Organization structure as a determinant of organizational performance

diagram - matrix structureIn today’s Matrix Monday post, where we regularly review some of the limited literature available on the matrix, Kevan Hall looks at a paper by Mansoor, Masala, Barbuda, Capusneanu and Lodhi, ‘Organization structure as a determinant of organizational performance, uncovering essential facets of organic and mechanistic structure’.

This paper is a literature review that aims to look at the relationship between mechanistic or organic organization structures and performance.

Mechanistic structures exhibit authoritative communication patterns, formalized processes and rules and centralised decision making processes, and may be better suited to large organizations and routine and stable environments. They use formalized structure to reduce variability and ambiguity. However, decision making becomes difficult for very large centralised organizations.

Organic structures exhibit more flexibility, informality, fewer written processes and rules and are better suited for more dynamic conditions and innovation. Decision making is distributed at all levels of the organization. They also improve job satisfaction and particularly (and unsurprisingly) the performance of individuals who have a high need for dominance, achievement or autonomy.

The review finds that:

  • A higher degree of formalization or standardization may lead to lower organizational performance.
  • Centralised decision making may work better in stable public sector conditions.
  • Decentralised decisions worked better in private sector organizations.

It seems to me however that this distinction is too simple, these are perhaps ‘ideal forms’ that don’t exist in isolation.

The paper assumes that size leads to formalization, bureaucracy and a more mechanistic style, and also that this style is suited to a stable environment. In a more dynamic environment, a centralized and mechanistic structure may be unable to change and make decisions fast enough.

However, even very large organizations today need to be dynamic and centralised decision making’s impossible in an organization with tens or even hundreds of thousands of people in different cultures, time zones and business units.

Even in a relatively stable and standardised manufacturing environment, it is essential to decentralise decision making for quality and other factors as close to the activity as possible. You will still have guidelines and routines but decentralization of decision making works even here.

In a matrix structure, it is essential to empower middle managers (where the reporting lines intersect) to make decisions or they will have to escalate constantly which will cause delay, cost and dissatisfaction. We may also be unable to define clear roles and processes as we have to manage constant ambiguity, trade offs, dilemmas and changes in priority.

The challenge is to scale up an organic way of working, to allow freedom within a framework, to create clarity where we can but also build the ability to cope with ambiguity and change – that’s what the matrix should be all about!

Source: Organization structure as a determinant of organizational performance, uncovering essential facets of organic and mechanistic structure, by Mansoor, Masala, Barbuda, Capusneanu and Lodhi. American Journal of Scientific Research 2012.

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