The Essence And Definition Of An Organizational Structure

Published Date: 02 Nov 2017

Introduction

Starting from the prehistoric ages as the number of people grew, as a social creature humans started to share work and responsibilities to make the life easier. It was more possible to focus on one thing than making every possible work of life alone. For this kind organization of people, we can give the name "Team".

Team is the core/starting point of an organization, which is in definition a group of people working together to achieve the same goal with a common vision, by sharing trust and responsibilities as well as authority, putting in their commitment in order to move towards to goal. Team as well is an acronym of Together Everyone Achieves More showing that team generates more productivity than productivity of all individuals in a team combined thus creating an effectively working organization.

In today’s global world, the organizations grew that big they can have connections all over the world and they can work flawlessly creating every time better results for the organization. But even in today’s world, there are a lot of new problems for management of organizations. One of the concepts for organization is matrix organizations which in fact create a lot of problems regarding evaluation of employees’ performance. On the other hand effectiveness of this system makes people use it as much as they can.

The work here presented is focusing on organizations and organizational structures beginning with historical development of organizational philosophy by showing different approaches to the organizations in order to create a better organization and then coming to present and showing the current concepts about organizations thus giving a perspective of change on organizations and structures that show the organizational philosophy.

The work is divided into two main parts which in the first part I will present a theoretical review of organizational theory and different organizational strategies and philosophies which are accepted in literature.

First chapter is a review of organizational theory which is giving an understanding of the idea behind the corresponding organizational structure which was built in order to maintain and realize the philosophy. In this chapter also mentioned working style, authority, delegation styles and critics about the corresponding theory. The chapter is divided into five sections which are the timeline for organizational theories starting from the history and then continuing as classical theory, neoclassical theory modern theory and contemporary or post-modern theories. I tried to show here how the mentality about an organization has evolved throughout the decades passed as industry, technology, employees and lifestyles change and in which direction they are heading.

Second chapter is more about structuring and designing the organizations and strategies on this issue. We will talk about different approaches on deciding which kind of structures to use depending on the organizational configurations.

Chapter is divided into four sections in which it starts with organizational configurations talking about possible organization types. Then passing to contingency theory in which shortly we will talk about this theory and the mentality behind it which can be very useful in choosing the appropriate structure or configuration for an organization.

Adaptive cycle is about how different organizational configurations respond to the possible problems in life thus focusing on the effectiveness and responsiveness of an organization depending on its configuration. Strategic typology which is connected to adaptive cycle model is about the general strategies of organizations with different perspectives and environmental needs to survive as an organization in different levels of adaptive cycle.

Third chapter is about the taxonomy or classification of organizational structures in which we will discuss about different organizational structures which are widely used in organizations. The classifications in the first section are depending on size of company by means of employee count and company turnover.

Second section in which we will discuss about the organizational circle I will present you three post-modern era approaches to organizational structures in which the organizations which are starting-up flat and going onto a bureaucratic structure as they grow, slowly try to come back to flatter structures as they become more and more inefficient through time.

Fourth chapter is about the common sense in task/team, project and matrix structures so in this chapter I will present you project management principles as a project and team structured work example. Next section will be about project management in a matrix structured environment. Then in the last section of this chapter I will present the common philosophy between those approaches to organization.

This chapter will conclude the theoretical part of my work.

Practical part includes three chapters in which we will discuss about team/project and matrix structured work examples from practical life. Basically we will discuss about how it was implemented where it is used, what are pros and cons, basic problems and how they were solved and my point of view on solution of these problems.

In the work I present here I will try to use as much as I can graphics to tell about the meanings of the organizations and other definitions to escape from –impossible to understand- definitions of management terms. I will try to keep my work as much as possible easily readable as I think it can be used as a small reference for the management students who are in the beginning of their studies and as a handbook for the others who need a reference in order to create a better organization at their work.

The goal of my work is to make a theoretical reference for management of organizational structures and create a solution for everyday problems of matrix organizations in terms of practical application of the structure.

I hope to create a helpful document to show the people who are in search of a solution and need ideas in order to overcome hungriness of curiosity and everyday problems of organizations and business life.

The essence and definition of an organizational structure

or·gan·i·za·tion [awr-guh-nuh-zey-shuh n], noun

The act or process of organizing.

The state or manner of being organized.

Something that is organized.

Organic structure; composition: The organization of this painting is quite remarkable.

A group of persons organized for some end or work; association: a nonprofit organization.What is Organization

Organization as we are discussing here is the undertakings in business life. We are in this project focusing on types SME’s as they are the most important part of economy (around 99% of all global economy).

The kind of organizations we are talking about got a lot bigger after industrial revolution.

Definition of Organization

The definition of organization has changed and evolved as our understanding of the components operating within an organization has developed. Examples of definitions include:

"…a system of division of labour in which each member performs certain specialized activities that are coordinated with the activities of other specialities." (Mott, 1965)

"The shape energy takes when the human beings who make up an enterprise blend their collective skills." (Swigart, 1994)

A small number of people with complementary skills who are committed to a common purpose, performance goals, and approach for which they hold themselves mutually accountable. (Smith, 1993)

Definitions above show the importance of a common goal (mission, vision and goals) in an organization as a source of motivation. Even they are good definitions they are mostly focused on the relations in an organization, the internal relations. Following definitions focus also on external relationships of a company.

