Organisational Structure

Topics: Organizational structure, Organization, Management Pages: 26 (6696 words) Published: August 28, 2010
Organizational Structure:
A Critical Factor for Organizational Effectiveness and Employee Satisfaction

August 2007

Craig W. Fontaine, Ph.D. Northeastern University College of Business Administration

Based on: C.W. Fontaine, How Organizational Structure Impacts Organizations. First Annual Conference on Organizational Effectiveness, Chicago, IL 2006

© 2007 Northeastern University

Executive Summary
“Organizational structure is perhaps the least understood and most under-appreciated topic in business.” James Schermerhorn, Jr., Professor, Ohio University

Organizational Structure is a topic seldom contemplated by most people working in organizational settings. We all go to work every day, go to assigned locations, and perform our jobs — and we don’t ever think about how our organization is arranged. However, Organizational Structure is critical both for a company and its employees. People should think very carefully about the organizational structure of the companies for which they work or of companies for which they intend to work. In the long run, Organizational Structure can spell the difference between success and failure for a company, as well as for the individuals who work there. The purpose of this white paper is to examine those challenges facing any company wherein Organizational Structure is not probably aligned with business strategy, and to consider the benefits and pitfalls of a number of Organizational Structure options as they pertain to the longterm success of individual employees and the company as a whole.

Organizational Structure: A Critical Factor for Organizational Effectiveness and Employee Satisfaction


The 4 Essential Management Functions
“Too often ideas get rejected because they have to travel too far in the organization filled with fiefdoms and inevitable roadblocks.” Mitch Thrower, Author, "The Attention Deficit Workplace“

The first thing to consider is that most people who study Management know that Organizational Structure is a crucial component of the overall business strategy, just as important as Planning, Leading, and Controlling an organization.

Figure 1: Major Components for Achieving Organizational Objectives


In essence, Organizing is the manner in which a company utilizes its resources — specifically, its human resources. How do we organize jobs into departments? How do we answer the questions “who does what” and “who reports to whom” in the chain of command? There is also an implicit issue of how to coordinate all of these people and all of these duties across an extended enterprise. Organizational Structure is the framework for answering these questions and more.

Flexibility of the Organization
Trigger Point
An external event that calls for immediate organizational response, flexibility and adaptation

While many companies today are still reluctant to change their Organizational Structure, more and more are coming to find that they need to be adaptive and they need to be flexible. In fact, Management Theorists — people who study this at the academic level — are starting to encourage organizations to change their structure because they need to be prepared to respond to what we call “trigger points.” A trigger point is an external event that has an impact on an organization. It could be a change in the markets; it could be a change in global competition; it could be the advent of new technology. These trigger points and any number of others call for immediate responses, as well as organizational flexibility and adaptation. 2

Organizational Structure: A Critical Factor for Organizational Effectiveness and Employee Satisfaction


Examples of Strategic Renewal


Altered Strategy
Government Contractor

®Commercial Vendor
Energy Production


®Energy Trading
Commodity Product


®Value-Added Products & Services
Low-Cost Grocery Store

Grand Union Strategic Renewal
A company’s realignment to...

References: Adapted from Romme, A.G.L., (2003), “Making a difference: Organization as design”, Organization Science, 14, pp. 558-573.
Based on Davis, S. & Lawrence, P. (1977) Matrix, Addision-Wesley, pp. 4-5.
13 Galbraith, J.R., (1994) Competing with Flexible Lateral Organizations, Addision-Wesley, pp. 101-102.
Based on Spector, B., (2007), Implementing Organization Change: Theory and Practice, 1st ed., pp. 141, Pearson Prentice Hall.
15 16 Thompson, A. & Strickland, A., (2003), Strategic Management Concepts and Cases, 13th ed., pp. 129, McGraw-Hill Irwin. 17
Source: Discussion of personality is loosely based on: McClelland, D
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