Is your organization well designed? How can you understand this? What is a well-designed organization like? How does it feel to work in it and how does it differ from an organization that is not well designed?
Types of organization design, applications, and key aspects.
These are questions that you need to look for when thinking about organizational design.
Many people equate organizational design with organizational structure: terms such as “hierarchical or vertical” and “flat or horizontal” are used to describe both organizational design and organizational structure. In fact, organizational design is more than just surrounding the structure.
Organizational design is the process of aligning the structure of the organization with its mission. That is, it looks at the complex relationship between missions, workflow, responsibility, and authority, and ensures that they all support business goals.
Good organizational design contributes to communication, productivity, and innovation, and creates an environment in which people can work effectively.
Many productivity and performance issues can be attributed to poor organizational design. A company can have a big mission, great people, and great management, but it may not perform well because of poor organizational design.
Consider, for example, a company whose sales and production departments work well as separate units. However, they need to be able to communicate with each other about the needs of the customers, but they are not organized to do so and as a result, the performance of the company is damaged. Now consider a company that wants to grow by gaining new customers; however, the sales team is rewarded for retaining old customers, which in turn jeopardizes the company’s performance.
How things are done, the business process, information sharing, and people motivation all have a direct impact on how an organization operates. All of these factors are different aspects of organizational design, each of which alone plays a significant role in the success of the organization.
Given the importance of organizational design, why is it always blamed for inefficiency and inefficiency? This is because organizations usually evolve gradually instead of being designed. Without a plan or intervention, the design of the organization is likely to be flawed and have uncoordinated incentives, process gaps, and barriers to good communication.
Without planning, the design of an organization usually takes on a hierarchical structure. This structure is common, as business executives and managers are usually reluctant to lose control.
But such a structure lacks flexibility, wastes resources, and does not make good use of key people and capabilities. When it comes to designing a good organization, the issue is achieving the right balance, the right control, the right flexibility, the right incentives, and making the most of other key people and resources.
In this article, we will first take a look at the types of organization design and their uses, and then take a closer look at the key design factors of the organization and make recommendations to ensure that the organization is in line with business goals.
Types of organizational structure.
Most organizations are designed or developed to have both hierarchical structure elements and organic structure flexibility. Organic structures, compared to hierarchical structures, are more informal, less complex, and capable of performing more specific and customized tasks. Organizations use.)
Before looking at some of the common organizational structures, it is good to examine the characteristics of a hierarchical structure and the differences between it and an organic structure. We have to say that a certain type of organizational structure is not inherently better than another structure.
Rather, the important thing is to make sure that the design of the organization is in line with the purpose of the organization and the people who work within it. The next section, which deals with decision-making for organizational design, discusses this in more detail.
Functional structure and sectoral structure are both examples of the structure of a hierarchical organization.
In the task structure, the tasks ( accounting, marketing, human resources, etc.) are completely separate; Each is managed by a senior executive who reports to the CEO. The advantage of such a structure can be efficiency and savings in mass production because they gain superior skills in performing tasks. The most important drawback of this structure is that the performance goals of each department can overshadow the overall goals of the organization.
In the segment structure, the company is organized according to the location of the office or the position of the client. Each department is independent and has its own manager who reports to the CEO. Each business unit is structured along task lines.
The advantage of using this type of structure here depends on the local results, as each section is free to focus on its own performance. The disadvantage of this structure is that the functions and efforts may be repetitive. For example, each segment may have its own marketing function, and as a result, there is a risk that marketing efforts will not be effective.
More organic structures include simple, flat structures, matrix organizations, and network structures.
Simple structure: Commonly seen in small businesses, the simple organizational structure is flat and may have only two or three levels; Employees tend to work in a large team, all of whom report to one person. Efficiency, flexibility, and clear responsibilities are the advantages of this structure.
The disadvantage of such a structure is that when the organization grows to such an extent that the founder or CEO can not make all the decisions, this structure prevents the growth of the organization.
Matrix structure: In a matrix structure, individuals usually have two or more reporting lines. For example, a matrix structure may be a combination of partition and task lines. For example, in this structure, a marketing manager may report to both the general manager of the marketing unit and the manager of the department in which he works.
The benefit of this structure is that while the organization shares the performance capabilities of professionals and resources, it also focuses on the function of each department. Usually, the most serious drawback of this structure is its complexity; Especially due to the existence of two hierarchical structures and creating more complexities due to the tension between these two structures.
Network structure: These types of organizations have a core of tasks that govern business strategy. Such an organization outsources or subcontracts decentralized operations, which may include production, distribution, information technology, marketing, or other functions, depending on the type of business. This structure is highly flexible and usually adapts very quickly to the market. Disadvantages of this structure are the complexity of managing the outsourced sector and sub-suppliers.
Deciding on organizational structure.
With so many structures, how do you decide on the design of your business organization? Different organizational structures have different benefits in different situations. The important thing is that the overall design of the organization is in line with the business strategies and the market environment in which the business flows.
It must then have the right control over the business, the right flexibility, the right incentives, the right people, and the right resources. In this section, we will discuss some things you can consider to think about the structure of your organization.
Strategy: Organizational design should support your strategy. If your organization tends to be innovative, then a hierarchical structure would not be appropriate. But if your strategy is based on low cost and high delivery volume, then a rigid structure with rigid controls may be the best design.
Size: The design should take into account the size of your organization. Over-specialization can cause a small organization to fail. On the other hand, in larger organizations, there may be benefits to mass production that can only be achieved by retaining departments and teams that are functionally specialized. A large organization needs more complex decision-making, and decision-making responsibilities are likely to be further developed or decentralized.
Environment: If the market environment in which you work (customers, suppliers, regulators, etc.) is unpredictable or changeable, then the organization must be flexible enough to be able to respond to these conditions.
Controls: What level of control is right for your business? Some activities require special controls (such as patient care at the hospital, money management at the bank, and maintenance in air transportation), while others are more efficient when there is a high degree of flexibility.
Incentives: Incentives and rewards should be in line with your strategy and business. When such things are not balanced, there is a risk that departments within the organization will work in their own interests. The example used earlier is an example of this. The company wanted to grow by attracting new customers, but the sales team was motivated to retain old customers, and as a result, it worked for its own interests rather than aligning with business goals.
In the design of the organization, in addition to deciding on its structure, other factors are involved. This list only shows some of the important aspects of organizational design that can be considered when thinking about it.
With each stage of growth or change, it is necessary to re-evaluate and align the design of the organization if necessary. This list will also help you identify issues that may cause team problems or disruption to your business.