IntroductionOrganizational design and structure serve as the foundation upon which business operations are built including important factor such formal managerial hierarchies and grouping of employees within different functional areas. O'Reilly and Tushman (2004) have defined organizational structure as an organization’s basic operational framework as characterised by its degree of formalization, complexity and centralization (decentralization) of decision making authority. O'Reilly and Tushman (2004) have also defined organizational design as the continuous changing or development of an organization’s structure. Well executed organizational designs can allow organization to develop strong corporate cultures and grow in response to changes in marketplace. Organizational strategy involves contingent plans on how to move an organization forward.
An organization’s strategic objectives may involve diversification, growth, increased attention to customer service, reduction of labor costs or increased turnaround times for product delivery (Rivkin & Siggelkow, 2001). Securing an appropriate path for achieving these goals and objectives should be at the core of organizational strategy. For example, if an organization needs to reduce labor costs, it may consider restructuring its staff to avoid reduplication of duties. Similarly, if the goal is to offer the best customer service experience, the organization may decide to beef up call centre service by opening more positions.
All these constitute organizational change and have a direct influence on organizational strategy. According to Sutcliffe, Sitkin and Browning (2000) effective organizational structure and design are merely a detailed articulation and support for organizational strategy. A clear alignment of organizational design and strategy translates the goals and objectives of the business into tangible, executable plans. Organizational structure and design fulfill a number of important functions. First, organizational structure allows harmonious division of work into specific job requirements and departments.
Secondly, it facilitates assignment of responsibilities and tasks associated with specific jobs. It also clusters tasks into units and establishes relationships between workgroups and among individuals. Finally, it enhances efficient allocation and deployment of resources. Pettigrew, Woodman and Cameron (2001) have highlighted three important contingent factors that influence the effectiveness of organizational design and structure. These are: size; technology and strategy. The kind of strategy that an organization adopts greatly influences its ability to respond to changes in the external and internal business environments.
Size affects organizational structure and design because as organizations develop, they tend to be more bureaucratic and formalized. On the other hand, technology influences organizational design and structure by influencing how the production process fits with the organizational structure. Technology also influences an organization’s ability to respond to changing market demand and customer preference for a particular product or service. BackgroundThis report is based on organizational design problems experienced by Airstar. A quick overview of the company reveals poorly articulated organizational structure and design which do not support the goals, policies and strategies for the company.
Although the company was at one time a market leader, its market position has been reduced significantly due to the inability to adapt and adjust to changes in internal and external market environments. Moreover, the roles of various functional departments have not been clearly defined and as a result there is redundancy and duplication of duties by employees. There are also misunderstandings and confusion about who should be responsible for particular aspects of the company’s business operations.