Why Is Organizational Design Important Management Essay

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1st Jan 1970 Management Reference this


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Organizational design is selecting and managing the culture, structure, processes and positions in organization so that organization can control the activities. The final aim is to achieve goals and objectives and to make organization successful (Sargent and McConnell, 2008). The design works best if it is effective and it has a positive impact on individuals (Nadler and Tushman, 1998). The organizational design is important because it shapes the behavior of members working in organization (Jones, 2010, p31) and managers acquired desired behaviors through managing organizational design. The two components of design are; Structural components include goal, strategy, and structure and Human components include work processes, people, communication, coordination and control, and incentive mechanism (Burton, DeSanctis and Obel, 2006). But it is not only about formal structure it also includes informal structures and managers integrate both into business strategy. The Ford Company makes a record loss of $13.3 billion in 2006, the tall hierarchy and culture based on empire building was found to be the reason of low productivity. The behavior of managers in Ford because of empire building structure is that they do not admit mistakes and protect their interests; the managers do not like their subordinates to ask questions. The new CEO from outside the company looks at the problem and ordered managers to share information across different departments (Jones, 2010, p36). Organizational design is a continuous processes because globalization, technological breakthrough and tough competition is continuously changing the way organization work and new forms of organizational designs are emerging such as learning, virtual, cellular, alliance, network, modular or spaghetti etc. (Burton, DeSanctis and Obel, 2006).

Organizations have limited resources, have internal constraints, external pressures and even face conflicting goal situations and organizational design makes the balance between internal and external pressures (Jones, 2010), manage the resources in such a manner that it will achieve high performance and give best possible outcomes (Daft, Murphy and Willmott 2010, p22). It also increases productivity, allows innovation and gives competitive advantage. When organizations are not performing, managers redesign and restructure the organization so that it will reveal its potential. There is no specific best design for organizations it emanates from overall vision of organization. What will happen if there is no design in company? A Brazilian company Semco has no organizational design, structure, charts, hierarchy, goals and mission statement but still performing well and making profits (Semler, 2007). But Semco has only 150-200 employees, when organizations grow and expands, employ large number of people then gradually it becomes more complex. If a manager puts less attention, a flawed design will emerge and it hinders productivity. The factors managers should take into account while designing the organization are vision, strategy, size, environment, communication, control and incentive systems. Finally have a fact in mind that organizational behavior is result of organizational design.


Burton, R. M., DeSanctis, G. and Obel, B. (2006) Organizational Design A Step-by-Step Approach. Cambridge University Press, New York.

Daft, R. L., Murphy, J. and Willmott, H. (2010) Organization Theory and Design. Andover: South-Western/Cengage Learning.

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In what ways is the managerial role changing in the 21st Century?

The economic fluctuations, change in technology, increasing socializations and demands for employees codetermination is continuously posing challenges to managers (Agthe, 1972) and in past two decades managerial roles had been gone through a notable transformation (Pearson and Chatterjee, 2003). The modern management has seen the shift from dictatorial style to team based approach. Top managers do not only stay in corporate offices but they handle employees from ground levels like Costco’s top managers works and administer employees from retail floor (Buffington, 2009). Managers now empower, motivate, educate and coach their subordinates and manage resources strategically. If subordinates do not satisfy with the role of their managers then there is a high employee turnover in organization. The number one reason for which employee leaves job in USA is because of dissatisfaction with their managers and immediate bosses, found in Gallup survey of over 1 million employees (AgriMarketing, 2009). Managers guide and control their subordinates but on the same time take orders from top management; they transfer the vision of top management to employee and communicate goals and objectives. Adam Smith argued managers play unimportant role in organizational performance (Horowitz, 1994) and they just adds hierarchical levels, raise cost and put burdens on organization. But as we have seen in past, managers make organizations economically and technically effective, they manage inputs and processes to maximize the output (Bern et al, 2009). They deals with human, physical and financial resources, makes work done by others and make the job of other’s easy, practical and possible through demonstrating their competencies in terms of knowledge, skills and abilities. The traditional approach states that managers in organizations perform four general roles planning, organizing, leading and controlling. Mintzberg (1980) had suggested ten managerial roles and are categorized in three dimensions; the first is interpersonal which includes liaison, leader and figurehead. Second is decisional which includes disturbance handler, resource allocator, negotiator and entrepreneur. The last dimension is informational which includes monitor, spokesperson and disseminator. In addition Douglas McGregor mentioned two styles of managers. Theory X in which managers push employees to do work, think employees are lazy, show dictatorial role and perform hard management practices. Whereas managers in Theory Y feels employees enjoy their work, wish to grow and that is why managers select soft management practices (Holloman, 1974; Weisbord, 2011). It is not necessary that traditional management roles only improve productivity. In 1914 Ford doubled wage rates from $2.5 to $5 and shortened work hours from nine to eight hours, the result was high productivity and cost went down. It was an out of box phenomenon practiced by managers in Ford. In 21st Century, the managers are seen as catalyst; have a strong impact on profitability and policies, they are more adaptable, proactive, innovative, mobile and committed (Eric, 1998) for minimizing the threats and grabbing the opportunities. Managers also start giving attention on cultural & diversity issues, work life balance, equality, strong laws and regulations affecting organizations which has been given less attention in past.


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In your view, does team working enhance or detract from enhanced organizational performance? Illustrate your key arguments with organizationally based examples.