A set of relationships that is persistent over time. One of the functions of an organization, of any organism, is to anticipate the future, so that those relationships can persist over time. An organization's reason for being, like that of any organism, is to help the parts that are in relationship to each other, to be able to deal with the change in the environment. (Flower, 1995)

The organization can be defined in many ways. It is possible to see in many branches of science. In this project we are talking about the organizations in business. Hence the word organization is defined as a social unit of people that is structured and managed to meet a need or to pursue collective goals. All organizations have a management structure that determines relationships between the different activities and the members, and subdivides and assigns roles, responsibilities, and authority to carry out different tasks. Organizations are open systems, they affect and are affected by their environment (Business Dictionary, 2012).

What is Organizational Structure

Bunun alt başlıkları da olması lazım mesela az çok birkaç başlık olarak (yazısız structure tipleri olmalı ve de bunların çizimlerle gösterildiği kısaca birkaç resimle anlatılmalı.

There are many definitions regarding organizational structures. Some of them are as follows:

"…organizational structure can be considered as the arrangement of organizational parts" (Tolbert & Hall, 2008)

P.M. Blau: […] the distributions, along various lines, of people among social positions that influence the role relations among these people.

S. Ranson, B. Hinings, R. Greenwood: […] a complex medium of control which is continually produced and recreated in interaction and yet shapes that interaction: structures are constituted and constitutive.

Organizational Theory

History of Organizational Theory

Studies in the area of organization gained velocity as the industrial revolution started. During this change of work environment independent craftsman to workers gathered together under the same roof in a factory to make mass production. Mass production was first studied and popularized, in 1776, by Adam Smith (Docherty, et al., tarih yok). In his famous study in the pin factory, he analysed the organizational practices. This factory employed a group of experts on pin production who were able to produce pins independently but in this factory this group of people were dividing the work so that every particular employee was a specialist in their particular task. By bringing together the tasks the production of the pin was completed. Every particular employee in their particular task area developed their own knowledge and skill which made them this area’s specialist. In his original notes Smith tells the situation as follows:

"I have seen a small manufactory of this kind where ten men only were employed, and where some of them consequently performed two or three distinct operations. But though they were very poor, and therefore but indifferently accommodated with the necessary machinery, they could, when they exerted themselves, make among them about twelve pounds of pins in a day. There are in a pound upwards of four thousand pins of a middling size. Those ten persons, therefore, could make among them upwards of forty-eight thousand pins in a day. Each person, therefore, making a tenth part of forty-eight thousand pins, might be considered as making four thousand eight hundred pins in a day. But if they had all wrought separately and independently, and without any of them having been educated to this peculiar business, they certainly could not each of them have made twenty, perhaps not one pin in a day; that is, certainly, not the two hundred and fortieth, perhaps not the four thousand eight hundredth part of what they are at present capable of performing, in consequence of a proper division and combination of their different operations." (Smith, 1904)

Observation of this approach by Adam Smith was the point where he started to create the concept division of labour which he was going to explain deeply in Wealth of Nations in 1776. Adam Smith as a result of his research found that dividing the labour increased productivity by a factor of hundreds (Docherty, et al., tarih yok). Smith’s concept as a result of his observation formed the base of the concept for division of labour for a powerful administrative approach to reducing cost increasing productivity and maximizing profits.

Classical Theory

Entry of machines into the industry increased enormously production capacity of businesses to a higher level. Smith’s observation as an ideal organizational companion, very well worked with the technological revolution on the subject of mass production.

Theorists studied on four components on the subject of division of labour. These are:

Hierarchy of authority

Span of control

Centralization versus decentralization and

Specialization of function or task

Hierarchy of Authority

Hierarchy of authority is the system that creates the vertical line of organization. This system determines in an organization the level of authority and rules. It creates a method of transmitting the directives to subordinates from top to bottom and reporting from subordinates to superiors from bottom to top. Organizations based on different systems of hierarchy of authority create different organizational structures which are functional organization, the product organization, and the matrix organization.

Functional Organization

A functional organization is the type of organization in which the specialization on particular tasks defines the hierarchy of authority. This kind of organization is made up with specialized departments on which on each department there is a supervisor who possess extensive experience in this specialization area. This kind of organization allows centralization of functions and being directed by the highest authority on the other hand avoids the unproductive situations such as a functional manager with a different background than the function he is managing.

In a functional organization the levels of authority and responsibilities are clearly defined, starting from the head of the organization directives follow the way to supervisors of functional departments and then to subordinates.

This kind of organization as it gets bigger, creates a weak communication between different functional units and makes it difficult for the organization to adapt to changes in a fast changing environment.

Product Organization

Organizations with a need of faster adaptation to their environment often use a product organization design. This organization makes it possible to focus on product design which allows them to change their business practices depending on environment without outgrowing their organizational structure.

In this organizational structure, the organization is structured into product groups and every product group is a unit which is dedicated to this particular product and each group can also have members from other units such as finance, accounting research and development, marketing, legal or any other needed specialization.

Reporting system is working a little different than functional organizations. Members of the product group reports to product manager directly. This reporting also cover the members from different specializations such as finance or marketing. There is no such functional manager such as marketing manager. Every member of this group reports to the same manager which is the product manager of this group.

A downside for this structure is replication of resources for different product groups such as tools, machines, or other items needed for example for research and development are running at the same time for different product groups. This kind of work may require duplication of different materials and staff for different product groups therefore creating additional costs.

Matrix Organization

Matrix organization is a kind of hybrid organization structure in which functional organization and product organization is brought together in order to overcome weaknesses of both organizational structures.

Matrix organization is a two headed system in which employees report to project manager and the functional manager together. In this organization it becomes more possible to offer employees a clear line of advancement while on the other hand to keep them in separated working groups for different projects.

