Organizational Design: Contingency Factors, Size, Technology, and Structure
UNIT 8 THE CONTEXT OF ORGANIZATIONAL DESIGN
1. CONTINGENCY FACTORS
Contingency factors are those variables that are derived from a specific situation in which the enterprise operates.
Aspects such as size, technology, environment (dynamism, hostility, complexity) or age influence the design of the organizational structure of the company.
CONTINGENCY APPROACH
The contingency approach indicates that the efficient design of structural models depends on the adequacy of internal variables (design) and external variables (contingency).
It has come to the conclusion that there is no optimal structure, but different structural possibilities change as do the conditions of the environment and the organization itself.
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2. AGE AS A VARIABLE OF CONTINGENCY
Companies go through different stages throughout their lives: young, mature, and old.
There is an organizational design suited to each stage of the life cycle of the organization.
LIFE CYCLE OF THE ORGANIZATION
DESIGN VARIABLES | BUSINESS | COLLECTIVE | TRAINING | DEVELOPMENT | DECLINE |
SPECIALIZATION EXECUTION Centralization COORDINATION SETUP | Low Null High Direct supervision Simple structure | Low Low High Mutual adjustment Organizational Structure | High High Low Standardization behavior Bureaucratic structure | Very high Very high Very Low Normalization results Divisional structure | Low Low High Direct supervision Simple structure |
STAGE “BUSINESS”
It’s been typical of startups. At this stage, the organizational structure is an emerging phenomenon, not just drawing or design. Differentiation is almost nonexistent, and the tasks are complex and varied. There is a figure of the entrepreneur, which is essential for the company. The employer makes all kinds of activities (operational and administrative) as well as direct control of the various members of the company. The relationships between the different members of the enterprise are mostly informal and direct contact, which favors, to a large extent, creativity.
- STAGE “COLLECTIVE”
The company grows and is adding a variety of resources from the company to stage 2.
At this stage, they usually lay the groundwork for the organizational design. The tasks remain complex and have a low level of specialization, although higher than in the previous stage. Coordination is dreamed up directly between the different members of the organization. The organizational structure is designed as an organic type, i.e., which promotes cooperation between individuals and creativity. Furthermore, it is a typical type of structure for newly established sectors and subjected to a high level of turbulence. The separation of functions, although very low, starts and will become a key feature of organizational development, though the figure of the entrepreneur is still relevant, especially in the allocation and control of resources.
- STAGE “TRAINING”
At this stage, the competition is stabilized and consolidated. The company features products or services clearly defined and companies know what forces companies to design new organizational structures more stable.
The design of the organizational structure becomes one of the objectives of management. Generalize the use of standards to govern the conduct and results of the different members of the company. Organizational structures to be more formalized pass, in which creativity has been substituted by the efficiency (productive and organizational).
There is a generalization of the specialization of functions and coordination of tasks is performed taking into account existing standards in the organization. The autonomy of individuals in developing their work is high, but is more apparent than real: the decentralization follows the guidelines arising from the rules that determine their behavior. However, we have a mechanical organizational structure characterized by the formalization and standardization of behaviors whose goal is survival.
- STAGE “DEVELOPMENT”
This stage arises when activities and traditional markets of enterprises are insufficient to allow them to grow and make better use of resources. It needs a structural change in the company caused by the increased complexity and scale of its activities. The structural configuration is the most appropriate bureaucratic as it facilitates the planning and control. In this structural state, it is possible decentralization in decision making, until the independent functioning of the various parts of the organization. Structural forms used, depending on the nature and extent of diversification, are the division (in the case of related diversification) and holding (for unrelated diversification).
- STAGE “DECLINE”
“Division and expansion of the business to countries with schemes of stage 4”
At this stage, there is the demise of the company. This stage is the result of increased competition, the disappearance of demand, the emergence of new competitors or new products. Management must find new activities and new markets in which to apply resources and organizational capabilities.
