How does Environment Affect Structure?

The organization’s environment is discussed as a constraint on managerial discretion. It also has a major effect on the organization’s structure. Essentially mechanistic organizations are most effective in stable environments. Organic organizations are best matched with dynamics and uncertain environments.

The evidence on the environment – structure relationship helps to explain why so many managers have restructured their organizations to be lean, fast, and flexible. Global competition, accelerated product innovation by all competitors, knowledge management, and increased demands from customers for higher quality and faster deliveries are examples of dynamic environmental forces. Mechanistic organizations tend to be ill equipped to respond to rapid environmental change. As a result, managers, such as those at Samsung Electronics, are redesigning their organizations in order to make more organic. As a result, Samsung has witnessed significant increases in sales and net profits.

Organization Design applications:

What types of organization designs exist in small businesses or companies such as Amul India, CRY, or Let’s look at the various types of organization designs that you might see in contemporary organizations.

What is simple structure?

An organization that is low in specialization and formalization and high in centralization.

Most organizations start as an entrepreneurial venture with a simple structure. This organization design reflects the owner as president, with all employees reporting directly to him or her.

A simple structure is defined more by what it is not than by what it is. It is not an elaborate structure. If you see an organization that appears to have almost no structure, it is govern the operation; and authority is centralized in a single person – the owner. The simple structure is a flat organizations it usually has only two or three verticals levels and a loose body of empowered employees in whom the decision making authority is centralized.

The simple structure is most widely used in smaller businesses. The strengths of the simple structure should be obvious. It is fast, flexible, and inexpensive to maintain, and accountability is clear. However, it is effective only in small organizations. It becomes increasingly inadequate as an organization grows, because its few policies or rules to guide operations and its high centralization result in information overload at the top. As size increases, decision making becomes slower and can eventually come to a standstill as the single executive tries to continue making all the decisions. If the structure is not changed and adapted to its size, the firm is likely to lose momentum and eventually fail. The simple structure’s other weakness is that is risky. Everything depends on one person. If anything happens to the owner manager the organization’s information and decision making center is lost.

As simple structure is the one in which most, if not all, employees report to the owner. At bookstore in Bangalore workers report to the owner, who, like employees, perform many of the day to day activities required to provide quality customer service.

What do we mean by Bureaucracy?

Many organizations do not remain simple structures. That decision is often made by choice or because structural contingency factors dictate it. For example, as production or sales increase significantly, companies generally reach a point at which more employees are needed. As the number of employees rises, informal work rules of the simple structure give way to more formal rules. Rules and regulations are implemented; departments are created; and levels of management are added to coordinate the activities of departmental people. At this point, a bureaucracy is formed. Two of the most popular bureaucratic design options grew out of function and product departments appropriately called the functional and divisional structures, respectively.