Factors Affecting Organizational Design

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Factors Affecting Organizational Design

By | October 2009
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Factors Affecting Organizational Design
Although many things can affect the choice of an appropriate structure for an organization, the following five factors are the most common: size, life cycle, strategy, environment, and technology.

Organizational size

The larger an organization becomes, the more complicated its structure. When an organization is small — such as a single retail store, a two-person consulting firm, or a restaurant — its structure can be simple. In reality, if the organization is very small, it may not even have a formal structure. Instead of following an organizational chart or specified job functions, individuals simply perform tasks based on their likes, dislikes, ability, and/or need. Rules and guidelines are not prevalent and may exist only to provide the parameters within which organizational members can make decisions. Small organizations are very often organic systems. As an organization grows, however, it becomes increasingly difficult to manage without more formal work assignments and some delegation of authority. Therefore, large organizations develop formal structures. Tasks are highly specialized, and detailed rules and guidelines dictate work procedures. Interorganizational communication flows primarily from superior to subordinate, and hierarchical relationships serve as the foundation for authority, responsibility, and control. The type of structure that develops will be one that provides the organization with the ability to operate effectively. That's one reason larger organizations are often mechanistic—mechanistic systems are usually designed to maximize specialization and improve efficiency.

Organization life cycle

Organizations, like humans, tend to progress through stages known as a life cycle. Like humans, most organizations go through the following four stages: birth, youth, midlife, and maturity. Each stage has characteristics that have implications for the structure of the firm. • Birth: In the birth...
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