Factors Determining Organizational Structure

Jan 20, 2010Updated 8 months ago

Factors of Organizational Structure
An organizational structure is the body of policies and rules that allows an organization to arrange its chain of command and communication while allocating rights and responsibilities, according to the Business Dictionary. Several factors should be considered in determining an appropriate organizational structure.

Size and Organizational Structure

The bigger the organization, the more complex its structure. If the company is small, such as a three-person tax company, the design is generally simple. A small company does not have to undergo a formal structure; it can operate solely on the desires of the principals and the needs of the company. Policies and guidelines may be present only to provide the boundaries in which employees make decisions.

Larger organizations depend more on authority delegation and formal work responsibility, because a bigger company is harder to manage. Work duties tend to be specific to certain employees, and work procedures are based on rules and policies. The communication system is arranged so it flows from management to subordinates. Larger organizations are structured to enhance efficiency and specialization.

Life Cycle and Organizational Structure

An organization undergoes the stages of birth, youth, midlife and maturity. During birth, the company is in its blossoming phase and without a formal design. During the youth phase, the company is attempting to expand, with the needs of the customers becoming the focus. In the midlife phase, the company has developed a formal design with a chain of command. In the maturity stage, the organization is more focused on maintaining the stability it has developed.

Market Strategy and Organizational Structure

The organization must determine the technique it will use to market its product. It may invent a new product, or enhance one that is already on the market. Regardless of the method used, it must include a strategy that assists the company in attaining its goals.

Environment/Technology and Organizational Structure

Stable environments are settings that remain the same for long periods of time, such as manufacturers of stationary supplies. In a dynamic environment, the company may change frequently to match its clients’ needs. For example, an electronics manufacturer may need to update or change its technology often to keep up with consumers’ changing desires.

Through the use of technology, companies are able to operate more efficiently and at lower costs. By using tools, equipment and strategy, technology helps workers accomplish their core tasks at a quicker pace. If a company has the appropriate organizational structure blended with the right technology, it can attain organizational success.