we are now prepared to address the question: Why are some organizations structured along more mechanistic lines whereas others follow organic characteristics? What are the forces that influence the design that is chosen? In the following paragraphs, we present the major forces that have been identified as causes or determinants of an organization’s structure.

Strategy:

An organization’s structure is a means to help management achieve its objectives. Because objectives are derived from the organization’s overall strategy, it’s only logical that strategy and structure should be closely linked. More specifically structure should follow strategy. If management makes a significant change in its organizations strategy, the structure will need to be modified to accommodate and support this change.

Most current strategy framework focus on three strategy dimensions, innovation cost minimization and imitation and the structural design that works best with each.

To what degree does an organization introduce major new products or services? An innovation strategy does not mean a strategy merely for simple or cosmetic changes from precious offerings but rather one for meaningful and unique innovations. Obviously not all firms pursue innovation. This strategy may appropriately characterize 3M Co, and Apple computer but it’s not a strategy pursued by conservative retailer Marks & Spencer.

An organization that is pursing a cost minimization strategy tightly controls costs, refrains from incurring unnecessary innovation or marketing expenses, and cuts prices in selling a basic product, This would describe the strategy pursued by Wal-Mart or the makers of generic products.

Organizations following an imitation strategy try to capitalize on the best of both the previous strategies. They seek to minimize risk and maximize opportunity for profit. Their strategy is to move into new products or new markets only after viability as been proven by innovators. They take the successful ideas of innovators and copy them. Manufacturer of mass marketed fashion goods that are rip-offs of designer styles follow the imitation strategy. This label probably also characteristics well known firms such as IBM and Caterpillar. They essentially follow their smaller and more innovative competitors with superior products but only after their competitors have demonstrated the market is there.

Innovators need the flexibility of the organic structure, whereas cost minimizes seek the efficiency and stability of the mechanistic structure Imitators combine the two structures. They use a mechanistic structure in order to maintain tight controls and low costs in their current activities, while at the same time they create organic subunits in which to pursue new undertakings.

Organization Size:

There is considerable evince to support the ideas that an organization’s size significantly affects its structure. For instance large organizations those that typically employ 2,000 or more people tend to have more specialization, more departmentalization, more vertical levels, and more rules and regulations than do small organizations. However, the relationship is not linear. Rather, size affects structure at a decreasing rate. The impact of size becomes less important as an organization expends. Why is this? Essentially once an organization has around 2,000 employees, its already fairly mechanistic. An additional 500 employees will not have much impact. On the other hand, additional 500 employees will not have much impact. On the other hand, adding 500 employees to an organization that has only 300 members is likely to result in a significant shift towards a more mechanistic structure.





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