The Importance of Business Organisation and Structure.

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What is Importance of a Good Structure? How does structure relate to both corporate strategy and the overall effectiveness of the organisation?

Organisation is uniform, structured and co-ordinated effort for achievement of economic/financial objectives for profit seeking firms and social for non-profit Organisations. To Satisfy Objectives, organisation channel employee endeavours in unified direction and establishes means of allocating resources/responsibilities and control under arrangements referred as structure.  

Buchanan and Huczynski (2004) define structure as

“A formal system of task and reporting relationships that controls, co-ordinates and motivates employees so that they work together to achieve Organisational goals”

Thus structure is synonymous to a rope that employees hold and binds all employees towards unified direction and aids the identification of “Who is Who” and “What is What” of organisation.

Mullins (2005) emphasizes that structure affects both productivity and economic efficiency and also morale and job satisfaction. Important notion stemming from Mullins assertion is that good structure will not only have tangible effects i-e financial but in-tangible affects like motivation thus impacting organisation’s operational effectiveness as employees carry out operations/tasks of organisation.

Bloisi (2007) highlights importance of structure as a mean of getting people work towards common goals thus acting as facilitator in pursuit of organisational goals. Looking simple but organization will have to make sure that employees identify with organisational thoughts and willingly forgo personal interests. Thus putting greater burden while designing structure which accommodates employees and harnesses an environment where staff takes organisational goals as their own and share believe of  being valued through their work, hence good structure should provide right blend of command and control plus employee independence without feeling of resentment that hinders organisation pursuit of its mission.

Superior structure promotes cultural values; cultivate integration and coordination as it seeks to strengthen relationship of individuals and tasks. Jones (2007) notes that from this relationship emerge norms and rules contributing to improved communications and common language that improves team performance. Contrary to Jones, Turner (2006) points to structure as primary reason why organisation struggle with cultural change as these structure often box people in old styled formations which are not aligned to new business philosophies.

Why shall an organisation follow certain arrangements? Buchanan and Huczynski (2004) refer to “Strategy” as a reason. They view strategy and Structure as “mutually interdependent”, and structure as vehicle for implementing strategy.

Needle (2004) writes that organisational environment influences strategy and structure. Strategy-structure relation owes a great deal to Alfred Chandler. He called strategy as determination of long-term goals and objectives and called it a means to administer structure. Changing organisation's strategy leads to administrative problems which require refashioned structure for successful implementation of new strategy. Thus if ideas of Needle and Chandler are linked, a 3-item relationship is established whereby at top its ‘Environment’ in which business operates, which affects ‘Strategy formulation’, followed by ‘Structure’ dealing with allocation of resources, responsibilities and authority.

The 3-item relationship is cemented by study of Green and Inman (2006) whereby businesses recognising environment calling for strengthening operations/marketing interface with customers that resulted in adoption of JIT (Just-in-time) with customer’s strategy and necessitated change to more integrated, specialized, and decentralized structure.

Mintzberg (1979) identifies 5 parts of organisation, one of them is Strategic Apex, For Mintzberg strategy is interpretation of environment and managers develop strategies to deal with environment but Mintzberg contrary to chandler views points that Manager’s in strategic apex

“Tailor strategy to its strengths and needs, trying to maintain pace of change that is responsive to environment without being disruptive to organisation”.

Chandler and Mintzberg agree that Environment affects Strategy but Mintzberg contradicts chandler that structure is followed by strategy but points that organisation may shape its strategy without disrupting its arrangements.

Daft (Huczynski and Buchanan, 2004) points to relationship of Environment, Strategy and Structure. CEO/Top Management considers both External and Internal Environment for formulating strategies (Strategic Management) whereby first official Mission is identified followed by Operational Goals and Strategies.  The next step is to design structure. It is important to note that daft refers to relationship between Structure and Strategy as Two-Way. Where Strategy affects Structure as identified by Chandler but daft also notes that Structure affects strategy thus strengthening Mintzberg ideology of structures’ affecting strategy.

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Daft proposes that structure might be affected by strategy and it may also affect strategy formulation. For instance the Case of Minnesota Mining and Manufacturing (3M) mentioned by Needle (2004) where new organisational structure was created in-order to provide the company with drive in strategy.

The extent of authority division in organisation is termed as centralisation and decentralisation. Mintzberg (1979) opinion is that when decision making power rests with single individual – its centralisation, but power dispersed among many individuals in the organisation – its decentralisation. Shall an Organisation centralize or decentralize? Bloisi (2007) answers that large organisation like ...

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