According to Oxford Dictionary Teamwork is “the combined action of a group, especially when effective and efficient”. Whereas Team is collection of more than one individual strive to achieve goals, they had a coordination of activities and had a specific performance objectives (Conti and Kleiner, 1997). People rarely work in isolation; they work as teams in organizations. In USA nearly 80% of organizations (having more than 100 employees) organized some employees to work in teams (Bishop and Mahajan, 2005; Plessis, 2011). Organizational performance depends on what are the objectives of organization and can be seen as productivity, higher outputs, financial and operational results (Delarue et al, 2008). Team works for achieving their objective and on the same time it contributes in organizational performance (Bishop and Mahajan, 2005).

Managers increasingly organize work around teams because it gives synergy; give greater level of performance as compare to the individual input (Fincham and Rhodes, 2005, p276). Boeing gathered members of design team from dozen countries for its 777 project and synergy is clearly observed in outcomes of teams. The new Boeing is 33% fuel efficient and 25% less costly (Benson-Armor and Hsieh, 1997). It is also important to mention ‘social loafing’; the sum of team efforts can be less than the sum of individual efforts, individual puts less efforts when team expands. Teamwork also raises the level of trust because employees depend on each other for completing tasks and projects. According to SHRM (Strategic Human Resource Management) theories, a well-planned HR system which usually includes teamwork will raise employee satisfaction, motivation and commitment which results in positive behavioral changes and leads to enhanced organizational performance (Delarue et al, 2008). On the other hand, team often leads to negative results such as conflicts, poor decisions and low productivity (Campion et al, 1993), which harms organizational performance.

Buchanan and Huczynski (2007, p284) mentioned overall success of a company is depending on performance of teams working in it. Effective team leads to enhanced organizational performance. According to Guzzo and Dickson (1996), the effectiveness of team depends on goals, team cohesiveness, composition, leadership and motivation. It is important to keep the team on track, the reason for their existence. Teams exist to achieve goals & objectives, they exist to perform tasks and it is the major reason for creating teams (Ilgen, 1999). The second performance-dependent factor is team cohesion, the more cohesive team leads to higher performance and teams with cohesion are efficient and effective. Smith et al (1994) found the positive correlation between team cohesion and financial success when he studies the cohesiveness in top management teams. The team composition means the characteristics and nature of team members. Campion et al (1993) mentioned composition is process of designing the team in terms of the size, heterogeneity, flexibility, tasks and roles of members. Effective teams are of relative size, highly flexible, heterogenic in term of skill and experience especially when tasks are diverse and need different expertise (Hillmann, 2005). He showed through empirical study that composition of team leads to effectiveness. Leaders can also affect the performance of team, sometimes the higher expectations of leaders regarding team performance raise the actual performance of team and leaders often intervene in team processes only to boost the individual performance of members (Guzzo and Dickson, 1996). On the other hand unrealistic expectations may makes members of teams frustrated and often put them in stress. The last factor is motivation; it can be individual or group level motivation. Teamwork raise work morale and the level of involvement of members, whereas incentives and rewards for team performance can raise group level motivation. The 385 employee company Shelby Die Casting, automobile manufacturing in Mississippi is 16 months away from closure, for saving the company employees had been organized into workplace teams. The result of teamwork is clearly observed, scrap reached to 12% (which was 40% two years ago) and performance is up, this teamwork saves the company from closure (Caudron, 1994). Another example is of Wellman International, a 450 employee company manufactures synthetic fiber. They improved quality and solve problems by implementing effective teamwork (Ingram, 1996).

Guzzo and Dickson (1996) had also challenged the assumption that improvement in team performance simply leads to organizational performance is not always true. Sometimes teams are working well but results are not seen in larger organizational context. If the company invests in IT infrastructure, it may increase team performances but it does not imply that it will have an effect on organizational performance. Team-Organization relation is very vital, the positive changes in team results in organizational performance. On the other hand changes in organization also affects working of teams exist in it. Nurmi (1996) claimed that teams often slow down the decision making process, if members are not empowered. Teams also face conflict situations and they spent huge amount of their time and efforts in resolving conflicts. Teams spend their time in improving communication and attending team meetings which divert them from their original goals, conflict is linked with low effectiveness in organizations (Dennis et al, 1999). Consensus and compromises are usually seen in teams for resolving conflict scenarios. Team concept is not necessarily applicable in all type of organizations. Gosen Corp organized its employees in cross functional team but after eight years employees did not find the reason for working in team when they are performing well individually and team concept is very ambiguous in company (Caudron, 1994).

Caudron, S. (1994) argued bringing the individuals in a group creates barrier for achieving success. Individuals are often become an obstacle in implementing teams, they do not want to be a part of team, rather likes to perform tasks alone and shows reluctance for taking responsibility and decision making, These reluctant employees can be a reason for low performance (Berman, 1999). If the individual employees are organized in teams they look for their interest such as career and salary and they do not put more attention on team objectives. From HR perspective, hiring individuals is easy but getting those individuals perform in teams is hard. Lencioni (2006) had explained the problems in team and explained factors of team dysfunction such as lack of trust, fear of conflict, commitment issues, absence of accountability and inattention to results. These problems are affecting the performance of organization and hard to manage but still they are curable.

In present era, teams have become an essential element in organization. Teamwork assists management, improves communication, encourage innovation, save time and hence enhance organizational performance (Nurmi, 1996). For making team perform and make them feel their higher potential, UK organizations invest heavily in team building exercises (Read, 2007). Organizations can work effectively only if there is strong collaboration and coordination among its team members (Mullins, 2011; Brooks, 2009). The self-assessments tool should apply in teams; each team member feels accountable for their work and evaluates their performance critically and member should give feedback to one another. Team roles should be clear among members and managers should make sure that there will no role clashes (Belbin, 2010). Another tool is Gap Analysis; the gap between current position and what should be the future position of tasks and goals then plan accordingly to lower down the gap. If teams are designed, managed and evaluate very well it will give better results and leads to higher organizational outcomes.

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