Factors Affecting Organizational Design
Although many things can affect the choice of an appropriate structure for an organization,
the following five factors are the most common: size, life cycle, strategy, environment, and
technology.
Organizational size
The larger an organization becomes, the more complicated its structure. When an
organization is small * such as a single retail store, a two-person consulting firm, or a
restaurant * its structure can be simple.
In reality, if the organization is very small, it may not even have a formal structure. Instead
of following an organizational chart or specified job functions, individuals simply perform
tasks based on their likes, dislikes, ability, and/or need. Rules and guidelines are not
prevalent and may exist only to provide the parameters within which organizational
members can make decisions. Small organizations are very often organic systems.
As an organization grows, however, it becomes increasingly difficult to manage without
more formal work assignments and some delegation of authority. Therefore, large
organizations develop formal structures. Tasks are highly specialized, and detailed rules
and guidelines dictate work procedures. Interorganizational communication flows
primarily from superior to subordinate, and hierarchical relationships serve as the
foundation for authority, responsibility, and control. The type of structure that develops
will be one that provides the organization with the ability to operate effectively. Thats one
reason larger organizations are often mechanistic*mechanistic systems are usually
designed to maximize specialization and improve efficiency.
Organization life cycle
Organizations, like humans, tend to progress through stages known as a life cycle. Like
humans, most organizations go through the following four stages: birth, youth, midlife,
and maturity. Each stage has characteristics that have implications for the structure of the
firm.
* Birth: In the birth state, a firm is just beginning. An organization in the birth stage does
not yet have a formal structure. In a young organization, there is not much delegation of
authority. The founder usually calls the shots.
* Youth: In this phase, the organization is trying to grow. The emphasis in this stage is on
becoming larger. The company shifts its attention from the wishes of the founder to the
wishes of the customer. The organization becomes more organic in structure during this
phase. It is during this phase that the formal structure is designed, and some delegation of
authority occurs.
* Midlife: This phase occurs when the organization has achieved a high level of success.
An organization in midlife is larger, with a more complex and increasingly formal
structure. More levels appear in the chain of command, and the founder may have
