We also discuss the need to align several organizational characteristics in

We also discuss the need to align several

This preview shows page 34 - 36 out of 60 pages.

We also discuss the need to align several organizational characteristics in this process and show how you can use this knowledge to enhance your personal and career outcomes. There is no one best form of structure for an organization. The choice of structure is instead based on considering a host of contingency factors and internal organizational characteristics. This section helps show how this is done by discussing the concept of contingency organization design. According to the contingency approach to organization design , organizations tend to be more effective when they are structured to fit the demands of the situation, and when the structure is aligned with internal activities and actions of the organization. 52 The demands of the situation consist of five contingency factors . Contingency Factors Experts suggest that managers should consider five key contingency factors when making decisions about organization design: strategy and goals, market uncertainty, decision-making processes, technology, and size. 53 Strategy and Goals An organization’s strategy is the cornerstone of its decision about the most appropriate design. Because setting a corporate strategy requires an organization to decide how it will compete given both internal and external considerations, organizational design must be developed in tandem with establishing strategy. For example, if a company has a strategy to grow by developing and selling new products or services, a flatter or more horizontal structure may be more effective. In general, more complex organizational designs are needed as companies pursue strategies to add products, services, markets, or geographic expansion.
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Market Uncertainty The level of market uncertainty the organization faces helps determine the level of formalization it needs. Organizations such as Intel and Facebook that operate in dynamic markets need less formalized structures. Horizontal or open structures are more appropriate in this case because they allow quicker responses to marketplace threats and opportunities. Organizations may need to change their structure due to marketplace changes such as new competitors, alternate products, or customer preferences. Decision-Making Processes Decision-making processes span a continuum from centralized to decentralized. Centralized decision making occurs when key decisions are made by top management. Decentralized decision making occurs when important decisions are made by middle- and lower-level managers. A landmark study by a pair of British behavioral scientists, Tom Burns and G. M. Stalker, found a relationship between decision-making processes and organizational structure. In the course of their research, Burns and Stalker drew a very instructive distinction between what they called mechanistic and organic organizations.
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