The different elements that make up organizational structures in the form of formalization, centralization, number of hierarchical levels and departmentalization often coexist. As a result, we can speak of two configurations of organizational structures, depending on how these elements are organized. Formalization is the extent to which an organization`s policies, procedures, job descriptions, and rules are written and explicitly articulated. Formalized structures are those in which there are many written rules and regulations. These structures control employee behavior based on written rules, so employees have little freedom of choice. One of the benefits of formalization is that it makes employee behavior more predictable. Whenever a problem arises at work, employees know that they must refer to a manual or procedural policy. As a result, employees react to issues across the organization in the same way. This leads to consistency of behavior. The degree of centralization and formalization of a company, the number of levels in the hierarchy of the company and the type of departmental training that the company uses are key elements of the structure of the company. These structural elements influence the degree of efficiency and innovation of the company, as well as the attitudes and behaviors of employees at work. These elements combine to form mechanistic and organic structures. Mechanistic structures are rigid and bureaucratic, helping companies achieve efficiency, while organic structures are decentralized and flexible, helping companies achieve innovation capacity.
Sine, W. D., Mitsuhashi, H., & Kirsch, D. A. (2006). Revisiting Burns and Stalker: Formal Structure and Performance of New Firms in Emerging Economic Sectors. Academy of Management Journal, 49, 121-132. Mechanistic structures are those that resemble a bureaucracy. These structures are highly formalized and centralized. Communication generally follows formal channels and employees are provided with specific job descriptions outlining their roles and responsibilities. Mechanistic organizations are often rigid and resistant to change, making them unsuited to innovation and quick action. These forms have the disadvantage of inhibiting entrepreneurial action and dissuading employees from taking initiatives. Mechanistic structures not only have disadvantages for innovation, but also limit individual autonomy and self-determination, which can lead to decreased intrinsic motivation in the workplace (Burns and Stalker, 1961; Covin and Slevin, 1988; Schollhammer, 1982; Sherman and Smith, 1984; Slevin and Covin, 1990).
Much has been written about Google`s informal organizational structure, which has created a creative environment like no other. At one point, the founders shared an office that resembled a student dormitory, complete with skateboards, bean bags, and remote-controlled planes. The company`s offices around the world are designed to be the most productive workplaces imaginable, sometimes with meeting rooms equipped with motorhomes (Amsterdam) or corridors with subway grids and hydrants (New York). The structural design generally follows one of the two basic models described in Table 7.3: mechanistic or organic. A mechanistic organization is characterized by a relatively high degree of task specialization, rigid departmentalization, many levels of management (especially middle management), narrow scopes of control, centralized decision-making and a long chain of command. This combination of elements leads to a so-called high organizational structure. The U.S. military and the United Nations are typical mechanistic organizations. As this creative environment grew, Google relied on its innovative and competitive culture to produce some of the most widely used products in the world, including YouTube, the Android operating system, Gmail, and, of course, Google Search. As Google grew, so did the pressure on its informal structure. In the beginning, when the company added employees on a daily basis, it had to find the right balance between maintaining creativity and leading a rapidly growing organization. Although few organizations are purely mechanistic or purely organic, most organizations tend towards one type or another.
The decision to create a more mechanistic or organic structural design is based, among other things, on factors such as the overall strategy of the company, the size of the organization and the stability of its external environment. After all, the activity in which a company operates has a significant impact on its organizational structure. In complex, dynamic and unstable environments, companies must organize themselves for more flexibility and agility. This means that their organizational structures must respond to rapid and unexpected changes in the business environment. However, for companies operating in stable environments, the demands for flexibility and agility are not so great. The environment is predictable. In a simple and stable environment, companies therefore benefit from the efficiency gains created by a mechanistic organizational structure. You now know the different ways to structure an organization, but how do you, as a manager, decide which design works best for your business? What works for one company may not work for another. In this section, we look at two generic models of organizational design and briefly examine a number of contingency factors that promote each. Slevin, D.
P. and Covin, J. G. (1990). Juggle entrepreneurial style and organizational structure – how to pull yourself together. Sloan Management Review, 31(2), 43-53. Fast forward to 2015, when the founders decided Google was getting too big to fit into a company. They founded Alphabet, which is now a holding company that owns Google as well as several other companies. Their decision to realign Google and move other businesses under the Alphabet umbrella brought transparency and a streamlined organizational structure. Sundar Pichai, who led Google search with great success, became Google`s new CEO, while Page became Alphabet`s CEO and Brin became Alphabet`s president. (Former Google CEO Schmidt is Alphabet`s executive chairman.) While formalization reduces ambiguity and gives direction to employees, it is not without drawbacks. A high degree of formalization can actually lead to a reduction in innovation because employees are used to behaving in a certain way.
In fact, strategic decision-making in such organizations often only takes place in times of crisis. A formalized structure is associated with decreased motivation and job satisfaction, as well as a slower pace of decision-making (Frederickson, 1986; Oldham and Hackman, 1981; Pierce and Delbecq, 1977; Wally and Baum, 1994). The services sector is particularly vulnerable to problems related to a high degree of formalisation. Sometimes employees listening to a customer`s issues need to take action, but the answer may not be specified in procedural policies or regulations. For example, while a handful of airlines like Southwest put their staff in a good position to handle complaints, lower-level employees at many airlines have limited ability to resolve a customer issue and are limited by strict rules that outline a limited number of acceptable responses. Organizational structure refers to how the individual and teamwork are coordinated within an organization. In order to achieve organizational goals, individual work must be coordinated and controlled. Structure is a valuable tool for coordination, as it specifies hierarchical relationships (who reports to whom), delineates formal communication channels, and describes how individuals` distinct actions are related. Organizations can operate within a number of different structures, each with different advantages and disadvantages. While any structure that is not properly managed is plagued by problems, some organizational models are better equipped for specific environments and tasks. This reorganization allows Brin and Page to focus on projects they are passionate about, such as Project Loon, a network of balloons that fly over commercial airspace and provide web connectivity to remote areas, while managing Google and its many successful efforts independently of Pichai and his team.