Organizational Design and Organizational Structure

Topics: Organizational structure, Organization, Management Pages: 5 (1426 words) Published: September 28, 2010
An organization is a pattern of relationships-many interwoven, simultaneous relationships- through which people, under the direction of managers, pursue their common goals. These goals are the products of the decision - making processes. The goals that managers develop through planning are typically ambitious, far-reaching, and open-ended. Managers want to ensure that their organizations can endure for a long time. Members of an organization need a stable, understandable framework within which they can work together toward organizational goals. The managerial process of organizing involves making decisions about creating this kind of framework so that organizations can last from the present well into the future. Managers must take into account two kinds of factors when they organize.

(1) First, they must outline their goals for the organization, their strategic plans for pursuing those goals, and the capabilities at their organizations for carrying out those strategic plans.

(2) Secondly, simultaneously, managers must consider what is going on now, and what is likely to happen in the future, in the organizational environment. At the intersection of those two sets of factors - plans and environments- managers make decisions that match goals, strategic plans, and capabilities with environmental factors. This crucial first step in organizing, which logically follows from planning, is the process of organizational design. The specific pattern of relationships that managers create in this process is called the organizational structure.

Is a framework that managers devise for dividing and coordinating the activities of members of an organization? Because strategies and environmental circumstances differ from one organization to the next, there are a variety of possible organizational structures.

Organizational structure refers to the way in which an organization’s activities are divided, grouped, and coordinated into relationships between managers and employees, managers and managers, and employees and employees. An organization’s departments can be formally structured in three major ways: (1) By Function

(2) By Product/Market
(3) Matrix Form

Organization by function brings together in one department everyone engaged in one activity or several related activities that are called functions. For example, an organization divided by function might have separate manufacturing, marketing, and sales departments. A sales manager in such an organization would be responsible for the sale of all products manufactured by the firm.

Functional organization is perhaps the most logical and basic from of departmentalization.. It is used mainly by smaller firms that offer a limited line of products because it. (1) Makes efficient use of specialized resources.

(2) It makes supervision easier, since each manager must be expert in only a narrow range of skills. In addition. (3) A functional structure makes it easier to mobilize specialize skills and bring them to bear where they are most needed.

As an organization grows, either by expanding geographically or by broadening its product line, some of the disadvantages of the functional structure begin to surface. Because (1) Functional managers have to report to central headquarters; it can be difficult to get quick decisions. (2) It is often harder to determine accountability and judge performance in a functional structure. If a new product fails, who is to blame-research and development, production, or marketing? (3) Finally, coordinating the functions of members of the entire organization may become a problem for top managers. Because members of each department may feel isolated from (or superior to) those in other departments. (4) They may have difficulty...
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