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Jestina is an upper-level manager who works for an upscale soft drink company called Quenchbliss. The company’s success in the southwest region of the United States gave their leaders the confidence that Jestina could handle a challenging assignment: Organize a new supply chain and distribution system for their products across the border, in Mexico. Almost overnight, Jestina is responsible for hiring competent people, forming them into a coherent organization, training them, and establishing the needed infrastructure for sustained success in this new market.
If you were given this assignment, what would you do? How would you organize your employees? How would you help them understand the challenge of setting up a new organization and system? These are the kinds of questions that require an understanding of organizational structure, organizational design, organizational change, and organizational development. If you are expanding into a new area, as Jestina is, it requires learning a new culture, perhaps even a new language.
One of the first issues Jestina will need to address deals with how she will design this new organization. Before we begin, we need to understand that there are two correlating aspects to any organization. The formal organization is an officially defined set of relationships, responsibilities, and connections that exist across an organization. The traditional organizational chart is perhaps the most common way of depicting the formal organization. The typical organization has a hierarchical form with clearly defined roles and responsibilities.
When Jestina sets up the formal organization, she will determine the administrative responsibilities, communication structures, and how information and resources are obtained and distributed. She will identify the essential functions that need to be part of the system and hire people to fill these functions. She will then need to help employees learn their roles and how they relate to one another.
However, there is also an informal organization, the invisible network of interpersonal relationships that shape how people actually connect with one another to carry out their activities. The informal organization is emergent, meaning that it is formed through the common conversations and relationships that often naturally occur as people interact with one another in their day-to-day relationships. It is usually complex, impossible to control, and may significantly influence an organization’s success. In short, the formal organization explains how an organization should function, and the informal organization is how the organization actually functions.
For example, Jestina needs help with the local culture and language, and Maria in marketing has family in Mexico. Jestina may turn to Maria as a colleague for collaboration, suggestions, and leads on who to talk to in order to learn more about the many facets of this project. In this case, Maria may be an informal connection (thus, the informal organization), as she is outside of Jestina's department, but may still make a valuable contribution to the project.
The informal organization can also be mapped, but it is usually very different from the formal organization, and the connections being mapped may not be visible. The chart you see in this example is called a network map, because it depicts the relationships that exist between different members of a system. Some members are more central than others, and the strength of relationships may vary between any two pairs or groups of individuals. These relationships are constantly in flux, as people interact with new individuals, current relationships evolve, and the organization itself changes over time.
The formal organization will take shape as Jestina hires and assigns people to different roles, and she can help the informal organization take shape by giving people opportunities to build relationships as they work together. As this occurs, the informal organization will also take shape.
Jestina must make sure that the organization enables and encourages these informal relationships, and she must do so with cultural competence. Her experiences in the U.S. workplace will only partly prepare her for cultivating a work culture in Mexico. Indeed, some of her core assumptions might prove to be wrong. As a simple example, using first names promptly upon meeting people is now the norm in the U.S. but is considered rude in Mexico; all colleagues should be addressed as señor or señora until one is invited to use a first name. Here, Maria, as part of the information organization, can offer additional insight and information.
As we continue our discussion of structure and design, we will next examine different ways of understanding formal structure.
As she designs the formal structure, Jestina will need to create a system for delegating duties, establishing oversight, and reporting on performance. One of the most common frameworks for this is bureaucracy, or a complex organization that has many layers and processes. Indeed, for many people the term has a negative connotation. However, large organizations tend toward bureaucracies because they give individuals clearly defined roles and responsibilities. People generally work better together when they have a clear sense of what they are supposed to do and who they report to. Organizations function better when people have clear roles as well, since they can fill a position when a person moves on or moves up in the organization.