Even if there is the problem of two headed authority, if there is coordination between project managers and functional managers then this system will overcome communication problems that occur in functional organizations between different departments and overcome the advancement problem of product organizations.

Major Theorists

On the subject of hierarchy of authority, Max Weber (1947) formulated the concept of bureaucracy. In his vision, organization was characterized with the clear separation of responsibilities, rules and line of authority in which decisions were made and implemented through a chain of command. Frederic Taylor’s (1911) scientific management had the foundation of Weber’s concept. Taylor believed that to enhance the functioning of such an organization an employee must be carefully chosen for a given specialization, specifically trained for that particular task, and placed appropriately in the organization's hierarchy under the tight control of a suitable supervisor. (Docherty, et al., tarih yok) Henry Fayol’s classical organizational theory had the similar idea of accepting the structure of authority as a critical component to have the most efficient organization.

Span of Control

Span of control is the number of employee types over whom a manager has authority. Positions with a narrow range of subordinates regardless of the number of employees are considered as narrow span of control. As the number of employee types increase the span of control rises and results with inefficiency of manager to supervise the subordinates.

Based on Taylor and Fayol’s theories, classical theorists embrace the vision of an organization with a tight control on employees which needs a narrow span of control which results a tall structure in an organization.

Centralization vs. Decentralization of Decision Making

In a centralized organization decision making power is collected in one person who is directing the company. On the other hand in decentralized organizations, decision making power is delegated with subordinates.

Classical theory of organization did not accept such a possibility of decentralized organization. Douglas McGregor of neoclassical movement in his book from 1960 "The Human Side of Enterprise" stated that it was the mistrust of human nature that did not let Fayol to create a decentralized vision of decision making in classical theory of organizational structure. (McGregor, 1960) McGregor in his "Theory X" defined the assumptions of human in classical authoritarian management style as following:

The average human belong has an inherent dislike of work and will avoid it if he can.

Because of this human characteristic of dislike of work, most people must be coerced, controlled, directed threatened with punishment to achieve organizational objective.

The average human being prefers to be directed, wishes to avoid responsibility, has relatively little ambition and wants security above all. Classical theory held that basic human nature was one of laziness, little desire to work, and low drive to accomplish more than the bare minimum necessary to survive. (Anon., 1990) (The Wall Street Journal Europe Edition, 2013)

For the reasons McGregor listed above centralization of authority is the main aspect in classical theory of organization.

Specialization

Regarding Adam Smith’s observations specialization refers to division of a business into smaller manageable components and tasks. By finishing the tasks the production will be completed.

As the employee is assigned a particular task from this process and trained with a way to teach the most effective way to do it, as he practices and gains experience on this particular task. He will be the specialist who knows how to do this task best and in a most efficient way.

Neoclassical Theory

The era of classical theory with the main idea of an organization which is working like a machine started to end after the Second World War as the researches on human behaviour advanced.

The theoreticians of the neoclassical school took as a reference the studies in classical school of organization. Neoclassical theoreticians bring together their theories with the other branches of science and they expanded their researches on the topic of organization

Management Process and the Human Behavioural Approach

The rise of the behaviour science, in particular after the Second World War, exerted influence upon the classical theoreticians of organization to expand the areas of the organizational investigation to the human aspects within the organization. This, however, caused that they were gradually changing the view of the classical organizational principles. These were taken into account only as assumptions in their investigations empirically testing them by the use of the mathematically statistical methods and behaviour science. They also researched the management process which was not a characteristic feature of the classical theoreticians of organization. The research on management process and the behavioural approach to the research of the organizational variables are the two essential characteristics of the orientation treated in the organizational investigation.

The most prominent representatives of the management process and the human behaviour approach are the American theoreticians of organization, W. Newman and C.H. Summer their common work of the year 1961 "The Process of Management" reflects all the essential characteristic features of the treated development stage of the scientific organization.

The theoreticians of management process and of the human behaviour approach expanded the areas of their investigations to completely new views within the organization, such as:

Participation

Communication

Motivation

Morale

Role and position of personnel in the organizational hierarchy

Perceptions, and similar views

The vision of classical theory on organization as a machine with a main goal of being the most efficient had started to change after the World War II as the behavioural sciences advanced.

Theoreticians expanded their researches connecting studies with the advancements behavioural sciences. This made them slowly change their vision about the machine organization as they started to treat an organization as a gathering of human with emotions.

Human Relations Theory

The human relations theory first began with the Hawtorn experiment which was made in the years from 1924 to 1929. This is the main phase where main advancements in this field were made however, covers a period of 20 years from 1930 to 1950.

The theory on human relations was influenced by the increased volume of operations and increased number of educated employees inside the organizations. It is a totally different vision of the organizations than the classical theory. The representatives of human relations theory perceived organization as a social system acting with emotions and needs very much different than the classical theory which sees an organization as a machine. Therefore classical theoreticians of organization were not interested in the idea of a social organization.

Theoreticians of human relations theory focused mainly on the areas:

Work motivation

Worker’s participation in decision-making

Communication

Informal working groups

Working morale

Worker’s relations to the changes

Working conditions

Informal organization

Human relations theory had the objective of making employees happy to work inside the organization in order to make them more productive and willing to work.

