Organizational design is an important concept for business leaders, especially those who develop a new business or reorganize an existing one.
The purpose of organizational design is to create the right structure and systems that allow employees to do their jobs efficiently.
It also helps companies predict how they will perform in different environments and what opportunities they might have across different industries.
In this post, we will look at the top principles of organizational design and how they affect organizational productivity.
What is Principle Organizational Design?
The principles of organizational design are the guidelines that dictate how an organization is structured.
The most common principles are a division of labor, hierarchy, the departments and/or processes, how they interconnect, and specialization. Each principle has its own set of benefits and drawbacks that need to be considered when designing an organization.
By understanding the principles of organizational design, managers can create a structure that is best suited for their specific needs.
What is an organizational design structure?
The organizational design structure is how people are arranged within an organization. It can be hierarchical, flat, centralized, or decentralized.
This includes how many levels of hierarchy there are and how they are arranged in the company.Â
Organizational structure can also vary based on whether it’s centralized vs decentralized; functional vs matrix; cross-functional vs project-based; vertical integration vs horizontal integration, etc…
Organizational design is the structure of how a business operates. It is the system that allows for human interaction and productivity, while also providing efficient use of resources.
Organizational design can be broken down into three main categories: physical layout, process flow, and communication channels (leadership style).
In each case, there are specific rules for organization design, so you should take advantage of them when designing your organization!
What Determines Organizational Design?
Organizational design primarily depends on the organization’s objectives and the strategy chosen to achieve them. Organizational design is designing the structure and systems of an organization. This can be done in two ways:
- By mapping out each person’s role within an organization, creating a structure that allows them to function as they need to according to their specific responsibilities; or
- Mapping out how each person will interact with other members of their team and external stakeholders such as clients, customers, suppliers, etcetera…
Technology, external environmental factors such as market conditions or government requirements, and internal environmental factors such as corporate culture or employee qualifications also affect it.
Technology can impact organizational design by making certain structures more effective than others. For example, a company may use computers to manage its entire supply chain to reduce costs and increase productivity.Â
External environmental factors change the needs of an organization over time—for example: if your industry changes rapidly because of new technologies or consumer demands, then you’ll need different organizational structures than those used ten years ago because they won’t work anymore because of changes in technology.
The goal of this type of organizational design is for each member or group within an organization to feel like they have autonomy over their work assignments.
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What are the Types of Organizational Design?
The following are common types of organizational design.
- Functional organization design
- Matrix organization design
- Team organization design
- Network organization design
- Hierarchical organization design
1. Functional Organization Design
Grouping activities into units, with each unit serving a purpose or performing an action that benefits the company.
Functional organization design is the most common type of organization design, and it’s used in many large companies, small companies, government agencies, non-profit organizations, and educational institutions.
This organization design has three main components: functional units, functions, and processes that link these two together.Â
Functional units perform tasks that benefit the company through their specific purpose or action—for example, marketing promotes products; customer service answers questions about products; product development develops new products based on customer feedback from previous purchases or sales figures from other stores where you sell your goods/services, etc.
This is often used in larger companies because it provides a clear task-specialization structure with many employees with similar skills working on a single aspect of the business.
This can be especially helpful when multiple teams are working on different aspects of an organization’s work, as each team must be able to communicate effectively with one another and coordinate their efforts.
2. Matrix Organization Design
A matrix organization design is a hybrid unit-based structure where employees report to both their department heads and project managers based on the work they do.
It can be used in business or non-business settings, but its main purpose is to create a more efficient and effective workplace by reducing bureaucracy and allowing for greater communication between employees.
This method also serves as an effective way for companies to scale up their operations with minimal effort from management staff.
Pros:
- It increases employee engagement because people feel like they’re impacting their work environment instead of just doing tasks assigned by others (e.g., supervisor).
- In addition, it helps prevent burnout because there are no longer any silos between departments; everyone has access not just within one area but also across several areas at once—meaning that if something needs attention urgently somewhere else within your company, then someone will surely notice!
In this type of organization, there is a clear separation between the two functions: one side focuses on developing products, while the other provides support services.
The advantage of this structure is that it enables each team to perform their jobs independently with minimal overlap or interference from other groups within your organization.
By utilizing a matrix organizational structure, you can increase productivity in your organization by allowing different teams to work independently without interfering with one another.
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3. Team organization design
Team organization design is creating and managing teams to achieve specific goals. The purpose of team organization design is to optimize the team’s ability to achieve its goal.
