Organizational Structures: Traditional vs. Modern Firms

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Seminar Paper
The organizational structure of a traditional and modern firm
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Abstract
In the modern-day business world, there are two types of organisations, namely traditional
and modern organisation. The latter is also called the team-based organisation. Different
researchers have given their own definition of organisational structure. The major differences
between two enterprises lie in their organisational structure. This paper discusses the
organisational structure of the two aforementioned organisations. The organisational structure
has a number of impacts or organisational activities and its modus operandi. The
organisational design decides whether or not an organisation adapts its internal and external
environment. It will discuss the impacts of the organisational structure and its six
dimensions. It has been known that for an organisation to be called bureaucratic, it has to
follow four underlying dimensions. Those dimensions have been discussed here. Comparison
of literature and current practices have been done.
Introduction
This term paper discusses the organisational structure in traditional and modern day’s
organisation. Various major differences in the organisational structure between the customary
and team-based organisation will be discussed. It is highlighted that the former has the
centralised structure of authority and the decentralised structure of authority.
Literature Review
This section will describe the theories that have been used to highlight the effectiveness of
the organisational structure for both traditional and modern day’s firm. Here, the meaning of
the organisational structure has been discussed. In addition to this, dimensions of
organisational structure, effects of organisational structure, Mintzberg’s five structures,
decentralisation or centralisation.
Organisational Structure
Different researchers have given their own definition of organisational structure. According
to Chandler (2013), the organisational structure is defined as some behavioural aspects that
are affected by "pre-existing control and programs” in an enterprise. An organisational
structure is an arrangement that reflects the activities that are carried out and directed to
accomplish organisational goals and objectives (Chandler, 2013). However, Carlson (2013)
gave the simplest definition of organisational structure as a group of people and operations
into various units to enhance and improve coordination, decisions, and communications.
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Understanding the connection between the tasks carried out in the organisation will help in
understanding the complexities of directing an efficient firm.
Dimensions of organisational structure
There have been mentions of various dimensions of the organisational structure. Bryman &
Bell, (2014) introduced the six distinct dimensions of the organisational structure, namely
standardisation, specialisation, formalisation, configuration, traditionalism, and centralisation.
In addition to this, Carlson (2013) argued that for an organisation to be called bureaucratic, it
has to follow four underlying dimensions. The first dimension is “structuring the tasks.” This
means that there are certain formal rules and regulation that controls the employees’ attitude
and behaviour via processes like formalisation, standardisation, and specialisation. The next
dimension is “concentration of authority” that is associated with the top management decision
making. The third is “line control of workflow” that is concerned with the managers’ ability
to control the flow of work. The fourth and last is “support component.” It reflects the extent
of bureaucracy in the organisation based on the size of the administration.
Impact of Organisation Structure on Efficiency
According to Alston & Tippett (2014), the organisational structure has a number of impacts
or organisational activities and its modus operandi. The organisational design decides
whether or not an organisation adapts its internal and external environment. In addition to
this, the competitiveness of the organisation is also associated with organisational structure
(Alston & Tippett, 2014). Internal and external changes, such as market share, customer
demands, taste, technology, etc., affects the organisation structure. Brown & Duguid (2017)
believe that the organisation needs to change its structure based on market strategies and
policies. For instance, a manufacturer needs to change its strategy based on the new product
or services or processes.
There is a large number of researchers who have given their views and findings on the
relationships of the organisational structure and its performance. Carlson (2013) argued that
there is a week relation between organisational structure's dimensions, such as formalisation
and specialisation and performance of the organisation. However, the other dimensions have
a bit stronger relationship. For instance, the degree of centralisation is directly associated
with organisational performance. Argyres (2016) gave a negative relationship between
organisation size and performance. However, other researchers have proposed curvilinear
relationships or no relationships.
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Brown & Duguid (2017) argued that the structure of an organisation defines a well-
established hierarchy for responsibility and helps in creating different levels of
communication. It is important for the organisation while monitoring the employee output to
consider the impact of organisational structure on efficiency. Boehm (2016) mentioned in the
study that efficiency and performance of the management team are directly associated with
the team and organisational structure. If there is any weak link in the management, then its
effects may spread in the whole organisation. On the other hand, good decisions and
intelligent decision-making improve the overall efficiency of the organisation. One
researcher discussed the structural flaws. The study mentioned that organisational structure
might affect the information flow within an organisation and between different levels.
