Question

What are the factors that influence organizational structure? Find and describe a specific example of how each factor influenced structure (can be all four influencing one organization’s structure or you can find different organizations for examples of each).

Answer 1

The factors that influence an organisation structure are as follows:

Strategy: Structure follows strategy. Every company will have a strategy and the structure must support the implementation and functioning of the strategy. Example if a company has a strategy to diversify its product lines into other countries and markets, the organisational structure should be more decentralised. Other countries and markets will have different needs and different situations where decisions have to be taken. Managers will have to take quick decisions and a decentralised organisation structure gives them the authority to do so.

Size of the firm: Depending on the size of the firm the organisation structure will also change. The bigger the size with more number of employees the need for decentralisation standardisation and job specialisation increases. For smaller organisations an autocratic structure will also work because of the few employees. It would give the management more control over the employees too, but as the firm grows autocratic styles create problems for the business

Environment: It absolutely essential for organisation structures to consider the effects of the environment. Company's must be able to adapt and respond to the opportunities and threats in the environment. For example a mechanistic structure is appropriate in countries where there is a stable environment, routine jobs, constant demands etc. Whereas a more organic structure is required for more volatile environments.

People and tasks: The organisation structure groups different departments and defines their work. People who possess the required skills are needed to accomplish the tasks. Example depending on the kind of job the structure will be influenced. For a company with multiple product lines a product focused structure or a matrix structure will be suitable. For a company that has few products but markets id different geographic locations a geographic organisation structure is needed.