A bureaucratic model, or formal study of bureaucracies, was introduced by Max Weber, a 19th-century sociologist. While describing characteristics of bureaucracy, Weber’s model gives us a vocabulary to discuss any organizational structure. Weber proposed five elements of organizational structure:
| Term | Definition |
|---|---|
| Specialization | The degree to which people are organized into subunits according to their expertise—for example, human resources, finance, marketing, or manufacturing. |
| Command-and-Control | The way in which people report to one another or connect to coordinate their efforts in accomplishing the work of the organization is tightly controlled and strictly reinforced. |
| Span of Control | The work that any one person in the organization is accountable for. For instance, top-level leaders are usually responsible for all of the work of their subordinates, mid-level leaders are responsible for a narrower set of responsibilities, and ground-level employees usually perform very specific tasks. |
| Centralization | How information and resources in an organization are gathered and distributed. A highly centralized organization concentrates resources in only one or very few locations, or only a few individuals are authorized to make decisions about the use of resources. In contrast, a diffused organization distributes resources more broadly throughout an organizational system along with the authority to make decisions about how to use those resources. |
| Formalization | The degree of definition in the roles that exist throughout an organization. A highly formalized system (e.g., the military) has a very defined organization—a tightly structured system in which all of the jobs, responsibilities, and accountability structures are very clearly understood. In contrast, a loosely structured system (e.g., a small, volunteer nonprofit) relies heavily on the emergent relationships of the informal organization. |
In the next section we will consider each of these terms and concepts as Jestina makes decisions about structuring their organization and officers abroad.
Recall that structures may be described as mechanistic (the traditional top-down hierarchy with departments) or organic (which are flatter and/or include more cooperation among team members horizontally). Mechanistic organizations may have many levels or layers between a worker and the CEO. A worker may never even see a CEO, let alone talk with them. Organic organizations, by contrast, may have fewer levels or layers, more interaction between those levels, or less inhibition associated with a worker talking directly to the CEO. The traits above are all highly correlated to these structures.
| Elements of Organizational Structure and Their Relationship to Mechanistic and Organic Forms | ||
|---|---|---|
| Mechanistic | ← → | Organic |
| High/Narrow | Specialization | Low/Broad |
| Rigid | Command-and-Control | Loose |
| Clearly Defined | Span of Control | Less Defined |
| Centralized | Centralization | Decentralized |
| Highly formalized | Formalization | Low |
On one end of the continuum is mechanistic structure. Recall that this is a strongly hierarchical form of organizing that often has a pyramid structure and a lot of vertical control from the top. A mechanistic structure tends to dictate roles and procedures through strong routines and standard operating practices. In contrast, remember that an organic structure relies on the ability of people to self-organize and make decisions without much direction, such that they can adapt quickly to changing circumstances.
Jestina will need to decide how much autonomy the Mexican offices have, and how many decisions will need to be approved by headquarters. Exercising more control over these departments might be desirable for quality and consistency but could lead to slower work as remote offices wait for approval.
The degree of specialization required in an organization depends both on the complexity of the activities the organization needs to account for and on the scale of the organization. A more organic organization may encourage employees to be both specialists and generalists so that they are more aware of opportunities for innovation within a system. A mechanistic organization may emphasize a strong degree of specialization so that essential procedures or practices are carried out with consistency and predictable precision. Thus, an organization’s overall objectives drive how specialization should be viewed. An organization that produces innovation needs to be more organic, while an organization that seeks reliability needs to be more mechanistic. In Jestina’s case, a more specialized organization will assure consistency and predictability, while less specialization will give the new staff more flexibility to adapt to their region.
Similarly, the need for a strong environment of command-and-control varies by the circumstances of each organization. An organization that has a strong command-and-control system requires a hierarchical administrative structure that is both vertical, with control from the top, and “tall,” meaning there are many levels within the hierarchy. Organizations that exist in loosely defined or ambiguous environments need to distribute decision-making authority to employees, and thus will often feature a flat organizational structure. Jestina must consider the need for a fluid organization that can adapt to the environment with the need for the product and customer service in Mexico to have the same high standards as the home company. She must also consider the norms in Mexican work culture, which are more hierarchical and centralized.
