The 4 Main Ingredients for Organizational Design

4 ingredients for organizational design

An organization, in order to be run smoothly and achieve its goals, needs an efficient structure, which is the formal system of tasks and authority relationships that control how people behave and manage their tasks. The latter has to fit with the organizational culture, in order to increment the efficiency and the cooperation between people, tasks, and technology, as the sociotechnical theory states.

Types of structure

There are different kinds of structure, which can be divided into two main branches: mechanistic and organic. Both have advantages and disadvantages, and the organization adopts one of the two in accordance with the environment it faces, as the contingency theory states. However, both have in common four main ingredients, necessary for organizational design – flow of activities, task-oriented behavior, control, and combinative capabilities.

Flow of activities

The first refers to a set of interlocking tasks that are at the bottom of the firm. These can have different relations among each other, factors described by J. Thomson in his task interdependence theory, the method used to analyze the degree of dependence of each activity on one another. He identified three kinds of technology, each of which related to specific interdependence: mediating, long-linked, and intensive technology.

• Mediating technology is the work process in which production activities perform their tasks independently and separately. It is related to the pooled interdependence, which means that each department, person, or team contributes separately to the overall performance of the organization. In this case, piece rates are the best incentives since it is easy to determine the effort given by each unit and control their performance. This relation is used in a conglomerate structure, franchisee strategy, and in networks.
• Long-linked technology is the work process in which the input, conversion, and output activities are performed in series. It is based on sequential interdependence, meaning that the output of one department becomes the input for another. It requires higher integration because the actions of a person directly affect the performance of the next one. This system is used in mass production, and the assembly is a perfect example of sequential interdependence.
• Intensive technology is the work process in which the first value creation activities are inseparable. The latter is based on reciprocal interdependence, meaning that each activity or person is fully dependent on one another. In this case, the technological complexity strongly diminishes because the result depends on people's skills and knowledge, factors which cannot be precisely programmed. Uncertainty of outcome is high.