The founder of the human relations theory is E. Mayo. In his investigations he started from the assumption that the industrial revolution had destroyed the traditional society in which people had been mutually responsible according to the established customs. He thought that the industrialization caused great contrasts in the society. On the same issue Drucker in his famous book "Management" wrote:

"Our society has become an employee society. In the early 1900s people asked, "What do you do?" Today they tend to ask, "Whom do you work for?" (Drucker, 1986)

On the other side Mayo stated as the old traditions cannot repeat he thought that it is necessary to seek the solution in the adapting of the society to the new relations. He made the researches onto employees and how to make them more satisfied of their work and make them work more efficiently. On his researches (Hawtorne Experiment) he came to conclusions that the informal organization between work groups is one of main points in order to increase the workers’ motivation and happiness to be at work. Basic principles from Mayo’s vision of employee centred management were in the following way:

Supervisors should act like friends, counsellors to the workers

Managers should not try to micro-manage

People should be periodically asked how they feel about their work

Humanistic supervision plus morale equals productivity (The Mayo Formula)

Humour and sarcasm are good in the workplace

Workers should be consulted before any changes

Employees who leave should be exit-interviewed

(Talloo, 2008)

Comparative Approach

Theoreticians of the comparative approach made their researches onto creating generally operative principles for organizations which takes into account similarities between classical and neoclassical approaches to organizations.

The well-known theoretician of comparative approach Ernest Dale, in his research he experimented principles of classical theory of organization together with the changes demanded by putting the principles into practice since a new working environment evolved on operations of industrial organizations.

The comparative approach researches have several variations. Some of them are neoclassical, and some closely connected with the behaviour science. The comparative approach of organization means a modification of the classical organization theory. These modifications on the other hand, meant a contribution on researches and quicker development of general management principles and theory.

Challenge and Response Approach

Challenge and response approach is a special direction in the neoclassical research of organization is essentially a programmatic approach. This approach did not tend towards creating a homogeneous course of thought or knowledge about organization. The supporters of this approach were of the opinion that organization was a skill or practice using the methods and techniques of the other scientific disciplines. The organization theoreticians also thought that the managers were challenged by the objectives in the concrete circumstances with which they were faced. With regard to the objectives and to the circumstances he had to find correct answers and solutions, irrespective of the limitation of any organizational principles.

P. Drucker and G. Odiorne are the well-known representatives of the challenge and response approach with their most important contribution to the treasury of the organization knowledge is the theoretical conception of a management by objectives.

Modern Theory of Organization

There are many different researches and therefore approaches onto the subject modern theory of organization but the most characteristic approaches are System Theory or Systems Approach and the Human Resources Theory. Many others which have been developed in Europe had not significant influence on further development of scientific researches about organizations.

Human Resources Theory

Human resources theory was developed in the USA in 1960’s having the foundation of human relations theory which is seeing the organization as small working groups working together as a social system. In the centre of human relations theory there were the working conditions of the employees and making employees happy and satisfied of their work. Theory was presuming that satisfying the needs of employee will solve the problems in organization.

The human resource theory deals with the organization as with a socio-technical system in which the human elements are the most important ones. The main problem of the research into the human resources theory is the human aspects of the organization. This theory assumes that the efficiency of the organization depends upon the people working in it.

Taking as a base of motivational theory, human resources theory is focused on satisfaction of employees, somehow integrating personal objectives and organizational objectives. This kind of integration creates higher motivation of the employee thus creating a more efficient work. The main study areas of human resources theory is as follows:

Management philosophy

Managerial behaviour

Communication processes

Motivation

Mutual interacting

Decision-making

Goals setting

Team building

Supervisory process

Performance

(Likert, 1962)

System Theory of Organization

The system theory of the organization is made researches onto component part of the organization of causes and effects in multidirectional connections. With this approach, we deal with the organization as a system consisting of mutually connected sub-systems and components creating feed forward and feedback of information thus cause and effect.

By systems approach it is possible to see the organization as a whole which is not possible with non-system approaches which are focusing on some aspects of organization.

Contemporary Theory / Post-Modern Theory of Organization

Until year 1980s development of organizational theories could not catch the amount of development which was achieved after these years. That time was the time that the industrial situations changed dramatically. Globally supply and demand ratios changed and supply exceeded demand Buraya bir citation gider! . Thus creating an environment where some companies are beaten out of the business game and get bankrupt. After 1980s many approaches were developed on organizations. Some of them are as follows:

Business Process Reengineering

Learning organization

Organization development

Team building

Theories of quality

Innovative organization

7 – S Model

System of twenty keys

Theory of business excellence

Business Process Reengineering

Information technology has profoundly changed the way we do business in a very short time. Business process reengineering (BPR) offers a solution to manage this fast change at the same time making business operations much more faster, without errors or mistakes, environment friendly (less amount of paper and ink usage). This system created a quiet revolution in businesses in the new millennium.

In this approach, technological superiority, innovation, or longevity no longer makes or breaks companies, it is how well they are organized to respond to and serve their customers.

Hammer & Champy defined the process of reengineering as "the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical, contemporary measures of performance, such as cost, quality, service and speed." (Hammer, 1993) Business process reengineering involves rethinking business processes, activities that cross functional boundaries. Processes, not functions, are the focus of attention.

Steps for successful reengineering are organize around outcomes not tasks; have those who use the output of the process perform the process; and decentralize decision-making to the point where the decision is made. Reengineering can improve integration between functions and solve control problems. If a company becomes involved in large, complex activities, it needs a more complex structure.

