This paper discusses the organizational theory and design. If builds on the work of Richard L. Daft and talks about the importance of a structural design and how it influences the overall performance of the organization. The paper gives brief descriptions of the types of structural design and their drawbacks. It further discusses the difference between efficiency and effectiveness and how to achieve them both. It focuses on the importance of well thought out strategies, devising the right action plan to implement the strategies and doing so in a successful manner.
An organization is a social body that is directed towards a goal, it is designed as deliberately structured and coordinated activity systems that is linked to the external environment (Daft, 2009). The organizational resources are deliberately managed and synchronized in a way, so as to fulfill the organizational purpose.
Organizations are the entities that generate business. They bring together resources like land, labor, capital, material and use them to fulfill their objective and achieve the desired goal. An organization develops its purpose from their vision and long term plan. This is referred to as a mission statement. A purpose defines the roles of all the stakeholders in an organization. It elaborates the reason behind a company's existence. The purpose is set at the top and then flows down till the bottom of the organization. In order to measure how effective the organization has been in achieving its purpose, they may use financial and non-financial measures. Financial measures may include cash balance and profitability (Basu, 2012).
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Since an organization is made of different individuals, it is important to focus on organizational behavior. This behavior is what creates a culture in an organization and significantly influences productivity. Organizational behavior is molded by leadership, motivation, positive/ negative reinforcement and communication. In profit organizations, the resources are put towards earning monetary returns while non-profit organizations direct their resources towards achieving some sort of social impact. This however causes instability in gaining a steady income (Daft, 2009).
In order to be successful, every organization needs to have a system in place. The core of a system is to take the required inputs, process them and give an output. There are a number of subsystems that make up the system. These subsystems work on their own, in coordination with each other to develop a function that allows the organization to survive.
An organizational design is a formal, directed process that incorporates the company's people, its technology and the information so that they work towards achieving the desired goals. The design process allows the organization to improve its chances to have successful collective efforts (Autry, 1996).
There are five basic organizational structures. These are functional, divisional, matrix, team and networking. Each structure has its own benefits and combines different elements and mechanisms of the organization. In the functional structure, units are made based on similarities in expertise and skill. For example finance, marketing, and human resource etc. This means that the structure is wider and likely to be more centralized, causing decision making to be slow. A divisional structure is more flexible. In this specialized departments according to the output are developed. This may be the customer services department, production department etc. However this structure is likely to cause duplication of similar activities. The matrix structure uses cross functional teams, one employee may work in two groups at the same time, and this means they report to two different people. This broadens a workers horizons, increases their flexibility and motivation.
The team structure eliminates barriers amongst different departments and creates healthy relations for solving ongoing problems. It is a wide but short structure that speeds up response time. And lastly the network structure depends on external resources; work is delegated to outside specialists on contractual bases. This means there is lack of control and unpredictability.
Organizational design on the other hand has two dimensions, as mentioned in chapter one. These dimensions are structural and contextual. The structural dimension defines the inside of an organization. These are useful when comparing one organization to the other. The amount of written documentation is the formalization while the subdivision of tasks highlights the specialization in an organization. The different levels and the span of control are all identified by the hierarchy of authority. This shows who is answerable and accountable to whom. Centralization shows the decision making authority and professionalism highlights the personal attributes of the workers, their education and skills. The last structural dimension is the personnel ratios (Hall & Pugg, 1991).
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The second dimension in organizational design is contextual. This portrays the entire organization plus the environment. Firstly the size shows the number of people who work in the organization. Then the tools and techniques used to process the inputs into the outputs fall under the heading of organizational technology. The environment consists of all the external elements. The culture is the norms of an organization and the values shared by its employees and the last contextual dimension is goals and strategy (Daft, 2009). These dimensions help evaluate and calculate the in depth factors in an organization. They analyze how well a stakeholder is being satisfied.
Effectiveness and efficiency
Effective organizations work in such a manner so as to deliver outputs that meet the defined organizational strategies. It is the degree to which an organization has been successful to meet its set goals. While efficiency is the amount of resources utilized to meet the goals. An efficient organization uses lesser resources yet increases productivity. By applying unique division of labor and an explicit rules system, organizations can achieve unmatchable efficiency. The returns on investment are a good indicator of efficiency (Harris, 2010).
While considering organizational effectiveness one needs to focus on both, quantitative and qualitative measures. The qualitative measures will include the company's visions, its values and culture, and purpose. Each company has its own way of analyzing their effectiveness, there is no set method. It enables to study the relationship between employee performance and the company's profits. And hence helps in modifying strategies to avoid loss. "Efficiency is doing things right, effectiveness is doing the right things" (Drucker, 1993).
Organizational strategy is the discipline and know-how to transform a strategic objective into organizational ability and performance. Organizational strategy includes all aspects of strategy development, restructure and redesign, and alignment with organizational objectives. The organizational strategy is developed at the top level and implemented in a manner that links together the entire body (Fairholm, 2009).
Keeping in mind the current market instabilities, it is very important that the strategies should be adaptable. They should have a focused purpose and a future perspective. Once the strategic plan is devised, it is very important that there is effective strategy realization. The strategy should be put into action in a successful way so that strategic intent is translated into aimed results. The right people should be involved to make the right decisions in order to create a perfectly aligned action plan. Performance management is vital. Everyone needs to be engaged into action taking, for this there needs to be clear communication, targets need to be set on individual bases and feedback should be encouraged while consistently measuring progress (Chapman, 2004).
Evaluation of organization theory
Organizational theory is a deep rooted analysis and study of organizational functioning. Most of the modern theories are built on the classical perspective that signifies the development of a hierarchy. There needs to be scientific management which means certain set criterions and procedures of performing a task. The top management devises these procedures while the lower levels perform them. Administrative principles look at the functionality such as unity of command and direction. However they fail to take into account the human and social aspects. Since most processes are interdependent, contingency plays a very important role in this.
Then there are the contemporary organizations and learning organizations. The primary criterions for evaluation of any theory are falsifiability and utility. Utility focuses on the usefulness of the system while falsifiability studies the possibility of empirical refutation. The matrix framework below evaluates the theories in contrast with two qualitative dimensions that are transformation and connectivity: (Bacharach, 2006).
Measurement Issues (validity, non-continuousness, reliability)
Construct Validity (convergent validity, discriminant validity, factor analysis, concurrent and predictive validity)
Logical Adequacy (non-tautological or non-derivation; and specified nature of relationship)
Explanatory Potential (specificity of assumptions regarding objects of analysis and determinative relations between antecedent and consequent; and scope and parsimony of propositions)
Predictive Adequacy (probabilistic and theory-based)
In order to fulfill the organizational purpose, all the internal elements need to work together in contingency with the external environment. The structural design shows the physical positioning of people, the span of control and chain of command while the organizational design highlights other aspects. To run an organization effectively and efficiently the entire body needs to have the same strategic intent so that they have a mutual goal and work in that direction. The strategies need to be in line with the company's future vision and mission. The structure should be destined in a way to enable strategy and work designs that maximize workforce performance, practices that help change the behavior of employees and management processes that develop human potential, commitment and performance.
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