The Issues for the Foundations of Organizational Structure
Foundational issues in organization is the most theoretical of all approaches to administration. In a competitive and increasingly global business climate, organization is one of the most important ways to cut costs and improve efficiency. Issues in organization, especially at their root, might be the difference between a streamlined business and a bloated bureaucracy.
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Basics
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Administration theorists Joseph Heim and Dale Compton list several major issues that should go into any foundational theory on organization. The main ones are the return on investment and basic productive efficiency. Others that serve these two main issues are quality, cost and innovation. These three issues can derive from the organizational structure itself. Efficiency does not always produce quality goods, just cheap ones. A tightly integrated, efficient organization might not spur employee innovation and expression, even though such initiative might be central to increasing market share.
Centralization
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Issues involving quality and initiative have to do with the vertical structure of management. The more vertical, the more centralized. The more centralized, the less room for individual initiative and expression concerning product-related ideas. At the same time, a decentralized structure might give great incentive to lower-level management and employees, but might cost the company in terms of efficient operation and coordination. Therefore, the tradeoffs between efficiency and quality, as well as efficiency and initiatives, require some constant compromise between a too-vertical and a too-horizontal structure.
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Lyndell Urwick
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The foundational issues in organizational structure were laid out in the 1940s by Lyndell Urwick, considered by most the pioneer in organizational theory in the modern era. For him, the basic issues were the coordination of function, the continuity of the organization over time, and importantly, the retaining of initiative among different departments. The compromise between the vertical and the horizontal was central to Urwick's approach. All of this had to be bound together by a doctrine of authority where power and control were vested in specific offices and was tightly connected to responsibility.
Issues in Function
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Urwick's approach is still being dealt with in 2011. Beyond the basics of authority and continuity, the functional divisions of the organization were to be coordinated by a central authority, but not to the extent where employee initiative was suppressed. Each functional unit of the organization embodies the organization as a whole. It is an authority in itself within its own competence. In other words, each department interprets the mission and purpose of the firm in its own sphere of ability and specialization. This balance is the central foundational issue in firm organization and is a continual negotiation among power centers, interests and functional units.
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