Organisation design is the outcome of shaping and aligning all the components of an enterprise towards the achievement of an agreed mission. This implies that there are designed-in qualities that keep the organisation adaptable to the operating context. A reorganization or restructuring that focuses – sometimes solely – on the structural aspects is not organisation design and is rarely successful. Focusing mainly on the structure is not enough and not the right starting point.
Principles of organisational design are that design is driven by the business strategy and the operating context (not by a new IT system, a new leader wanting to make an impact, or some other non-business reason). Design means holistic thinking about the organisation – its systems, structures, people, performance measures, processes and culture, and the way the whole operates in the environment. A futuristic design is a better bet than designing for the present. Design is not to be taken lightly – it is resource-intensive even when it is done well. Design is a fundamental process, not a repair job.
The design of a new structure is not a single task that can be performed in a couple of hours. It involves a good deal more than sketching out a series of charts until it ‘looks right’.
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It is the business model which tells us how the company or institution earns its bread. However, all too often there is no shared understanding of how this works by those who labour at it. Even though all important decisions made by managers are or should be elements of it, the properties of the model itself may be articulated rarely or referred to only infrequently in discussions and decision-making forums, even among the most senior managers.
In designing how an organisation should be structured and should function we believe in the absolute necessity of using the model as the foundation stone. The model is the reason the business exists and a failure to take account of the breadth and depth of what the organisation is, and is trying to be, results in structures that are not fully fit for present or future purpose. The business model will be liberated by good organisational design which is rooted in that model.
Managers have to make choices about how to group people to perform their work together. Five specific approaches— functional, divisional, matrix, team, and networking— help managers define groupings of departments (grouping roles into departments). The five systems are fundamental frameworks of organisation, which are then tailored to the needs of an organization. All five approaches incorporate different mechanistic and organic structural components. The organizational design pattern today, for example, introduces a minimum of bureaucratic features and demonstrates more organic design features with a decentralized authority framework, fewer rules and procedures.
Functional Structure
The functional structure groups roles on related tasks, abilities, knowledge and resources in work units. Within a functional framework, development, marketing, finance, and human resources are typical groupings. A structured framework as the simplest solution features well-defined communication channels and relationships of authority/responsibility. Not only does this system increase efficiency by reducing staff and equipment duplication, but it also helps workers happier and also simplifies preparation.
The functional structure has many downsides that may make it inappropriate for some organizations. Here are a few examples:
- Regardless of the separateness of various department workgroups, the functional framework will contribute to limited perspectives. For example, managers may have a difficult time related to marketing, which is often in a completely different category. As a consequence, it can be difficult to predict or respond to changing customer needs. Furthermore, there could be decreased coordination and contact.
- Owing to the multiple levels of Hierarchy, decisions and communication are slow to take place as a result of more centralized power.
- The functional framework provides administrators with expertise in only one area— their own. Managers have no chance to see how all divisions of the company work together and appreciate their interrelationships and interdependence. In the long run, this specialization leads to narrow-minded managers with little experience in managing top management duties.
Divisional Structures
Since managers in large companies may find it difficult to keep track of all the goods and activities of their business, specialist departments may develop. These units are organizationally organized according to their outputs. Examples include the divisions formed to differentiate between the categories of manufacturing, customer service and geography. This grouping of departments is called Divisional structure. Such departments allow managers to concentrate their efforts and performance better. The divisional structure also makes the control of the results easier. This framework is therefore versatile, and open to change.
The divisional structure does have its drawbacks, however. Since managers are so skilled they can waste time duplicating their activities and resources. Furthermore, the rivalry between divisions could grow due to limited resources.
Matrix Structure
The composition of the matrix blends functional specialisation with divisional composition emphasis. The arrangement uses permanent cross-functional teams with a divisional orientation to combine organizational skills. Employees in a matrix structure belong concurrently to at least two formal groups-a functional group and a product, system, or project team. They often report to two bosses— one within the community of functions and the other within the department. Not only does this system improve employee productivity, but it also allows for professional and general management training across functional areas. Potential advantages include:
- Better cooperation and problem-solving.
- Increased flexibility.
- Better customer service.
- Better performance accountability.
- Improved strategic management.
Predictably, the form of the matrix has possible disadvantages too. Here are a couple of the drawbacks of this structure:
- The two-boss structure is vulnerable to power struggles as efficient bosses and team members compete to assert control over each other.
- Matrix leaders can suffer from task frustration when they take orders from more than one supervisor.
- Teams may create strong team loyalties that cause a lack of concentration on the interests of larger organizations.
- Adding team members to a matrix structure, a key component, can lead to increased costs.
References
- Cliffsnotes.com. 2020. Five Approaches To Organizational Design. [online] Available at: [Accessed 23 March 2020].
Ifeoma is a Business Analytics and Research Consultant at Industrial Psychology Consultants (Pvt) Ltd, a business management and human resources consulting firm.
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