The key situational determinants of organizational design are technology, organizational environment, and organization size and life cycle.
- Technology: Technology is the set of processes that an organization uses to transform various resources such as materials and labor into products or services. Joan Woodward was the first person to see the link between technology and organizational design. In particular. Woodward defined three basic types of technology.
In unit or small-batch technology, products are manufactured according to customer specifications in small quantities. Examples are printing press and studios.
In large batch or mass-production technology, products. are manufactured in assembly-line fashion by combining component pans to create finished goods. Examples are home-appliance,” automobile and computer manufacturers.
In continuous-process technology, products are transformed from raw materials into finished goods through a series of machine transformations that change the composition of the materials themselves. Examples are petroleum refiners, food processors and chemical manufacturers.
Woodward viewed unit or small-batch technology as -the least complex while the continuous process technology as the most complex. She found that organizations within each set had similar designs but the designs varied somewhat from set to set.
Bums and Stalker argued that managers should examine the rate of change in technology to determine the best organizational structure. They recommended a bureaucratic or mechanistic structure for organizations with slowly changing technology and an organic or flexible structure for organizations with rapidly changing technology.
Charles Perrow concluded that me key question concerning an organization’s technology is whether it is routine or non-routine. In his view, a highly formalized centralized structure is appropriate for an organization that uses the same routine technology while a more flexible structure is necessary for an organization that often uses new technology. ‘
An organization that uses continuous process, non-routine or intensive technology needs to ensure that its structure can adapt to changes in the technologies. Technology can affect all aspects of an organization, not just production and the same technological change can have very different effects on different organizations.
- Environment: The environment also influences the type of design an organization is likely to adopt. The environment of an organization consists of all the factors and conditions outside the organization that might affect it. which include customers, shareholders competitors, legislatures and regulatory agencies, economic factors, which include interest rates, unemployment rate, finance, objects, which include buildings, machines and events, which include as elections, war, floods etc.
If the managers are good at analyzing and predicting changes in the environment, then, they can help the organization to take advantage of any change. Since the environment affects organization both directly and indirectly, therefore, the managers must keep an eye on it and be ready to modify organization’s design to respond to environmental changes.
- Organizational Size and Life Cycle: Organization size refers to how large : the organization is, usually, in terms of the number of its full-time employees. Life cycle refers to organization’s maturity relative to that of other organizations.
Size can affect organization design in many different ways. A group of researchers in England found that large organizations tend to have more job specialization, more standard operating procedures, more rules and regulations, and more decentralization than small organizations. Thus, as organizations grow in size, they should be prepared to adapt their design accordingly.
An organization’s life cycle is related to its size. Organizations tend to follow a predictable pattern of growth. After they are created, they grow for some period of time and then eventually stabilize as a mature organization.