The Learning Organization

The learning organization is one of very important post-modern theory of organization. Peter Senge with his title The Fifth Discipline is considered to be the most significant factor in popularizing the notion of the learning organization. According to Peter Senge, learning organizations are "…organizations where people continually expand their capacity to create the results they truly desire, where new and expansive patterns of thinking are nurtured, where collective aspiration is set free, and where people are continually learning to see the whole together.." (Senge, 1990) Another definition is according to Pedler a learning organization is "an organization that facilitates the learning of all of its members and continuously transforms itself" (Pedler, et al., 1996)

Pedler (Pedler, et al., 1996) says that The Learning Company is a vision of what can be achieved in an organization. It is not achieved by training individuals but learning at the organizational level. Learning Company is an organization that creates lifelong learning environment and makes easy the learning process for all of its members and continuously adapts itself.

Senge described the core of a learning organization’s work as based upon five learning disciplines that represented lifelong programs of both personal and organizational learning and practice. According to Senge Learning organization includes (Senge, 1990, p. 5 – 11).

Table 3.1: Learning disciplines Bunu yeniden Çiz!!!

Source: Senge, 1990.

Systems thinking: Peter Senge defined systems thinking as "a discipline for seeing wholes. It is a framework for seeing interrelationships rather than things, for seeing patterns of change rather than static snapshots." (Senge, 1990) Systems-thinking helps us to see every day issues in an organization as a whole and shows us the relationships between causes and effects, as well as the underlying patterns and root-causes of symptoms and problems.

Personal Mastery: Individuals learn to expand their own personal capacity to create results that they most desire. Employees also create an organizational environment that encourages all fellow employees to develop themselves toward the goals and purposes that they desire. Mastery might suggest gaining dominance over people or things. But mastery can also mean a special level of proficiency. Fran Sayers, PhD, in the April 1996 Quality Monitor Newsletter defines personal mastery as "a journey of individual, personal, continuous improvement. ‘Journey’ and ‘continuous’ emphasize the on-going nature of our pursuit of Personal Mastery. We do not march toward a destination but mine the gold along the way and relish its joys. Individual and personal remind us that while our growth is set in a context of other people and systems, we are responsible, we are in charge of our Personal Mastery." (Sayers, 1996)

Mental Models - this involves each individual reflecting upon, continually clarifying, and improving his or her internal pictures of the world, and seeing how they shape personal actions and decisions. Senge defines mental models as "Mental models are deeply held internal images of how the world works, images that limits us to familiar ways of thinking and acting. Very often, we are not consciously aware of our mental models or the effects they have on our behaviour" (Senge, 1990)

Shared Vision is the vision of a desirable future of a group of people which involves individuals building a sense of commitment within particular workgroups. This is one of the essential features of leadership; showing the direction to a group of people and create the same vision of future on all of them.

Team Learning: Team learning is an effective way of learning as a group since teams are small organization of people generating a higher productivity than the sum of individual productivities. This learning involves relevant thinking skills that enable groups of people to develop intelligence and an ability that is greater than the sum of individual members’ talents.

Team learning is essential in modern organizations because without teams learning the organization cannot learn, here the most important thing is teams not the individuals.

Summary

SUMMARY bölümünde aşağıdaki konulardan fazla bahsetmeden geç kurtul yoksa uzuyorkonu.

1.1.1.1 Teambuilding

1.1.1.2 Models of Quality Management

1.1.1.3 Innovative Organization

1.1.1.4 7-S Model

The context of organizational structure: conditions and effectiveness

Introduction

Depending on type of an organization it is possible to see different working styles as an example when we see the work in a bank with full of procedures and systems of control on the other hand in some other organizations people work totally in a free work environment.

This difference between different organizations is because of a different philosophy and need in structuring the organization depending on the work done and structure of an organization can make a big difference on how the work is done.

If every company copies a strict control work environment as an example many of them will fail because there are businesses that require less intelligence of the worker and some that requires more or totally depends on their intelligence. Only this difference requires a different way of working. The organizations that figure out which type to use and how to evolve it through time is the successful ones when it comes to organizational structures.

According to management theorist Henry Mintzberg, an organization's structure emerges from the organization's strategy set by the top management and environment it is working in. If the two fits then the organization will work well when they don’t there will be problems in practice. (Mintzberg, 1979)

Different structures arise from the different characteristics of these organizations and conditions of environment, which are called by Mintzberg as "basic pulls" on an organization. Using Mintzberg’s organizational configurations one can find out if the organization fits into its environment or not.

Organizational Configurations

The five successful organizational structures that Mintzberg identifies are as follows:

The entrepreneurial organization (Simple organization)

The machine organization (bureaucracy)

The professional organization

The divisional (diversified) organization

The innovative organization ("adhocracy")

(Mintzberg, 1979)

Ten years later Mintzberg added two more structures into his list:

Idealistic organization (Missionary organization)

Political organization (Idealistic organization)

(Mintzberg, 1989)

We'll look at the first main five of them in more detail as they create the general overall picture of organizations.

The Entrepreneurial Organization

Entrepreneurial organization has mostly a flat structure which is made by a management body created by one or few top managers.

Most common example of this kind of organization is young companies which are controlled directly by the owner. Organization lacks standardization or an organizational structure. Mostly organization is informal. This makes the entrepreneurial organizations very flexible and reflexive.

The fastness and reflexiveness of an entrepreneurial organization with its lean structure is a way bigger companies want to work. On the other hand as the companies get bigger this becomes difficult to maintain. Since the decision making and authority has to be shared in order to make better decisions and maintain a safer environment for everyone for the possible unpleasant incidents that can happen if the company depends on only one person.

The Machine Organization

The machine organization is the kind of organization we discussed earlier in classical theory of organization. Efficiency in the centre of focus, formalized with a centralized decision making character, routines and procedures.

