How the Structure of an Organization Affects Productivity
Much has been written about the structure of organizations. Yet there are two important reasons why the theory has not always fit the reality. First, most research has been in empirical studies stating how organizational structures work. Although this understanding is helpful, it does not tell how organizations can actually change their structure to realize an increase in productivity. Second, most studies lacked synthesis and gave no clear understanding of how to put theory into practice, leaving managers in the field to discover this for themselves without the support of theoretical studies. Still, some basics are very useful; there are five organizational structures commonly recognized, and knowing which is the best structure for an organization will improve productivity.
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The Simple Structure
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This structure is distinguished by a small, strategic top and centralization. New firms, small firms, entrepreneurial firms and firms in crisis benefit most from this structure. Strong and direct leadership is needed within these firms, showing employees what should be done and how. The firm's productivity will thrive under a strong leader who lays down the law and mobilizes his workforce to march in his footsteps.
The Machine Bureaucracy
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This structure is known for standardization. Mass-production firms and white-collar firms benefit most from this structure. The top of the organization is relatively small, yet succeeds in standardizing the work process. Employees have standard tasks and work within strong teams; their impact on productivity is relatively low since it is dictated by the work processes. The firm's productivity itself thrives under the standardization of the work process, and managers who succeed in maximizing standardization also maximize productivity.
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Professional Bureaucracy
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This structure includes a core of professionals in the workforce. Service firms, firms specialized in craftsmanship and small research firms benefit most from this structure. The top of the organization is relatively small and relies on its professional workforce. Managers who succeed in coordinating the professional workforce will succeed in optimizing productivity. Professionals need their space to make their unique contributions to the firm's productivity, but guidance and coordination of their efforts are also required.
Division Structure
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This structure works by coordinating the output of various departments within the firm. Firms constructing specialized products and firms operating worldwide benefit most from this structure. Each part of the organization is capable of producing its own output. Yet coordination on how to bring all these different outputs together in the best way is the challenge for management. The firm's productivity will be strongly affected by the level of coordination reached; each division is part of the value chain and should be treated as such.
Adhocracy
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This structure distinguishes itself by mutual coordination. Big research firms, exclusive manufacturing firms and firms in creative fields benefit most from this structure. The firm's productivity is based on the level of coordination possible among the highly specialized employees. The end result comes together only if all specialists can work together in a desired way. Very complex or creative projects are common to every day's work within these firms. Productivity can thrive only if the coordination of specialists is successfully achieved.
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References
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