Organization designs vary from rigid bureaucracies to flexible matrix systems. Most theories of organization design take either a universal or a contingency approach.
There are two main theories/approaches to organization design. They are; Universal approach (Mechanistic Design Theory) and Contingency Approach (Organic Design Theory).
1. Universal approach (Mechanistic Design Theory):
A universal approach is one whose prescriptions or propositions are designed to work in any situation.
Thus a universal design describes the ‘one best way’ to structure the jobs. Authority and reporting relationships of the organization’s external environment; the industry and type of work to be done.
This approach is also called Mechanistic design theory. This structure is similar to Max weber’s bureaucratic organization.
The basic characteristics of an organization based on mechanistic structure are:
- Division of labor by functional specialization: A maximum possible division of labor makes it possible to utilize, in all links of the organization, experts who are fully responsible for the effective fulfillment of their duties.
- A well defined hierarchy of authority: Each lower official is under the control and supervision of a higher one. Every subordinate is accountable to his superiors for his own decisions and actions of his subordinates in turn.
- A system of rules covering the duties and rights of employees: These rules should be clear-cut and the responsibility of every member in the organization must be clearly defined and assigned and strictly adhered to.
- A system of procedures for dealing with work situations: These procedures must be time tested and equally applicable under similar situations at work.
2. Contingency Approach (Organic Design Theory):
A contingency approach, on the other side, suggests that organizational efficiency can be achieved in several ways.
In it, specific conditions such as the environment, technology and the organization’s workforce determine the structure. This approach is also called Organic design theory. It is flexible and humanistic in nature.
The basic characteristics of an organization based on organic structure are:
- Tasks and roles are less rigidly defined: There is little emphasis on formal job descriptions and specializations. The authority to solve problems is given to those who are capable of solving such problems irrespective of their position or status.
- Decision making is more decentralization: The decisions are made at the scene of operations so that there is no assumption that people in higher positions are more knowledgeable than people in lower positions.
- The atmosphere is more collegial: The employees are more friendly and respectful to each other so that there is more information and suggestions rather than instructions, directions and decisions from higher ups passed on down.
- Departmental boundaries are flexible: This flexibility results in cordial horizontal relationship across departments which are equally important as compared to vertical or chain of command relationships.
Factors Affecting Organization Design
There are four major factors that affect organization design. They are as follows:
Strategy provides long-term direction and scope to the organization. Structure should follow strategy. The strategy can be:
- Innovation: New unique products are introduced.
- Cost minimization: Costs are tightly controlled. Price is lowered.
- Imitation: They are copy of products already in the market. But they are new to the organization.
It is the process of transferring inputs into outputs. It consists of knowledge, equipment, process and methods. It can be routine or non-routine depending on the type of work. Technology influences organization design.
Internal environment consists of shareholders. External environment consists of political-legal, technological, economic and socio-cultural forces. Environmental factors influence the organization design. They cause uncertainty.
iv. Organization size:
The size of organization influences organization design. Size is indicated by the number of people. People have individual differences.