This organization has mostly a tall, tight vertical structure bringing the decision making to the top management, level by level. Functional organizational structure with clearly defined jobs and positions, formal processes for planning with budgets and audits is a part of these organizations.

This is kind of a bureaucratic organization as we will discuss in the next chapter.

As an example to these organizations we can give large manufacturers, government agencies and most of the service firms that perform routine tasks. A very well-known example for this will be in general restaurants and in particular McDonald’s which successfully implement machine organization concept globally.

The Professional Organization

Professional organizations are the ones that rely on highly trained professional personnel that demand control of their own work. This situation creates the decentralized decision making but still very bureaucratic organization.

This is more common in the knowledge based organizations where the organization employs knowledge workers, giving them their freedom in their particular work area but on the other hand maintain the procedures, routines and standardization of a machine organization. Therefore this kind of organization has a character of a machine organization with professional knowledge workers with their own share of power and freedom.

The Divisional Organization

The divisional organization structure is used especially when a company has many business units and product lines. Large and mature companies mostly use this kind of organization which in the centre there is the headquarters to support all divisions and divisions with their own decision making capabilities and their unique organizational structures.

This kind of organizational structure gives more decision making power to line managers than a classical machine structure. This kind of delegating power and authority in large organizations gives the top management ability to see the bigger picture in company and make bigger decisions easily without getting lost in details.

The disadvantage of such a system is duplicating the limited resources financed by headquarters in many divisions that often creates conflicts between divisions.

Strategically when the company goes onto a product or market diversification and if the central decision making is no more efficient a company may decide on moving onto a divisional structure.

The Innovative Organization

Dynamic environment of present time, forces people to create different kinds of organizations than the traditional organizations like in the beginning of industrial revolution. The new industries with innovation or creativity based works have to operate in an ad-hoc basis to move on. These organizations have to be fast, reflexive, therefore the concepts like bureaucracy, central decision-making or complexity as well as long routines and procedures for in-company operations are too much limiting and slowing down the organization.

Project-based industries such as artistic, pharmaceutical or consulting organizations use this kind of organizational structure in order to faster adapt to new situations as every new work obtained is a different competency. This structure uses creative teams to operate focusing on projects. As one project ends the members are assigned to another project.

One disadvantage of this organization is it is difficult to control and monitor, since the decision making is totally decentralized and power is delegated to the place when needed.

This organization has a clear advantage by working as a big team in a constantly changing sub team structures which is a flexible working environment with contribution of team benefits to an organization. By creating a good pool of talent, these organizations can work well.

Adhocracies can create conflicts about the authority and power if it is ambiguous and rapid change and constant competency of the oncoming work makes it stressful for the workers to adapt.

This structure is popular around the young organizations which allow them to rapidly adapt to the new conditions arising from the current dynamic environment.

Contingency Theory

As defined by Gordon Marshall in "A Dictionary of Sociology" (1998) contingency theory is "A strand of organization theory (sometimes also known as the ‘rational systems perspective’), the leading practitioners of which were Tom Burns, Joan Woodward, Paul Lawrence, and Jay Lorsch, an otherwise theoretically eclectic group who were nevertheless united in their belief that no single organizational structure was inherently more efficient than all others. Rather, since organizations differed in the tasks they performed and environments they faced, the appropriate organizational structure was in each case a function of such factors as technology, market, and the predictability of tasks." (Marshall, 1998) Or in a more popular fashion "it all depends" theory. Efficiency or "goodness" of an organizational structure depends on situations that organization is operating in and the people that create the organization. For instance when a person wants to work in a more free fashion but on the other hand the work is structured and very much formalized, soon there will be a conflict between the person and the system and thus inefficiency occurs.

Contingency Approach

The Fielder’s Contingency theory of effectiveness for the group performance has taken a big attention in 1960s, when it comes to measure a leader’s effectiveness, influence and efficiency in a group. The main idea of this early theory is that leadership effectiveness in group performance depends on two factors: the leader's task or relations motivation and aspects of the situation. The leader's task or relations motivation is measured through the Least Preferred Co-worker (LPC) scale.

"This scale asks leaders to recall a co-worker (previously or currently) they work with least well and to characterize this individual with ratings on a series of 8-point bipolar adjectives (e.g., distant– cold). High LPC scores reflect more positive descriptions of the least preferred co-worker, whereas low LPC scores evidence more negative perceptions." (Viviane, 2012)

Another variable of this model is situational favourability which states task or relations motivation of a leader is contingent to whether the leader can foresee the group’s outcome or not.

"Situational favourability depends on three assessments: (1) whether the leader perceives cooperative relations with subordinates (leader-member relations), (2) whether the task is highly structured with standardized procedures and measures of adequate performance (task structure), and (3) whether the leader's level of authority is punishing or rewarding group members (position power)." (Viviane, 2012)

The combination of these variables (leader-member relations, task structure, and position power) creates eight different situations (a.k.a. "octants") for high or low LPC leaders; each situation is categorized under three categories which are favourable, intermediate and unfavourable situations.

Creating this way of perception, every leader is better at some of these situations and worse at the other part; it all depends on situation and to the leader.

From the efficiency and influence perspective of leadership, Fielder concludes that "high LPC leaders are most effective in influencing group performance in intermediate situations, and low LPC leaders are most effective in favourable or unfavourable situations." (Viviane, 2012)

Path-Goal Theory

Path–goal theory was originally developed by Martin Evans in 1970 and expanded by Robert House in 1971 into a more complex contingency theory and then reformulated by House in 1996 for "The 1996 Path Goal Theory of Work Unit Leadership" (House, 1996).

