Influence of Environment on Organizational Structure

Keywords: organizational structure impact

Organizational structure provides the framework of an organization and its pattern of management. The purpose of structure is division of work and co-ordination of activities among members, so that they can achieve objectives of the organization. The organizational structure directly determines the formal command system and communication network, which not only affect the flow of information and material and utilization efficiency, but also affect the psychological and social functions inside the organization. Therefore, the appropriate organization structure is very crucial to effectively reach goals of the organization. In the following paragraphs, I will explain the vital impacts of technology and environment on the creation of organizational structure.

An organisational structure is a construction which directs members through controlling, co-ordinating and motivation to complete organizational goals. Horizontal division of labour is related to specialization of the labour force. The vertical division of labour is associated with controlling, monitoring, decision making and program of authority distribution.

An organization has different ways and styles to be structured, owing to different goals and conditions. There are three opinions about which factor affects variation of organization structure .The first argument in favour of environment condition, which is a very important constraint to select an effective structure form. The remaining factors which are considered to influence organizational structures are technology and size.

Technology mainly refers to the process from input to output within the organization. The level of certainty on technical activities of the organization determines different management and coordination requirements for the organizational structure. A high degree of certainty can strengthen formalization and centralization of organizational structure. On the contrary, the structure of organization in this circumstance needs to have greater flexibility.

Technology is a transformation process of mechanism to complete its tasks in an organization. A crucial issue in technology is meeting an organizational customers’ demand for output customization. The speed of which products must be changed is related to this. When the demand for product change or output customization is high, a stable organizational structure (for instance, machine bureaucracy) is inappropriate for controlling the production process. In order to efficiently fulfill needs of customization and change, an adaptive structure (for example, organic) is more effective and advisable. For instance, in the Microsoft, the development of new technology and product is a major mission in the fierce market competition. To achieve the goal, employees and departments need to pay more attention to market demand and other competitors. Therefore, flexible structure is essential to take effective measures in terms of environmental changes.

If outputs are standardized, product life-cycles are long, and consumer exceptions are few, more bureaucratic or mechanistic structures will be suitable. It is likely that organizations which are faced with high demands for output customization or change pay higher attention to effective problem solving, while organizations with relatively stable transformation technologies focus more on the efficient performance. As the work in organizations with routine technologies is standardized, employees are likely to be required less training and education. Employees in organization with non-routine technologies need professional training and relevant work experience. Compared to a worker in the assembly line, a costume designer may be required more professional knowledge and skill training.

Span of control refers to the number of subordinates supervised by a manager or a supervisor. Span of control is also different in organizations with different types of technology. The more complex the technology, the more that the requirement of a supervisor for problem solving. However, it relies on professional employees in an organization with non-routine technologies. Professional staffs have expert knowledge and personal experience that can perform well without close supervision, so the span of control can be larger. The span of control in organizations with non-routine technologies is smaller than that in organizations with routine technologies.

Centralization of decision making is also a character of organizations with routine technologies. Moreover, coordination and control are contained within a centralized management structure. The organization’s task is usually in the form of memos, reports and procedures when it is analyzable and the communication is frequent. On the contrary, if the task is less analyzable, information is conveyed by interpersonal communication, for instance, telephone conversation and group meetings. The scope of decision making authority is extended in organizations with non-routine technologies, so are coordination and control activities.

Based on the relationship between technology and organizational structure, we can predict that which organizational structure is appropriate for which form of technology. For instance, machine bureaucracies should only be applied to routine technologies. Organic structure is adequate for other kinds of technologies, even though it may work best with non-routine technologies.

There is a technological determinism which argues that technology is the primary force to determine jobs, attitudes, behaviours and organizational structures. Joan Woodward, James Thompson and Charles Perrow are the representative figures in this school.

Joan Woodward found that an organization structure was related to its performance through technology. She believed that it was the complexity of technology determined which structure to be used. Woodward discovered that as the technology became more complex, the length of the chain demand would increase, so did the proportion of managers in total employment. With the increasing complexity of technology, the management personnel’s span of control enlarged.

James Thompson argues that organizational structures are determined by the type of coordination, which is indicated by interdependence between individuals, groups and divisions. Different kinds of technology create different types of interdependence, so technology indirectly influences the organization structure. It is the pooled task interdependence when the contributions made by individuals and departments are separate and independent. In such a case, it is easy to evaluate the performance of each group member or division, so a bureaucratic organization structure with low coordination costs is adapted. Long-linked technology is a technology that requires a series of tasks to be performed in a predetermined order. One division or an individual cannot perform until the former has completed their tasks. It is sequential task interdependence when the performance of a team member or a department is difficult to be evaluated, so different divisions need to achieve a consensus through coordination and integration. For instance, in the flow process of fruit juice production, fruit juice has to be processed before it can be packaged.

External environment factors, trends and developments lead to change in internal organisation structure, processes and behaviours. As the external environment is becoming more and more complex, organizations have to adapt to the changes. The strategies an organization uses to manage its environment are reflected in the structure of the organization. Organisational structure is not static, it will change as the times progress and variation of surroundings. For example, in 2004, Motorola announced reorganization in the framework of company, because the first deficit in the last three years occurred. Motorola attributed the losses to lower demand for highpoint mobile phones and continuous decline of market prices. There were only two business departments in the firm after reorganization: research and development department and marketing department.

Organic structure and mechanistic are two patterns of organizational structure that can be created by environmental conditions. An organic structure is suitable for a company operated in a turbulent environment, while the organization with stable surroundings should employ the mechanistic structure. As these two structures are appropriate for different environment, so it is difficult to judge which one is more efficient.

To some extent, the success of an organization’s operation depends on its responds to environmental conditions. Environmental variability is the main element which is taken into consideration of decision makers. It refers to the degree of change in environmental activities relating to the operation of organizations. Mintzberg classified environmental elements which are related to organizational framework into four areas, including stability, complexity, market diversity, and hostility.

Differentiation is the process of dividing an organization into different departments and each of them is responsible for different types of tasks. As differentiation allows employees to make more efficient response to the environment, many organizations increase their differentiation when their environment becomes more uncertain. However, excessive differentiation of departments may lead to difficulties in co-operation and aggravation of conflicts. In order to prevent this from happening, organizations must strengthen co-ordination between different departments. It is the reason why the environment determinists believe that the level of environment uncertain determined the organization structure.

Duncan produced the typology of organizational environments, which is different from the viewpoint that external environments determine internal structures. He argues that organizational reaction made to the environmental changes depends on the managers’ perception rather than objective observer’s classification. If a manager have not realised that the environment is changing, he will not give a corresponding response. The internal structures and processes will transform with changes in our perception. Since different managers focus on different aspects of the environment, they get different information and make different decisions about organizational strategy and structure.

Conclusion

In conclusion, the selection of organizational structure depends largely on the technology and environment it faces. Even though a lot of modern theorists of technology do not consider that technological determinism is an accurate concept to express the relationship between organization structure and technological improvements, it makes a significant contribution to development of organizational theory. Organizational structure plays an important role in the operation of organizations and development of organizational behaviour. The study of organization structure can help us learn how to establish efficient and functional form of organizations.