To achieve organizational goals and objectives, employee activities within the organization need to be coordinated and managed. To achieve this coordination, the organization must have a structure to it. Organizational structure is essential in specifying reporting relationships, delineating formal communication channels and in linking all activities together toward organizational goal achievement. There are two primary structure types; organic and mechanistic. There are four main elements to organizational structure; centralization, formalization, hierarchy, and departmentalization.
These elements often coexist in organizational structures and their configuration will determine whether an organization is organic or mechanistic. Organic organizations are less formal and more flexible than traditional organizations and are characterized by such things as flexibility, informality, and knowledge based authority. An organic structure is laid out like a network and emphasizes horizontal specialization, personal coordination, and extensive communication. Organic organizations are generally flat and decentralized, with little reliance on formal authority, which enables faster decision making. Mechanistic structures are primarily hierarchical, with an emphasis on specialization, and vertical communication. Mechanistic structures also place an emphasis on control by relying on rules, policies, and procedures in conducting operations. Mechanistic structures are highly formalized and centralized and as a result are more rigid and resistant to change. Determining which structure is best is dependent on the stage of development the organization and its industry are in. Firms in mature, stable environments may find greater success with the mechanistic structure while established firms in dynamic or turbulent environments may find greater success with the organic structure.
Organizational Structure
To achieve organizational goals and objectives, employee activities within the organization need to be coordinated and managed. To achieve this coordination, the organization must have a structure to it. Organizational structure is essential in specifying reporting relationships, delineating formal communication channels and in linking all activities together toward organizational goal achievement. Organizational structures contain four elements that are essentially building blocks, centralization, formalization, hierarchy, and departmentalization. How these elements are arranged in an organization determines the type of structure it should implement. The two primary structure types are organic and mechanistic structures (Carpenter, Bauer, & Erdogan, 1969, para. 2).
Before analyzing organic and mechanistic structures a review of the four elements, centralization, formalization, hierarchy, and departmentalization, is called for. Centralization is the extent of which decision making authority is concentrated at the highest levels of the organization. In centralized firms, important decisions are made at the executive level, whereas in decentralized firms, decision making is delegated to lower levels of management who are closer to the issues at hand (The business environment, 2009, p. 286). The benefits from centralization are cost savings and efficient operations if the company is in a stable environment. On the other hand, centralization can result in inefficient decision making and lost opportunities if the firm is operating in a more dynamic environment.
Formalization is the degree to which a firm has its policies, procedures, job descriptions, and rules formalized in writing. The more written rules and policies that an organization has, the more formalized it is. Formalization provides greater employee direction, which reduces role ambiguity. However, it can also reduce employee motivation, innovation, and job satisfaction (Carpenter et al., 1969, para. 10-11).
The number of levels that a company has in its hierarchy is another element of structure. Tall structures have many levels of management between its front line employees and executive officers. With tall structures, the number of employees reporting to each manager is small, resulting in greater opportunities for managers to interact with employees. Conversely, flat structures have only a few layers of management and there are larger numbers of employees reporting to each manager. With the flat structure, managers are unable to provide close supervision to employees, allowing them more freedom and autonomy (Carpenter et al., 1969, p. 13).
Departmentalization is the process of grouping activities by the work performed. Departmentalization is typically done by function or by division. Functional departmentalization is when activities are grouped by function, such as marketing, accounting, or human resources. Divisional departmentalization is when activities are grouped by products, services, or geographical location. Functional departmentalization is more effective when a company does not have a lot of different products or services and is operating in a stable environment. Divisional departmentalization is more effective a company has a diverse product line and when it is operating in a turbulent environment (Carpenter et al., 1969, para. 16-20).
These four elements, centralization, formalization, hierarchy, and departmentalization often coexist in organizational structures. The configuration of these elements will determine whether an organization is organic or mechanistic.
Organic organizations are less formal and more flexible than traditional organizations and are characterized by such things as flexibility, informality, and knowledge based authority (Covin & Slevin, 1988, p. 219). An organic structure is laid out like a network and emphasizes horizontal specialization, personal coordination, and extensive communication (The business environment, 2009, p. 284). Employee roles are not well defined in an organic structure, and employees are frequently asked to perform tasks that are based on the needs of the organization, regardless of whether they are in the employee’s area of expertise. Employees in organic structures experience greater autonomy and report higher levels of motivation and job satisfaction. Organic organizations are generally flat and decentralized, with little reliance on formal authority, which enables faster decision making (Carpenter et al., 1969, para. 24).
Organic structures are usually associated with entrepreneurial and innovative firms because they are fluid, flexible, and responsive to a changing environment. Organic structures facilitate entrepreneurial behavior with loose policies and procedures and authority residing with knowledge rather than position (The business environment, 2009, p. 284). Similarly, organic structures facilitate innovation through open communication and autonomous decision making (Pierce & Debecq, 1977, p. 31).
Research conducted by sociologist, Tom Burns and psychologist G.M.Stalker in 1961 found that companies operating in turbulent environments should opt for an organic structure (Sine, Mitsuhashi, & Kirsch, 2006, p. 121) because formalization decreases an organization’s ability to adapt to environmental changes and increases its risk of failure (Sine et al., 2006, p. 123). An example of a company that operates under an organic structure is 3M. 3M has over 100 profit centers with each division functioning like a small company and every division manager operating autonomously. To keep the agility and small company atmosphere, as a division or product becomes large and profitable, it is spun off into a separate business unit (Carpenter et al., 1969, para. 24). Other types of companies that would use the organic organizational structure would be smaller, high tech firms and niche product firms that need to respond quickly to changing environments (The business environment, 2009, p. 285).