These changes in activity typically involve the use of new technologies and the need for new knowledge and skills. In this process of transformation, it is necessary a re-centralization of decisions to achieve optimal allocation and use of scarce resources in the organization. This re-centralization, like the disappearance of rules and standard procedures are the most important changes at this stage of the life of the company, returning to a simple organizational structure. The time and the growth of the company (if it occurs) will need the progressive structural complexity.
3. SIZE OF ORGANIZATION
Size is one of the most studied contingency factors. This is a variable of great significance for the structural configuration of the company: its effect on other design variables.
3.1. DEFINITION AND MEASUREMENT OF THE SIZE
For the European Commission, there are three types of variables that are used simultaneously to measure the size of a business:
- The number of workers.
- Turnover.
- The balance sheet of the organization.
3.2. ORGANIZATIONAL SIZE AND DESIGN ORGANIZATION
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In terms of organizational differentiation, with increasing the size of the organization, organizational differentiation increases.
Workers in small businesses perform common tasks, i.e., can handle everything, but large companies are already giving out the different activities and individuals specialize in specific tasks.
We started to create departments, there is horizontal differentiation (division of tasks) and vertical differentiation (the departments that arise are managed by people who previously did not exercise this function of control).
In terms of organizational centralization and organizational formalization, the size of the company negatively affects. It is necessary to share power in order to make efficient decisions (as the company increases) but as we start to lose the direct control of managers as we seek a more formalized structure, imposing standards for monitoring and control tasks to personal.
3.3. ORGANIZATIONAL STRUCTURE OF THE SMALL BUSINESS
What is an SME?
The small and medium enterprises (SMEs) is a company with distinctive features, and has dimensions to occupational and financial limits preset by the States or Regions. SMEs are logical agents, cultures, interests, and specific entrepreneurial spirit. Usually, the term has also been MSME (acronym for micro, small, and medium enterprises), which is an expansion of the original term, which is included in the microenterprises.
Nº WORKERS | BUSINESS NUMBER | BALANCE SHEET | |
MEDIUM | 250 | 50 million | 40 million |
SMALL | 50 | 10 million | 10 million |
MICRO | 10 | 2 million | 2 million |
Particularly organizations of SMEs
Organizational variables | TYPICAL ELECTION | |
Differentiation | Low | A person usually performs many different tasks (horizontal differentiation) and are very flat hierarchy (vertical differentiation) |
Centralization | High | The employer assumes most of even some operational decisions. |
Formalization | Low | Jobs are flexible and there is often no procedures manual. |
Coordination | Mutual adaptation | No controls were used for behavior, and results for skills, but the direct supervision and mutual adjustment. |
Structure | Organic (low differentiation) | They are very attentive to the changing environment in the form of opportunities and threats to suit them. |
4. TECHNOLOGY AND ORGANIZATIONAL STRUCTURE
Technology are the processes that transform inputs into goods or technical services or information systems.
The concept applies not only to production processes or physical-material processing industry organizations, but also to production processes.
The technology is a controversial term because:
- There are many interpretations of the term technology.
- Each performance uses a different unit of measure:
- Techniques used in workflows.
- Characteristics of raw materials used.
- Variety and uniqueness of the problems to be solved.
- Complexity of the technical system of production.
- Degree of continuity.
- Degree of automation of production processes.
4.1. FOREIGN TECHNOLOGY-STRUCTURE
- Organizational differentiation, as more intellectual character of work the harder it will split…
- Organizational centralization, the more routine technical system is the greater the propensity to use rules and regulations governing the conduct and results of the members of the organization. (Direct supervision of managers).
- Organizational formalization. If the system is routine technical structure that relates the rate is not centralized and decentralized routine. Centralization and formalization are mechanisms for regulating the conduct mutually substitutable, so that if you go to the formal decision-making will be decentralized.
5. SUMMARY AND CONCLUSIONS
EFFECTS ON INTERNAL EXPERTISE
EFFECTS ON INNER CENTERING
IN EFFECTS ON THE EXECUTION
