Organizational systems are described in many management concepts, theories and practices. From the systems theory point of view every organization is a complex systems of interrelated parts, main task of organizational system is to coordinate functioning of disparate entities (people, machines, materials, information) to achieve goals of organization. That structure shows how each division of a business is set up, the hierarchy of who reports to whom and how communication flows throughout the organization.
Types of Organizational Systems
There are four main types of organizational structures:
Functional organizational structure
A functional organizational structure is a traditional hierarchy. Many companies, especially larger corporations, follow the functional structure. This system features several specialized divisions such as marketing, finance, sales, human resources and operations. Then a senior manager oversees all the specialized divisions. The reporting flow is clear. Each employee reports to their senior, including division heads, who report to the senior management. Senior management oversees the entire structure. Because the company remains split up into specialized divisions, employees tend to become specialized as well. This causes a clear path for promotion and growth. However, the divisions can have trouble communicating with one another. Because all departments report upwards, there is little horizontal communication between them, leaving little space for holistic, whole-company thinking, except at the top management level. This makes the functional organizational system slow to adapt to change.
Divisional organizational structure
A divisional organizational structure divides the business up into teams based on the projects the employees are working on. This system includes many different types of teams, including legal, public relations, research and business development. Further, teams are created around specific projects. The divisional structure allows employees to become deeply familiar with their team's work. However, divisions are often unaware of what other teams are doing, and do not communicate with each other. Employees may not be able to work effectively across divisions when necessary. Ultimately, this system can be challenging to manage due to its spread-out structure.
Matrix organizational structure
A matrix system is a cross between a functional structure and a divisional structure. From a birds-eye perspective, the business is set up in a functional structure, with a traditional hierarchy and specialized divisions. However, when you look at those divisions up close, they are each set up in a divisional organizational structure. This means they are split up into projects and smaller teams. The matrix type of organizational structure is quite complex and requires a lot of planning, not to mention strong systems of communication across the organization. However, when the matrix structure works well, it eliminates a lot of the issues that pop up with divisional or functional-only organizations. Communication can travel to the right people, which increases productivity and holistic thinking. Further, employees are exposed to other departments and projects, encouraging cross-collaboration. On the downside, the matrix structure can quickly become confusing for employees when there are too many managers, and it's not clear who to report to.
Flat organizational structure
Flat organizational structure flattens much of the hierarchy and allows employees more autonomy over their work. Often, flat organizations are split up into temporary teams, although they usually do not have formal structures. There are still some top-down dynamics in a flat system. Often, there is at least some senior leadership steering the ship. However, this system is predicated on disrupting the traditional hierarchical structures of businesses. Many startups and tech companies tend towards a flat organization, as it encourages innovation and employee input. The thinking is that when employees are not tamped down by red tape, they will think freely and generate fresh, profitable ideas. This increases communication across teams and eliminates some of the communication issues that can happen when messages travel up a top-down structure. Unfortunately, a flat system is difficult to maintain as a company grows, and the need for more structured communication systems comes into play. Further, employees in a flat organization can become overwhelmed with doing too many different tasks, and do not have a lot of room to grow or be promoted.
The advantages of organizational systems
Organizational systems are important for businesses of every size. Having a solid, well-defined structure in place erases confusion and lays out simple processes for employees to follow. Each worker should know exactly who they report to. Without some type of hierarchy or structure in place, a workplace can become chaotic. Employees may not understand who is responsible for what, causing important things to fall through the cracks. A solid organizational structure streamlines a company and keeps everyone on the same page. A solid organizational system eliminates many business problems, including the duplication of work and conflicts between positions. Choosing the proper organizational system can take your business to the next level.
Limitations of Organizational systems
Organizational systems have certain limitations which need to be taken into account to ensure effective performance of the organization. These limitations include:
- Limited resources - Organizations typically have a limited amount of resources (time, money, human resources, etc.) which can be used to accomplish organizational goals. This can lead to a lack of focus or an inability to meet all of the desired outcomes.
- Inflexibility - Organizational systems are often rigid and structured, meaning that they can be difficult to change or adapt. This can lead to a lack of innovation or the inability to respond quickly to changes in the environment.
- Complexity - Organizational systems can be very complex and hard to understand. This can lead to confusion and a lack of clarity about roles, responsibilities and goals.
- Stagnation - Organizational systems that are not regularly updated can become outdated and inefficient. This can lead to an inefficient use of resources and a lack of motivation for employees.
- Inequality - Organizational systems can be seen as oppressive and create inequalities. This can lead to a lack of diversity and inclusion, which can have a negative effect on performance and morale.
Organizational systems are also described in many other management concepts, theories and practices. These include:
- The Contingency Theory, which states that the best organizational structure depends on the context, environment, and other variables. It is based on the idea that there is no one-size-fits-all approach to organizational design and instead focuses on finding the best structure for a particular situation.
- The Resource-Based View, which is a strategic management concept that suggests that a company’s resources can provide a competitive advantage. It emphasizes the need to identify and develop the resources that will enable a company to outperform its competitors.
- The Open Systems Theory, which states that organizations should be open and responsive to the external environment in order to remain competitive. This theory highlights the need for organizations to keep up with changes in their environment and to strategically respond to them.
- The Organizational Ecology Theory, which suggests that organizations exist in a competitive environment and must adapt to survive. This theory emphasizes the need for organizations to be agile and responsive to changes in their environment in order to remain competitive.
In summary, there are many different management concepts, theories and practices that describe organizational systems. These include the Contingency Theory, the Resource-Based View, the Open Systems Theory, and the Organizational Ecology Theory, each of which emphasize different aspects of organizational systems and how they can be used to gain a competitive advantage.
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Author: Maria Drzazga