Many factors need to be considered when designing a team, including the team’s composition, structure, and communication methods.
A well-designed team can be very effective in achieving its goals, while a poorly designed team can be ineffective and even counterproductive.
4. Network Organization Design
Network organization design (NOD) is an approach to the design of organizations that focuses on the relationships between individuals and groups, rather than on the individual or group.
The goal of NOD is to create an organizational structure that allows for the free flow of information and ideas, and encourages collaboration and innovation.
There are several approaches to NOD, but all share the same basic principles: simplicity, flexibility, and openness.
5. Hierarchical organization design
Hierarchical organization design is a system where employees are divided into layers or tiers, with each layer having specific responsibilities.
The most common type of hierarchical organization is the pyramid structure, where the top layer makes decisions that affect the entire organization, and the bottom layer carries out the decisions made by the top layer.
Other types of hierarchical organizations include the inverted pyramid, tree structure, and wheel structure.
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Top Principles of Organizational Design
Here are the top principles of organizational design:
1. The Principle of Orientation:
The first premise is one of direction, and it relates to marketing. Within the business, it ought to speak to the interests of the customers.
Marketing represents client interest within the organization and contributes to its long-term sustainability.
As an exception, the organizational structure of a marketing company should be created from the bottom up to best serve the needs of a market or markets; it should be planned in such a way as to maximize profits while also addressing consumer pleasure.Â
The organization matches the marketing plan. It is organized around the markets and goods it serves.
2. The definitional principle:
The organization is primarily concerned with outlining the whole scope of the job at hand, grouping it, and establishing relationships between it in terms of responsibilities and powers.
The division of responsibilities and authority must be precisely defined to make each person’s function within the marketing organization crystal clear. This is more crucial than anything else. It prevents authority from being undermined, confusion, and disorder.
3. Principles of Authority
Although we are discussing the principle of authority in the singular, it has plural dimensions because there are a lot of different authority principles like the scalar chain of responsibility, responsibility parity, unity of command, authority level chain of command, and more. Results-related accountability should line up with a manager’s power and influence.
These regulate interpersonal interactions among members of an organization, using authority as the point of reference. The marketing industry cannot be an exception to the fact that these are universally followed.
4. The principle of span of control
The span of control relates to power and responsibility and the span of management and monitoring. It refers to the number of subordinates who ask their immediate superior for guidance, direction, and oversight.Â
So, because a superior has subordinates and gets the task done from them, it alludes to the number of subordinates under his authority.
The ideal number of people reporting to a superior relies on a variety of variables, including the abilities of the subordinates and the superior, the scope and form of authority delegation, the clarity of plans and policies, communication and control methods, and so on.
5. The Balance Principle
Balance in organizational structure does not imply equality per se; rather, it means an equal emphasis on size and the number of people employed.
According to the viewpoint of total efficacy, there should be balance. However, a department need not be overemphasized despite its size, which can be tiny or large.
As a result, it is important to avoid excesses, regulate extremes, maintain a balance between centralization and decentralization, line and staff relationships, coordination requirements, specialization, and other factors.
6. The Flexibility
The flexibility principle states that relationships are arranged according to a system of working rapport. Such a plan cannot afford to be impenetrable and uncompromising. It is incorrect to believe that an organization is static or unchanging.
However, the marketing organization needs to be flexible to respond to the environment it operates in, which is always changing. Any external alteration will inevitably affect this subsystem’s functioning and way of life.
To respond effectively to competitive and customer actions, the organization should be flexible to changing situations.
A flexible organization has procedures that are simple to comprehend, implement, and modify. Its managers are also more likely to prepare ahead and embrace change’s challenges.
7. FlowPrinciple
Information is the lifeblood of every organization, according to the principle of flow. To achieve this, information should be able to flow back and forth throughout the organization’s veins in both directions.
According to the idea of information flow, information should change from specialized to general as it moves up the ranks and vice versa as it moves down the line.
Additionally, the format of the information corresponds with the decisions that will be made at various organizational decision points. The information flow must be accurate, sufficient, and timely.
FAQs
The organizational design structure is how people are arranged within an organization. It can be hierarchical, flat, centralized, or decentralized.Â
Here are the top principles of organizational design:
The Principle of Orientation
Principle of Flow
Principle of flexibility
Principle of Balance
The principle of span of control
Conclusion
Organizational design is a key factor in any organization’s success. It shapes the way an organization functions, how it grows and adapts over time, and how employees interact with each other within their roles. The following are some of the most common types of organizational design: functional, matrix, and hybrid.
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