Organisational Structure Essay Example for Free

Organisational Structure Essay All organisations are designed to suit their objectives, role, and mission. Internal structure of an organisation is the way in which interrelated groups of an organisation are arranged in a particular fashion for effective communication and best possible coordination (Wikipedia, 2006). Organisational structure plays an important role in day-to-day functions of an organization. The organisational structure of an organization will dictate the delegation of authority, work specialization, and employee reporting framework. An efficient structure will facilitate decision making. A good organisational structure removes uncertainties and helps in planning for future expansion as well (Business Bureau-uk, 2002). A company would adopt a suitable combination of structure and control systems that are most effective for pursuing sustainable competitive advantage. In addition to coordinating strategy implementation, the role of structure and control is to motivate and provide incentives for superior performance. There are numerous internal and external factors affecting the way organizations structure themselves. This essay will scrutinize organisational structures of small and medium sized organizations in different countries. An evaluation of the factors affecting these structures has also been carried out coupled with an analysis of the response from these organizations to varying challenges. Organisational Structures Three major components of organisational structure identified by most theorists include complexity, formalisation, and centralisation (Robbins, 1987). Complexity is basically the degree of differentiation that exists within an organization. Horizontal differentiation considers the degree of separation between units of the same level and vertical differentiation refers to the depth of the organizational hierarchy. A well-known way of horizontal differentiation is the multidivisional (M-form) structure (Chandler, 1962). This structural form is used by firms to carry out most diverse economic activities. Other forms of horizontal differentiation are the functional structure in which people and tasks are grouped together on the basis of their common expertise and experience. Then there are the geographic structures, which use regional basis for organizing activities, and the product division structure which has a focus on products or product groups. The second component of organisational structure is the formalisation. The formalisation refers to the degree to which jobs within the organization are standardized. If a job is highly formalized, there are explicit job descriptions, lots of organizational rules, and clearly defined procedures. The formal organization however does not imply that the organisational structure will become inflexible. The informal organization on the other hand is any joint activity without conscious joint purpose, even though contributing to joint results (Barnard, 1964). The third component of organisational structure is the centralisation. It is defined by most theorists as the degree to which decision making is concentrated at a single point in the organization. Small and Medium-sized Enterprises (SMEs) in Different Countries SMEs are generally defined as having fewer than 250 employees and less than 50 million euros in annual turnover (Cardais, 2005). SMEs play a major role in developed economies. According to the United Nations Economic Commission for Europe, in 2000, 99. 8 per cent of enterprises in 19 countries in Western Europe were SMEs (Kuwayama, 2002). In the United States, small businesses employ more than half of the labor force. The SMEs constitute 96% of the total establishments and represented 69% of total employment in the US (APEC, 2006). SMEs are inherently adaptive to changing market and supply environments. SMEs help in deepening managerial and entrepreneurial skills, and are considered very attractive because of their diversity and competition in the supply of products and services. In United States, SMEs generate half of the national total sales. Most of these corporations develop market-like relationships between the different parts of their organisation. This is reflected in the greater use of the multidivisional structure form. In United States, companies are split into profit centres in pursuance of their market strategies. There is however heavy reliance on formal procedures and standardisation of organisational roles which makes American companies to coordinate a large diversity of economic activities. In Europe, 20 million small and medium sized enterprises comprise major chunk of the European economy. The SMEs in Eurpoe are providing around 65 million jobs. SMEs have greater opportunities to continuously evlove their structures keeping in view their diversified role and constantly changing competitive environments. Organisational Structure of SMEs is very dynamic in Europe. In Germany specially, SMEs are more centralized than US companies and planning and control is more integrated (Europa, 2006). The German SMEs are characterised by a strong linkage between enterprise and owner. This close relationship strongly influences the internal structure and market strategies of the enterprises (Hauser, 2000, pp. 1-2). Factors Reshaping Organisations There are many internal and external forces that can affect an organization. Internally an organization creates its own internal structure, mission, and fiscal policies. These internal forces are designed to meet the external challenges like competitors, the economy, and the demands of the customers. All these factors are having unified impact on organizations in United States and in Europe. Customer demands are influencing organizational structures directly in the same manner that supply can affect demand and vice versa. Another area influencing organizational designs is the constantly changing requirements of the human resources. Surveys conducted in United States have revealed changing workforce behaviour. Changing drives for motivating workers, and getting the best out of them affects the way a company needs to organise its resources. SMEs in developed economies are influenced by e-business to a great extent, allowing them to trade worldwide from a single website. Organisations in Europe and United States are deeply effected by the environment. The advancement of technology is forcing the companies to reengineer their processes. The general environment is dictating change in socio-cultural outlook of companies. With regard to the task environment, major forces playing their part in reshaping organisations include competitors, customers, suppliers, regulators, and strategic allies. High performance and customer satisfaction are directly related to structural design of a company. To compete effectively, the company must avoid becoming operated by a top-down approach. In an era of rapid change and high technology, companies are required to shift centralized management controls. The environment is dictating to focus on streamlining operations, and empowering workers with the knowledge, skills and resources to do their jobs. Analysis of Response to Changing Requirements Change is always viewed differently by the management and the employees. Top level management perceives change as an opportunity to strengthen the business and to advance in their career. The employees however do not welcome the change. They consider change as disruptive and intrusive. They may worry about their ability to meet new job demands. They may think that their job security is threatened, or they may simply dislike ambiguity. Some managers may also feel threatened by the change since it may be against their self-interests. Managers so affected may fight the change as well. But the change is inevitable. The only thing constant in this world is the change. Organizations in Europe and United States are changing and actively adapting to their environments. Organisations in United States are structuring to small business units to tackle complex, and highly uncertain environments in the face of huge competition. Organizations whose structures are not fitted to the environment can not perform well and eventually fail (Borgatti, 1996). The changes are being made to the tools, resources, and the physical or organizational settings of the company. Organisations in Europe and United States are redesigning their structures to meet new challenges. Customers, owners, suppliers, regulators, local communities, and other employees are changing their needs constantly which are compelling the SMEs to adopt a flexible and dynamic structure. The Impact of uncertainty avoidance dimension is forcing towards flexibility of jobs definition and task interchangeability which is quite visible in US and European companies nowadays (Hofstede, 1980). Conclusion The last decade of 20th century witnessed developments occurring within a frame work of rapidly expanding social and economic interdependence on a global scale. Organizations have evolved through periods of incremental or evolutionary change. The major work changes happening today are changes in organizational strategy, organizational structure and design, technology and human resources. In contrast to the classical scholars, most theorists today believe that there is no one best way to organize. What is important is that there be a fit between the organizations structure, its size, its technology, and the requirements of the environment including the competitors. References http://www.actetsme.org/usa/usa98.htm http://www.analytictech.com/mb021/orgtheory.htm http://en.wikipedia.org/wiki/Organizational_structure