According to House (House, 1996) a leader should help and serve his followers in order to illuminate and explain the path to follow. This also covers leader behaviour of motivating followers and satisfying their needs on the path followed in order to accomplish group goals. The Path-goal theory in the first edition (House, 1971) identifies two general classes of leadership behaviour; first, path-goal clarifying behaviour; second, behaviour directed toward sub-ordinate needs. (House, 1996) Later in the end of tests on the first theory House and Mitchell identified four types of leader behaviour that include; Directive path-goal clarifying leader behaviour, supportive leader behaviour, participative leader behaviour and achievement oriented behaviour. (House, & Mitchell, 1974) (House, 1996)

House defines these behaviours as follows:

Directive path-goal clarifying leader behaviour: "is behaviour directed toward providing psychological structure for subordinates: letting subordinates know what they are expected to do, scheduling and coordinating work, giving specific guidance, and clarifying policies, rules, and procedures. Directive behaviour is one form of path-goal clarifying behaviour." (House, 1996)

Supportive leader behaviour: "is behaviour directed toward the satisfaction of subordinates needs and preferences, such as displaying concern for subordinates' welfare and creating a friendly and psychologically supportive work environment." (House, 1996) Also House states that this kind of leadership behaviour will be performance increasing when it is contingent on goal-directed effort.

Participative leader behaviour: "is behavior directed toward encouragement of subordinate influence on decision making and work unit operations: consulting with subordinates and taking their opinions and suggestions into account when making decisions." (House, 1996) House adds that this kind of leadership behaviour will bring closer the subordinate goals and organization goals since subordinates are able to select the best fitting options given by the leader to them which fits the best to their own goals.

Achievement oriented behaviour: "is behavior directed toward encouraging performance excellence: setting challenging goals, seeking improvement, emphasizing excellence in performance, and showing confidence that subordinates will attain high standards of performance." (House, 1996) This kind of behaviour will motivate the employees to bring out their most as the leader motivates them on their encouragement and better self-image.

Normative Decision Model

The contingency theories above and the most of them who were not mentioned in this work focus on leadership on group performance on the other hand as a different angle of view normative decision model, originally developed by Victor Vroom and Phillip Yetton in 1973 and later revised by Victor Vroom and Arthur Jago focuses on decision making model of a leader and tries to create formulas to guide leaders how to make better decisions on certain situations and contingencies.

This model creates a picture for decision making in which there are five different decision-making strategies that range on a continuum from directive to participative decision making. These strategies include two types of autocratic styles (the leader decides alone), two types of consultative styles (the leader consults followers but decides alone), and a group decision-making option (group consensus). (Vroom & Yetton, 1973) Below it is possible to see a diagram presenting the idea in an understandable way.

Vroom and Yetton created a tree consisting of seven of yes-no questions to reach to the optimal decision making strategy depending on current situation taking into account leader’s and followers’ current situation regarding problem given.

Figure Leader Styles in the Vroom–Yetton decision model (MovGP0, 2012)Despite noted various limitations, such as a questioning of whether the leader has sufficient information and knowledge in order to answer some of the questions given for the decision tree, in overall the model was accepted as useful and contributing to understanding of decision making processes.

The Adaptive Cycle

Adaptive cycle is the general model of the adaptive process created by Miles, Snow, Myer and Coleman Jr. (1978). Adaptive cycle model theorists studied the theories strategy-choice approaches and ideas formulated by theorists such as Chandler (1962), Child (1972), Cyert and March (1963) , Drucker (1954, 1974), Thompson (1967) and Weick (1969, 1977) As a conclusion to these theories can be degraded into three main problems of organizational adaptation and these are entrepreneurial problem, engineering problem and administrative problem.

The Entrepreneurial Problem

In a new organization, the entrepreneurial problem is changing the entrepreneurial insight which was at first vaguely defined into a business product or a service targeted to certain market or market segment. When it comes to an already working organization the entrepreneurial problem adds another dimension since the organization is already operating has products or services defined along with the market or market segments and already solved its engineering and administrative problems enough to run the business. From this comfortable and safe zone moving the organization to an unknown or less known direction creates difficulties.

Solution to this problem depends on management body of the enterprise and their acceptance of this particular product or market. At the acceptance of change level of adaptive cycle, the engineering problem begins. Keeping in mind that in reality entrepreneurial problem does not disappear when the engineering problem begins, it remains as a responsibility of top management body of organization.

The Engineering Problem

When the management decides on a solution for an entrepreneurial problem the engineering problem begins. The engineering problem is realization of managerial solution.

As the engineering solutions are implemented the administration problem starts. Keeping in mind as the cycle goes on even if we are on a further phase, the organizational configuration in previous phases can change until the engineering problems are solved. The configuration starts to be stable in the administrative level in which the organization has the relations with its environment and solved many of its problems on the way.

The Administrative Problem

The administrative problem, as described by theories of management, is reducing uncertainty within the organization, or as defined by adaptive cycle model, "rationalizing and stabilizing those activities which successfully solved problems faced by the organization during the entrepreneurial and engineering phases." (Miles, et al., 1978)

As a competency of administrative problem, solving this problem does not only involve a simple rationalization of the developed system but also involves implementation of processes to keep the organization developing.

Strategic Typology

Adaptive cycle model (Miles, et al., 1978) states that in order to solve problems of adaptive cycle, organizations have three basic strategic types: defenders, analysers and prospectors. Each type has its own strategy for overcoming these problems of adaptive cycle. To this model as a fourth type the "reactors" can be added which are strategic failures.