Ineffective channels of communication might delay the important information to reach to the
middle managers and to lower team leaders. This will definitely affect the efficiency. **
pinpoint the weak links between the different levels of organisational structure to be a major
cause of inefficiency and poor performance. It is important for the corporate structure to grow
with the company in order to maintain productivity
Boehm (2016) talked about the impact of organisational structure in measuring the
performance of employees. It is a well-known fact that organisational structure can enhance
or inhibit the organisational performance. However, it depends on the effectiveness of
supervisory relations and workflow. The characteristics of an effective organisational
structure are that they have defined policies, procedures, and organisation. Chang (2018)
gave various structures for the different types of organisations. For instance, an
entrepreneurial organisation can have a flat organisational structure, whereas a bureaucratic
organisation can have policies, standards, and routines. These might have a fairly rigid
vertical structure. In an innovative organisation, the organisational structure varies with the
market demand and the performance measurement in such organisation are very much
informal.
Mintzberg’s five structures
Mintzberg in 1980 gave his arguments and divided the organisational structure into five
distinct configurations. The first and foremost configuration is named as ‘simple structure.’ It
is usually characterised by small-middle level management, a loose division of labour,
informal decision-making along with centralisation of power that assists in rapid response
and actions. The second is called ‘machine bureaucracy.’ It is featured as centralised power
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along with highly formalised and specialised procedures with the clarity of organisational
management. The communication in such structure is mainly formal throughout all the stages
of organisation. The next structure is ‘professional bureaucracy.’ It has highly particular
occupations and insignificant formalization; the structure decentralized both vertically and
evenly take into account a more liberated workplace, however, keeps the institutionalization
prerequisites utilized by an extensive company in a steady and complex environment.
Decentralisation or Centralisation
According to Boehm (2016), the modern organisation has two forms of authority, namely
centralised and decentralised. The centralisation of power can be defined as the concentration
of the power for decision-making in the hand of the top management. On the other hand,
decentralisation of power means the distribution of the authority and the decision-making
powers in the hands of different individual units at different stages of the organisational
structure. The concept of decentralisation is not new in the business world. However, the
choice for going with the decentralisation is optional for the organisation. There are many
advantages of decentralisation. The first is it helps in developing initiative among the team
members by establishing a sense of faith and trust. It helps in making rapid decisions without
wasting any time. The team leaders and managers have the powers to direct on the issues
faced by the employees. This results in faster decision making.
Literature Analysis Summary
From the above discussion, various new concepts of organisational decision-making have
been highlighted. The first and foremost was the definition of organisational structure. The
simplest definition of which was discussed in the literature analysis part. It is discussed that
understanding the connection between the tasks carried out in the organisation will help in
understanding the complexities of directing an efficient firm. In addition to this, the six
dimensions of the organisational impact and their importance have also been talked about. In
addition to this, the literature review suggested that the organisational structure affects the
organisational efficiencies and performance. In addition to this, it has been highlighted that
organisational structure needs to grow with the company. The performance also depends on
communication between the organisational structures. The importance of centralisation and
decentralisation also affect the organisation performance.
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Current Practice Report
If an organisation is reorganising its business methods, then the best way is to form the teams.
It has been that the traditional organisational structure has a leader and various layers of
followers. In a functional organisation, the departments are grouped together. On the other
hand, a divisional organisational structure has a distinct unit for different organisational tasks.
For example, there is a sales team, marketing team, and the training team. Such traditional
organisational structures usually depend on forming formal relationships for reporting and
they work inefficiently if the working environment changes rapidly or without any notice. On
the other hand, the modern day's organisation are characterised as a team-based organisation
that is less structured and can adapt rapidly to the rapidly changing organisation. There is a
much major difference between current and traditional organisational structures. For that
purpose, it is important to understand the modern organisational structure based on which the
comparison between the two eras of organisational structure can be compared.
According to Alston & Tippett (2014), the modern day’s organisations are often characterised
as boundary-less organisations that network and collaborate with one another. In addition to
this, they can accommodate and manage with the rapidly changing environment. The best
example of such a kind of organisation is IT-organisation. The modern organisational
structure emphasises on building relationships with the stakeholders, understanding their
needs, listen to their queries and resolve them as soon as possible, and most importantly
consensus building. Regardless of whether little or expansive, each organization must
consider the manner by which its tasks are planned and organized. To work adequately and
productively, an organization needs a formal arrangement of communication, basic
leadership, and completion of tasks that coordinate the requirements of the firm. A small
organization, for instance, may just need a straightforward hierarchical plan. As an
organization develops and turns out to be increasingly intricate, so the hierarchical structure
develops and changes. All things considered, the hierarchical structure is frequently
considered a ceaseless.