At the other end of the spectrum from the organic structure is the mechanistic structure. Mechanistic structures are primarily hierarchical, with an emphasis on specialization, and vertical communication. Mechanistic structures also place an emphasis on control by relying on rules, policies, and procedures in conducting operations (The business environment, 2009, p. 284). Mechanistic structures are highly formalized and centralized. Communication in a mechanistic structure follows formal channels and employees have specific job descriptions which delineates their roles and responsibilities. These characteristics make mechanistic organizations more rigid and resistant to change, which can have a negative impact on the organization in a dynamic environment (Carpenter et al., 1969, para. 22).
Mechanistic structures are best suited to large, mature organizations in stable environments. Mechanistic structures can help an organization maximize efficiency and minimize costs through its use of formalized jobs and clear lines of communication (Carpenter et al., 1969, para. 23). The mechanistic structure however is associated with bureaucracy, and is consequently known for a lack of innovativeness, agility, and responsiveness. Additionally, because a mechanistic structure limits individual autonomy it is also associated with lower levels of employee motivation and job satisfaction (Carpenter et al., 1969, para. 22).
A good example of a company with a mechanistic structure is McDonald’s. McDonald’s has specific job descriptions for its employees and clear lines of communication, keeping them highly formalized. The mechanistic structure enables McDonald’s to turn out a uniform product throughout the world at a minimum cost (Carpenter et al., 1969, para. 23). A university or a textile factory would be other entities that the mechanistic structure would be most appropriate.
There is however one caveat as to the when the mechanistic structure would be the most appropriate. While the research by Burns and Stalker has shown that organizations in a dynamic environment will benefit from an organic structure this research was applicable only to mature organizations. A more recent study by Sine, Mitsuhashi, and Kirsch (2006) has demonstrated that new ventures in emerging sectors require more formalization and organizational structure that is inherent with the mechanistic structure (Sine et al., 2006, p. 121).
New ventures in emerging sectors are generally thought to be organic because of their innovative and entrepreneurial nature. These firms after all, are typically created in reaction to opportunities presented by a changing environment by people with entrepreneurial vision. New ventures initially tend to be small and flexible; however they generally lack formalized roles and routines. While the organic structure seems to be the most appropriate in this kind of situation, it can actually lead to failure for the firm (Sine et al., 2006, p. 121).
Because new ventures are plagued by role ambiguity and uncertainty, which impede individual and organizational action, they would benefit from implementing a mechanistic structure. These firms need the formalization and specialization of the mechanistic structure to help reduce role ambiguity, to enable individual focus, to allow for learning, and to facilitate decision making. New ventures also generally require greater managerial resources per employee which a hierarchical structure would provide (Sine et al., 2006, p. 122).
The organic structure and the mechanistic structure are about as different as anything can be. Where the organic structure is flat, the mechanistic structure is tall. Where the mechanistic structure has a high degree of formalization with specific job descriptions and duties, the organic is informal with broadly defined job descriptions and tasks. Mechanistic structures are generally centralized whereas organic structures tend to be decentralized. Organic structures encourage innovation and entrepreneurial behavior, whereas mechanistic structures inhibit it.
Organic and mechanistic organizational structures are very different yet they both serve the same purpose; to coordinate and manage activities that will enable an organization to achieve its goals. Determining which structure is best is dependent on the stage of development the organization and its industry are in. Firms in mature, stable environments may find greater success with the mechanistic structure while established firms in dynamic or turbulent environments may find greater success with the organic structure. Firms should choose a structure that is the most consistent with their strategic goals and company vision.
References
Carpenter, M., Bauer, T., & Erdogan, B. (1969). Principles of management. Retrieved from http://www.flatworldknowledge.com/node/28982
Covin, J. G., & Slevin, D. P. (1988, May). The influence of organization structure on the utility of an entrepreneurial top management style. Journal of Management Studies, 25(3), 217-234. Retrieved from http://search.ebscohost.com.proxy1.ncu.edu/login.aspx?direct=true&db=buh&AN=4554742&site=ehost-live
Cummings, L. (1965). Organizational climates for creativity. Academy of Management Journal, 8, 220-227. Retrieved from http://search.ebscohost.com.proxy1.ncu.edu/login.aspx?direct=true&db=epref&AN=AMJ.H.BBJ.CUMMINGS.OCC&site=ehost-live
Pierce, J. L., & Debecq, A. L. (1977, January). Organizational structure, individual attitudes and innovation. Academy of Management Review, 2(1), 27-37. Retrieved from http://web.ebscohost.com.proxy1.ncu.edu/ehost/detail?vid=3&hid=104&sid=74f56f5c-2234-46cd-8720-afc87c425f1d%40sessionmgr111&bdata=JnNpdGU9ZWhvc3QtbGl2ZQ%3d%3d#db=buh&AN=4409154
Sine, W. D., Mitsuhashi, H., & Kirsch, D. A. (2006, February). Revisiting Burns and Stalker: Formal structure and new venture performance in emerging economic sectors. Academy of Management Journal, 49(1), 121-132. Retrieved from http://search.ebscohost.com.proxy1.ncu.edu/login.aspx?direct=true&db=buh&AN=20785590&site=ehost-live
The business environment. (2009). Retrieved from http://www.cengage.com/cengagebrain/ncubus