Organisation’s Strategy and Its Design

After reading this article you will learn about the relationship between an organisation’s strategy and its design.

Another current approach to organisational design is through the relationship between organisation strategy and organisational design. In the early 1960s, Alfred D. Chandler reached the conclusion that an organisation’s strategy tends to influence its structure.

However, the impact is not direct, but indirect. As Griffin has observed, “Strategy indirectly determines such things as the organisation’s tasks, technology and environments and each of these influences the design of the organisation.”

More recently, Henry Mintzberg has provided further insight into the relationship between strategy and organisation design. Like Chandler, he suggests that an organisation’s strategy deter­mines its technology, environment and tasks, which, in turn, affect design. But he also suggests that its growth rate and distribution of power — which are other factors determined by strategy, also affect the design the organisation adopts.

Mintzberg proposes that the strategy an organisation adopts and how far it has moved to fulfill that strategy result in five different forms of organisation design. These forms are summarised in Table 9.4.

Simple Structure:

The simple structure uses direct supervision as its primary coordinating mechanism, has as its own important part its strategic apex, and employs vertical and horizontal centralisation.

Machine Bureaucracy:

The machine bureaucracy uses standardisation of work processes as its prime coordinating mecha­nism, the techno-structure is its most important part and limited horizontal decentralisation is established. A high level of task specialisation and a rigid pattern of authority are also typical. Spans of management are likely to be narrow and the organisation will usually be tall.

Professional Bureaucracy:

The third form of organisation design suggested by Mintzberg is the professional bureaucracy. It uses standardisation of skills as its prime coordinating mechanism, has the operating core as its most important part, and practices both vertical and horizontal decentralisation. This form of organisation includes universities, general hospitals and public accounting firms.

Divisionalised Form:

This is Mintzberg’s fourth design and exhibits standardisation of output as its prime coordinating mechanism, the middle line as its most important part, and limited vertical decentralisation. Most large organisations (especially those with product-based departments) are likely to adopt this form.

Adhocracy:

The adhocracy uses mutual adjustment as a means of coordination, has as its most important part the support staff, and maintains selective patterns of decentralisation. The adhocracy is somewhat similar to the organic form of organisational design; it avoids specialisation, formality and unity of command. Even the term itself, derived from ‘ad hoc’, suggests a lack of formality.

Conclusion:

Clearly our understanding of the relationship between an organisation’s strategy and its design is still in its infancy. At present, managers should at least recognise that the strategy of the organisation is very likely to have an impact on its overall design.