Defenders

Defenders try to maintain stability in the organization, try to create and interact with the environment in order to reach this goal. By their solution to the entrepreneurial problem it is more possible to create a stable solution. To create this stability, defenders defend their position in the market and sometimes aggressively compete with their competitors.

The defenders as a strategy focus on the engineering problem in order to make the solution as economic or efficient as possible to be more powerful defenders in their small product-market domain. This strategy makes it possible for a defender to penetrate into a niche market where normally its competitors can’t.

Solution to the administration problem by defenders is stated in the adaptation cycle model (Miles, et al., 1978) is aligned with defenders’ solutions to entrepreneurial and engineering problems. For administrative problem defenders try to maintain strict control of the organization just as we discussed before in classic style organizations in second chapter to maintain the maximum efficiency in order to keep the power to defend their position in market.

This kind of organization stays away from opportunities and continues to invest in current position in market as long as the problem continues to be an engineering problem.

Prospectors

According to Miles et. al. (1978) prospectors are the organizations which behave to some degree similar to defenders, on maintaining a consistent solution to entrepreneurial, engineering and administration problems, but in the remaining aspects they are behaving in a total contrast.

For prospectors change is in their centre of work. They monitor the environment on every level of adaption cycle and mostly invest into this environment following in order to hunt new opportunities in a way larger domain compared to defenders. In this kind of organizations the managers invest taking into account future needs when it comes to entrepreneurial problems, solutions of prospectors to engineering problem cover creating always a little higher capacity systems which are easily adaptable to future changes and opportunities. The failure of some opportunity hunting by sustained innovation makes it difficult to catch the profitability of defenders but prospectors are the ones to effect the industry and create their competitive advantage by their ability of changing dynamically.

Administrative problems are also solved with a possible future perspective by investing on systems which pledge a higher level of adaptation to the future product-market domain. For processes and new products they act as much dynamic as possible making the organizational structure more organic rather than mechanic as in defenders’ strategy which brings prospectors possibility to easily change the structure adapting to new opportunities and move on to new problems.

Analysers

According to Miles et. al. (1978) analysers are the group of organizations which reside in the middle of defenders and prospectors if we assume that defenders and prospectors are two opposite ends of a continuum.

Miles et. al. (1978) defines analysers in the following way: "A true analyser is an organization that attempts to minimize risk while maximizing the opportunity for profit that is, an experienced analyser combines the strengths of both the Prospector and the Defender into a single system" stating that analysers are a combination of both types of organizations which makes this strategy a challenging one to maintain since the main idea is balancing the two opposite sides. The main strategy on adaptive problems is minimizing the risk while trying to catch the new opportunities. This makes them a balanced organization between defenders and prospectors.

Reactors

The adaptive cycle model states that the defender, prospector, and the analyser can all be proactive with respect to their environments even if they follow a different way to be proactive.

Miles et. al. (1978) define a fourth type of organization, the reactors as "exhibiting a pattern of adjustment to their environment which is both inconsistent and unstable" and add that "this type lacks a set of response mechanisms which it can consistently put into effect when faced with a changing environment."

Reactor organizations are identified with their instability in their organization which as a result poorly performs. Miles et. al. (1978) state that this strategy arises when the other three is followed in a wrong way and fail thus this strategy is a residual one.

According to Miles et. al. (1978) unless an organization exists in a monopoly environment in which it possess absolute power they cannot stay as a reactor, the organization has to move forward as one of defender, analyser or prospector otherwise it will fail.

Summary

In this chapter when we discuss about the effectiveness or efficiency of organizational structures I believe Mintzberg’s organizational configurations will make a good clarification on how to design the organizations in order to make them the most effective and efficient on certain situations.

When we go deeper in the subject of organizational structures we reach to point which describes the ideal way of deciding with "it all depends" theory of contingency. With many theories built on this theory shows us possible conditions and possible solutions in particular conditions.

In the final part of this chapter we discussed about the adaptive cycle model of Miles et. al. (1978), as a conclusion using their approach I tried to present how the conditions and efficiency take part in organizations as a part of action strategy.

In the next chapter we will see the results of these theories and philosophies as organizational structures and how they look like.

Taxonomy of organizational structures

Introduction

Until now we discussed about the organizations and organizational structures from many different angle of views. When it comes to taxonomy or classification of organizational structures, we can rethink about the definition as follows:

An organizational structure consists of activities such as task allocation, coordination and supervision, which are directed towards the achievement of organizational aims (Pugh, 1990). It can also be considered as the viewing glass or perspective through which individuals see their organization and its environment. (Jacobides., 2007)

Depending on the company’s mission, vision and goals the organization can be structured in many ways. The structure of the organization will determine the modes of operation of the company. The organizational structure allows companies to allocate the resources in a more organized way and express the division of authority responsibility, functions and processes to different entities such as the branch, department, workgroup and individual.

Organizational structure affects organizational action in two big ways. First, it provides the foundation on which standard operating procedures and routines rest. Second, it determines which individuals get to participate in which decision-making processes, and thus to what extent their views shape the organization’s actions. (Jacobides., 2007)

Organizational structure types

Pre-bureaucratic (entrepreneurial) structures

Pre-bureaucratic (entrepreneurial) structures do not have standardization of tasks. This kind of structure is frequently used in smaller organizations to be used in solving simpler tasks. The structure is totally centralized, collecting all decision making activities on the founder of the organization. It is useful for the founders of new (entrepreneurial) businesses in order to control growth and development.

This kind of organization is usually based on traditional domination or charismatic domination as discussed in Max Weber’s tripartite