Designing Organization Structure

Organization Structure:

It is the formal pattern of interactions and coordination designed by the management to link tasks in achieving organizational goals.

If you are like most people, you have probably had the experience of running into a problem that made you want to speak to the supervisor of next in command in an organization or may be in your own college. Under such conditions, you would probably respond with disbelief if you were told that no one knew whose job it was to handle a complaint like yours. We expect such matters to be worked out and organizations to have developed reasonably effective organization structure. This brings us to the need to define organization structure. It has been defined as the formal pattern of interactions and coordination designed by management to link the tasks of individuals and groups in achieving organizational goals. The word ‘formal’ refers to the fact that organization structures are typically created by management for specific purposes and hence are official or formal, outcomes of the organizing function. Organizations also have informal structures, or patterns of interaction, which are not designed by management, but usually emerge because of common interests or friends.

Organization structure consists mainly of four elements:

1. Defining jobs of individuals and units by assigning tasks and responsibilities.
2. Clustering of individuals into units and of units into departments and larger units to form a hierarchy.
3. Coordination mechanisms for vertical structures, such as the degree of delegation of authority and the number of people reporting to any given managerial position.
4. The various mechanisms needed to foster horizontal coordination such as projects and inter-departmental teams.

Designing the Company’s Organization Structure:

The process of developing an organization structure is referred to as organization design. To design the organization structure, the primary work of the organization in terms of its objectives is identified first. This is to be followed by arranging this work in properly grouped and balanced packages followed by arranging for a proper span of supervision for each management position.

Organize in terms of objectives:

The organization as a whole exists for the purpose of accomplishing predetermined objectives. All work done in the organization should be dedicated to this end; if it does not contribute to the objectives, the work should not be performed. Each section, department, and division should have clearly defined objectives which are part of the total objectives of the organization. A sound statement of objectives will in itself identify the major kinds of work to be performed and hence the primary line activities of the company. Organization as a management activity must be devoted to the proper identification of this basic work and to provision of adequate management positions and grouping of advisory and other service agencies to facilitate it.

Group related work together:

To provide for most effective performance, closely related work should be grouped together by arranging work to form positions, functions and other organizational elements. The best method of deciding what work should be placed in a function is to evaluate it in terms of the purpose of that function. Consider a case where market research is placed in the finance department because it seemed mostly concerned with figures, statistics and income predictions. This obviously is an inefficient design as market research should properly concern itself with the consumer’s needs and requirements and hence is Marketing and not a finance function.

Conventional and Unconventional Approaches:

Every organization has a need for organizing from bottom up as well as from top down. Conventional (top down approach) organization planning starts with the job of the manager or president and breaks this up in a series of delegations and re-delegations. This approach is necessary to explain and analyze the delegating of responsibility and authority and the establishment of accountability once the organization structure is established. In order to identify the important and necessary work that must be done in the organization, the unconventional or bottom up approach is needed. First the work to be performed by the function is determined. Next, the positions needed to manage this primary work are decided and finally management positions to manage the managers are created.

Balance the Grouping:

Each function should be given its proper emphasis with respect to its basic purpose in the organization and no primary function should be permitted to dominate. If a company is equally dependent upon manufacturing and research, both must have equal organizational status.

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