EzHR Malaysia Consulting - Organization Structure Design

The Important of Aligning the Structure with the Business Strategy

The key to profitable performance is the extent to which four business elements are aligned:

Leadership. The individuals responsible for developing and deploying the strategy and monitoring results.
Organization. The structure, processes and operations by which the strategy is deployed.
Jobs. The necessary roles and responsibilities.
People. The experience, skills and competencies needed to execute the strategy.

Achieving alignment and sustaining organizational capacity requires time and critical thinking. Organizations must identify outcomes the new structure or process is intended to produce. This typically requires recalibrating the following:

Which work is mission-critical, can be scaled back or should be eliminated.
Existing role requirements, while identifying necessary new or modified roles.
Key metrics and accountabilities.
Critical information flows.
Decision-making authority by organization level.

📞 Contact Us Now

The Impact of Growth Stages on Organizational Structure

Organizations typically mature in a consistent and predictable manner. As they move through various stages of growth, they must address various problems. This process creates the need for different structures, management skills and priorities. The four stages of development in an organization's life cycle include the following:

STARTUP - The beginning stage of development is characterized by an inconsistent growth rate, a simple structure and informal systems. At this stage the organization is typically highly centralized.

EXPANSION - The expansion stage is evidenced by rapid, positive growth and the emergence of formal systems. Organizations at this stage typically focus on centralization with limited delegation.

CONSOLIDATION - The consolidation stage is characterized by slower growth, departmentalization, formalized systems and moderate centralization.

DIVERSIFICATION - The diversification stage occurs when older, larger organizations experience rapid growth, bureaucracy and decentralization.

As an organization grows or passes from one stage of development to another, carefully planned and well-conceived changes in practices and strategies may be necessary to maximize effectiveness.

Key Elements of Organizational Structures

Types of Organizational Structures

Today, organizations are usually structured within each of these categories as the following:

Vertical — functional and divisional.
Vertical and horizontal — matrix.
Boundary-less (also referred to as "open boundary") — modular, virtual and cellular.

These five elements elements comprise an organizational chart and create the organizational structure itself:

Job Design
Departmentation - refers to the way an organization structures its jobs to coordinate work.
Delegation
Span of Control - the number of individuals who report to a manager.
Chain of Command - refers to a line of authority.

The company's strategy of managerial centralization or decentralization also influences organizational structures.

Centralization - the degree to which decision-making authority is restricted to higher levels of management, typically leads to a pyramid structure. Centralization is generally recommended when conflicting goals and strategies among operating units create a need for a uniform policy.

Decentralization - the degree to which lower levels of the hierarchy have decision-making authority, typically leads to a leaner, flatter organization. Decentralization is recommended when conflicting strategies, uncertainty or complexity require local adaptability and decision-making.

Metrics

The art of organizational design is assessing the environment's essential aspects and their meaning for the organization's future. Translating those characteristics into the right structure is critical to increasing efficiency and controlling costs. When selecting the best structure for the organization, company leaders should examine and evaluate current key structural dimensions and contextual factors.

STRUCTURAL DIMENSIONS

Leaders can develop an understanding of the organization's internal environment through measurement and analysis of its structural dimensions. Key dimensions, which are usually measured through a survey, include:

Specialization. The extent to which an organization's activities are divided into specialized roles.

Standardization. The degree to which an organization operates under standard rules or procedures.

Formalization. The extent to which instructions and procedures are documented.

Centralization. The degree to which leaders at the top of the management hierarchy have authority to make certain decisions.

Configuration. The shape of the organization's role structure, which includes:

Chain of command. The number of vertical levels or layers on the organizational chart.
Span of control. The number of direct reports per manager or the number of horizontal levels or layers on the organizational chart.

CONTEXTUAL FACTORS

A review of contextual factors will provide a better understanding of the external environment and the relationship between the internal and external environment. Some of the significant contextual factors to consider in this review include:

Origin and history. Was the organization privately founded? What changes have occurred in ownership or location?

Ownership and control. Is the organization private or public? Is control divided among a few individuals or many?

Size. How many employees does the organization have? What are its net assets? What is its market position?

Location. How many operating sites does the organization maintain?

Productsand services. What types of goods and services does the organization manufacture and provide?

Technology. Are the organization's work processes effectively integrated?

Interdependence. What is the degree to which the organization depends on customers, suppliers, trade unions or other related entities?

After examining the structural dimensions and contextual factors and developing an understanding of the connection between an organization's structure and strategy, organization leaders can consider alternative structures. They may use diagnostic models and tools to guide the design process.

Communications, Technology, Global & Legal Issues

In establishing internal communication channels, leadership must be aware of the advantages and shortcomings of communication technologies and match them to the organization's needs, strategic goals and structure. Employers should also be cognizant of, and be prepared to deal with, the common communication challenges in various organizational structures. For example, communications technology has enabled organizations to create virtual workplaces and teams. In a virtual team, members from various geographical locations work together on a task, communicating via e-mail, instant messaging, teleconferencing, videoconferencing and web-based workspaces. Although virtual teams have significant advantages—most notably reduced travel costs and flexibility in staffing and work schedules—they also pose challenges. Virtual teams often find coordinating team logistics and mastering new technologies difficult. Communication is also a major challenge because of the absence of visual (body language) and verbal (intonation) clues. Research suggests that organizations can overcome these challenges through effective support and training.

Regardless of the type of structure, employers must ensure compliance with legal requirements in the Malaysia where their organizations operate. Some of those requirements will be quite extensive. When organizational structures change, or if the chain of command is weak or fails to keep up-to-date with changes in the business, a company may have compliance problems because the structure has not been evaluated with regard to these laws. Imagine, for example, a restructuring that reduces the number of direct reports for an entire layer of management, which perhaps leads to those individuals no longer being exempt.

As rapid changes in technology affect global communication, employees must be aware of linguistic, cultural, religious and social differences among colleagues and business contacts. The organization should train all employees (not just managers and CEOs who travel) in cultural literacy.

Moreover, employers should be aware that language difficulties, time‐and‐distance challenges, the absence of face‐to‐face contact, and, above all, the barriers posed by cultural differences and personal communication styles make global virtual work far more complex than local structures. These practices can enhance global virtual team relationships:

Using online chats, video- and audio conferencing in addition to one-on-one conversations and e-mail.
Posting profiles of team members that outline their expertise and roles in the organization.
Being sensitive to the level of engagement team members are likely to deliver if they must meet at inconvenient hours across multiple time zones.

Page updated

Google Sites

Report abuse

The Important of Aligning the Structure with the Business Strategy

Key Elements of Organizational Structures

HR Planning

HR Development

Employee Relation

HR Administration

One-Stop HR Service Packages

Other One-Stop Services