The world today is experiencing the most rapid pace of change in its history. The purpose of this essay is to discuss what organizational structure is suitable in the business circumstances of today. This essay will argue that the environment of the 21st century is such, that to be effective, organizations are tending towards less formalized structures than used in the past. To support this argument, firstly organizations will be defined, and then the properties that make an organization effective will be identified.
Next organizational structure will be appraised, and what constitutes business environment will be established. Finally the influences globalisation and technology have had on the will be addressed in relation to changes in organizational structure. Robbins et al. define an organization as a deliberate arrangement of people to accomplish some specific purpose (2000: 5). While Wood et al. consider organizations as collections of people working together in divisions of labour to achieve a common purpose (1998: 15).
These definitions fits a wide variety of groups such as sporting clubs, religious bodies, voluntary associations etcetera however for this essay will concentrate on business organizations. A Business organizations purpose is to deliver and product or service in such a way that a benefit is gained for the organization, profit or goodwill for example. The Macquarie dictionary is defines effective as producing the intended or expected result and producing a striking impression (1990).
Thus an effective organization is an arrangement of people that successfully achieved their purpose, ie. a large profit of fine product, and have done so in a noteworthy, exemplary, commendable method or fashion. It is understood that to be effective an organization must be efficient. Efficiency is defined as the relationship between inputs and outputs, the goal of which is to minimize resource cost (Robbins et al. , 2000: 8). Usually a business organizations success is primarily measured in financial profit, though this is not the only benchmark.
Organizational structure is defined as the organizations formal framework by which job tasks are divided, grouped and coordinated (Robbins et al. , 2000: 351). Generally an organizations structure is considered to be the managerial framework that directs the non-managerial employees. Traditionally western organizational structure can be argued to have developed from the feudal system of government where a strict pyramidal power and class structure existed. Termed as mechanistic organizations they are described by Robbins et al. being characterized by high specialization, extensive departmentalization, narrow spans of control, high formalization, a limited information network, and little participation in decision making by low-level employees (2000: 361). Organic structures on the other hand developed as alternatives to mechanistic structures. The underlying philosophy of the organic model is to provide the space for all people to contribute ideas and effort towards the well being of the organization.
Organic organizations are characterized by Robbins et al. highly adaptive and flexible with little work specialization, minimal formalization and little direct supervision of employees (2000: 362). Examples of organic structures include team based structures, matrix organizations, project structures, boundaryless organizations and learning organizations (Robbins et al. , 2000: 370-377). Organic organizations usually provide employees with more autonomy than those with mechanistic structure. Business organizations are classed as open systems, that is, they dynamically interact with their environment (Robbins et al. 000: 18). Robbins et el. define environment to be outside institutions or forces that potentially affect an organizations performance (2000: 101).
Wong et al. list elements of the environment to include competition; economic conditions; physical environment; political and legal atmosphere; socio-economic characteristics; sociocultural elements; population distribution; infrastructure; technological conditions; workforce composition and education of the population (1998: 4). Once an organization could essentially ignore environmental forces but Wood et al. ates now an effective organizational design reflects the powerful external forces (1998: 417). Organizations need to know their environment in order to recognize and take advantage of the opportunities it offers, to recognize the constraints it imposes and to seek to turn the constraints into opportunities (Dawson, 1992: 80).
To Know their environment organizations must engage in environmental scanning, described by Robbins et al. as the screening of much information to detect emerging trends and create scenarios (2000: 311). Robbins et al. gues that organizations have to pay special attention to the part of the environment that is directly relevant to the achievement of an organizations goals, defined as the specific environment (2000: 102). In Images of Organizations Morgan states as we move into the 21st century we find ourselves living through a period of unprecedented change (1997: 375).
Environmental uncertainty, defined by Robbins et al. as the degree of change and complexity in an organizations environment, (2000: 103) must be having an effect on organizations. Theodore Levitt (in Wong et al. 998: 239) stated his article in the May-June 1983 edition of the Harvard Business Review that two vectors shape the world technology and globalisation. Since Levitt published his article, the development of technology and the growth of globalisation have increased at such astonishing rates that free-thinkers such as Levitt wouldnt have imagined the world as it is today. Globalisation is defined by Ryan et al. as a process occurring in the economic, political, and social realms which is a result of the dismantling of fixed boundaries around nations, cultures and economies.
It implies an unprecedented level of nations economic activities (1999: 226). While there is much debate over benefits and detriments globalisation will have on the world, it is accepted that globalisation has, and is, taking place. Globalisation has countless affects on business organizations, including increasing the extent of competition as trade barriers are abolished; and generally widening the specific environment of an organization, from commonly being local organizations and events to possibly being worldwide influences. The exponential growth of technology as we enter the 21st century is indubitable.
In the ten years clock speeds in personal computers have increased thirty- fold, 33 megahertz to 1000 megahertz. The increase in technology has inequitably changed the world. The average white-collar worker has a computer on his or her desk, and does not write anymore, rather types. Typing pools are things of the past. Large labour needs in manufacturing is also a things of the past, as tasks become automated. 60 people staff the 20,000 square foot factory that manufactures Lexus automobiles. Technology advances are constantly changing organizations.
As organizations are open systems they have to adapt changes in the environment. This is done by the developing or changing of a organizations structure referred by Robbins et al. as organizational design (2000: 351). Globalisation has had many influences on organizational design. For example changes to base labour intense manufacturing processes in countries such as Mexico and China leaves nations like Australia with a more educated workforce. Often a university-educated person is in a job that twenty years ago, was filled by a worker with minimal formal education, who trained on the job.
Thus the organization needs a less formalized structure to better utilize the knowledge of such people in the decision making process. The pace of technology change is often requiring organizations to constantly be changing to keep up. Robbins et al. view communications technology as having particular influence on organizational design. Communication and the exchange of information among organizational members is no longer constrained by geography or time. And elimination of these physical and time constraints means that organizations no longer need to be structured solely to facilitate information flows and work activities (2000: 380).
Thus organizational design can move away formalized structures designs that once where needed to have efficient information, flows to less formalized structures that facilitate innovation. Kilmann et al. state in order to be effective in fast-changing environments, design needs to be either more frequent or more revolutionary in the magnitude of its proposed (1976: 7). Ideally an organization striving to stay effective should be constantly evolving structure to find form that best suits its environment.
A structure termed by Robbins et al. as a learning organization fulfils this. Robbins et al define a learning organization as an organization that has developed the continuous capacity to adapt and change because all members take an active role in identifying and resolving work-related issues (2000: 376). This essay has only touched on two aspects of the changing environment an the effects they have on organizational structure however it is clear that organizations can not remain static and hope to remain effective.
Effective organizations are defined as being noteworthy, or in other words more innovative than other organizations. The only way to be innovative in organizational structure is to move forward into designs that take advantage of environmental changes and forces of the 21st century. These are generally less formalized than traditional structures as they are adaptive to the rapid pace of change. To conclude, the pace of change in the environment dictates that organizational structure must be constantly evolved to suit the current circumstances.
Technology advancement has made it possible to shift from concentrating organizational design on maximizing communication and information exchange efficiently. Education quality of organization members is such that ideal structures need to ensure that all members of the organization can contribute ideas. As an effective organization is innovative in successfully achieving its goals, and innovative structures are generally less formalized, the environment of the 21st century is such, that to be effective, organizations are tending towards less formalized structures than used in the past.