Organizational design theory outlines how a company structures itself for normal activities. The type of goods produced and sold can dictate the design, with tall and flat structures being two general theories. Other important elements include control, authority, and accountability. Companies can seek external help if they lack knowledge on this topic.
Organizational design theory is a framework that outlines how a company structures itself for the completion of normal activities. There are many types of organizational designs available, each offering specific advantages and disadvantages. In some cases, there is no fixed meeting in a company where it decides on organizational design theory. Under these circumstances, the organization simply evolves into a model of efficiency or inefficiency, with no general guidance on activities. Companies that do not have a specific organizational structure or knowledge on this topic can ask for external help in completing this administrative task.
The type of goods a firm produces and sells in the market or industry in which it operates can dictate its organizational design theory. Again, the structure here isn’t unique to the company; it simply replicates its organization after a previously successful business model. A disadvantage of this theory is that the individuals who work in a company may not be suited to the type of organizational design common in the industry. In this case, the company and its employees have to change their behavior or adapt to this specific structure. It can be difficult to change or alter the structure of a business once it is established and in place.
Two general theories in organizational design are tall and flat structures. These two names simply describe the amount of levels of management within a business, with tall structures having multiple levels of flat structures. While none of these structures are bad in principle, each has distinct drawbacks to operations. For example, organizational design theory states that a tall structure works well when more management is needed to control all employee activities. If a company wants more freedom and creativity in its operations, a flat structure with fewer levels of management may be the best option, provided the execution works well.
Other important elements in organizational design theory include the extent of control, the authority given to each individual, and the responsibility placed on each position. The span of control determines the number of employees that a single manager or supervisor can effectively manage without losing control. The authority given to each individual or position is also important as too much authority given to the wrong level can limit a company’s activities. Accountability represents the checks and balances a company places on all management positions. Not using all of these elements effectively can lead to poor business operations and lack of focus in an organization.
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