The span of control assigned to any specific manager is commonly used to encourage either mechanistic or organic bureaucracy. Any manager’s ability to attend to responsibilities has limits; indeed, the amount of work anyone can accomplish is finite. A manager in an organic structure usually has a broad span of control, forcing them to rely more on subordinates to make decisions. A manager in a mechanistic structure usually has a narrow span of control so that they can provide more oversight. Thus, increasing span of control for a manager tends to flatten the hierarchy while narrowing span of control tends to reinforce the hierarchy. In our example, Jestina’s span of control may be limited or expansive. She must consider her own capabilities in keeping up with the activities throughout Mexico or if she can rely on regional managers to make key decisions and keep her informed.
Centralization addresses assumptions about how an organization can best achieve efficiencies in its operations. In a mechanistic structure, it is assumed that efficiencies will occur in the system if the resources and decisions flow through in a centralized way. In an organic system, it is assumed that greater efficiencies will be seen by distributing those resources and having the resources sorted by the users of the resources. Either perspective may work, depending on the circumstances. As mentioned earlier, this is a special challenge to Jestina, as a more centralized structure is more common in Mexico.
Finally, managers also have discretion in how tightly they choose to define the formal roles and responsibilities of individuals within an organization. Managers who want to encourage organic flexibility will resist the idea of writing out and tightly defining roles and responsibilities. They will encourage and empower employees to self-organize and define for themselves the roles they wish to fill. In contrast, managers who wish to encourage more mechanistic bureaucracy will use tools such as standard operating procedures (SOPs) or written policies to set expectations and exercise clear controls around those expectations for employees. For Jestina, these decisions will largely follow the bigger decisions about specialization, control, and centralization. An organic approach will have more loosely defined roles and responsibilities, which may be necessary as the new offices get their footing, but there must still be enough formality that new hires know what to do.
As a result of this information on organizational structure and design, Jestina created the following structure for the Mexico division:
Here is Jestina’s rationale for this structure:
| Jestina’s Organizational Design and Rationale | |
|---|---|
| Specialization | Since the organization seeks reliability, the jobs are fairly specialized so they can adapt to the individual region. |
| Command-and-Control | Because this region is more focused on hierarchy and centralization, Jestina decided that a tighter structure is necessary. |
| Span of Control | Jestina wanted the initial span of control to be small. As the organization grows, it might make sense for each manager to have a greater span of control. In addition, the layers of hierarchy will allow her to be more effective because she would receive updates from the sales manager and logistics and distribution managers. |
| Centralization | Given the cultural aspects of Mexico, it makes sense to keep the operations somewhat centralized. |
| Formalization | Because this operation is new, Jestina wants to keep formalization low to see how the organization grows. As it gets bigger, there may need to be more formalization. |
Of course, the structure of the organization is still not complete and may continue to be in flux as they realize organizational needs and as environmental factors change.
When a bureaucratic structure works well, an organization achieves an appropriate balance across all of the considerations. Employees specialize in and become highly advanced in their ability to perform specific functions while also attending to broader organizational needs. They receive sufficient guidance from managers to stay aligned with overall organizational goals. The span of control given to any one manager encourages them to provide appropriate oversight while also relying on employees to do their part. The resources and decision making necessary to accomplish the goals of the organization are efficiently managed. There is an appropriate balance between compliance with formal policy and innovative action.
Source: THIS TUTORIAL HAS BEEN ADAPTED FROM OPENSTAX "ORGANIZATIONAL BEHAVIOR". ACCESS FOR FREE AT OPENSTAX.ORG/BOOKS/ORGANIZATIONAL-BEHAVIOR/PAGES/1-INTRODUCTION. LICENSE: CREATIVE COMMONS ATTRIBUTION 4.0 INTERNATIONAL.