According to Alston & Tippett (2014), the modern organisation structures are based on the
ideas taken from various fields in order to make communication a little more dynamic. In
addition to this, they are more focused on blending individual and solutions proposed. The
new organisational designs are focused on adaptability. They depend hugely on staff
involvement, distribution of authority based on talents and expertise, and they have a bit
lesser number of rules and boundaries. Basically, they are more of an organic structure
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instead of the traditionally rigid structure of old times. Talking about the significance of
modern organisation, Argyres (2016) argues that the current business world is rapidly
changing by virtue of transforming technology and customers' demand. It has been noticed
that there has been a great demand of boundaryless organisation as they are best to deal in the
rapidly changing environment. The modern organisations are based on networking and
collaborating with other organisations dealing in the same field.
According to Sharma (2017), the modern organisations is either project or team-based
organisation and they do not have rigid structure or chain of command or stubborn hierarchy.
Rather, each group works how it sees fit and afterward group pioneers facilitate crosswise
over offices for explicit complex issues. These self-guided groups require another style of
management as it is very difficult to help the self-guided group. In addition to this, the
modern organisation has better control as they are basically based on the decentralisation of
the power at various levels and decision-making in such organisation is quick. Employees are
more responsible as they are more accountable and responsible for their course of actions.
There is no place for any blame game within the organisation. The control is good over the
operations of the company and the employees.
Unlike the traditional organisation, the modern organisation promotes creativity and
initiative-taking attitude of employees. With the free hand and a higher degree of autonomy,
this helps them in taking initiative. Conversely, when middle and lower level executives are
carrying out the task of senior management, then it adds more creativity and quality to the
work as they do work with utmost decency and concentration. In addition to this, the modern
organisation focuses on improving the teamwork by facilitating the share of powers and
freedom of making a decision. This would help the employees to integrate their effort and
establish a sense of teamwork among the workers.
Comparison of Literature and Current Practice
There is so much difference in the organisational types and the organisational structure that
has been discussed in the literature analysis and the one in the above section. The first and
foremost difference can be seen in the authority. The traditional structures give power to
senior management. In addition to this, they lack the management hierarchy. On the other
hand, the team-based organisational structure depends on the decentralisation of powers and
provide them to the lower hierarchy staff. In a traditional organisation, there is one manager
who is responsible for looking after several teams (Iveroth, 2015). Talking about the type of
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organisational structure, the traditional one needs strict control and the overall functional
structure of the traditional organisation depends on management hierarchy. Furthermore, the
additional management is also important to manage the complexities that might affect the
company. On the other hand, the modern organisation does not need such a stringent
hierarchy and the bureaucracy would impart some sort of flexibility.
Other than settling on choices on departmentalization, the management must decide queries
for power, limits, and chain of command. The choices bring about shifting degrees of basic
rigidness or mechanization. It has been noticed that most mechanistic is the utilitarian
organizational design. It is stringently developed, with secured jobs and divisions, much
oversight, numerous principles and a formal hierarchy of command (Sharma, 2017). The
modern organizational structure is free and natural, becoming out of the convergence of
organization needs and the environmental issues a firm faces. Teams might be semi-perpetual
or even only an impermanent measure. Where there is a rigid functional structure, the modern
structure is flexible.
Most importantly the difference lies in the use of technology. Modern organization is more
innovation-based and boundary-less. So the amount of workforce or office size doesn't make
a difference. However, a customary organization is centralized and in reverse to acknowledge
cutting edge innovation (Argyres, 2016). In the current circumstance, consumer demands are
boundless and their consideration turned out to be broadened. So organization ought to be
progressively unique, increasingly virtual and further developed in present-day innovation.
Conclusion
In the following term paper, a discussion has been done on the organisational structure in
traditional and modern day’s organisation. Various major differences in the organisational
structure between the customary and team-based organisation have been discussed. It was
highlighted that the former has the centralised structure of authority and the decentralised
structure of authority.
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