Template:SFR:Today's Featured Article3/2012
The context of organisational design
Generally speaking, there are a number of factors which influence how an organisation is structured. Research suggests there are four main contingencies influencing the structure of an organisation. These are:
- the size of the organisation
- the technology utilised by the organisation
- the strategy of the organisation
- the environmental context within which an organisation operates
The link between strategy (the long-term goals and objectives of an organisation) and structure was first documented by the business historian Alfred Chandler Jr (1962). In a study of around a hundred US firms he concluded that continued organisational growth led to vertical integration (for example, firms buying previously separate suppliers) and to diversification of the product range. Chandler argued that the logical structure for such an organisation was the divisional structure (see following sections).
In general a large organization can be split into divisions in accordance with the products or services. Divisional managers are responsible for all operations (production, sales and so on) relating to their product. In general, a divisional structure will lead to decentralization of the decision-making process and divisional managers may have the freedom to set selling prices, chose suppliers, make product mix and output decisions and so on.
Companies who organize as divisions can do so along: Geographical regions Product lines
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