Theories of Organizational Structure

Organizational theory was a product of the industrial revolution to help businesses appropriate their workforce. At the time, workers were not considered as people but skills bundled together. Workers' values and motivations became an important factor around the 1960s as businesses were expanding, and it was necessary for them to have managers function more autonomously. This brought about theories prevalent in today’s business: the open-system, contingency theory and Weick's model of organizing.

Traditional organizational theory was developed at the late 19th century and was taken from a bureaucratic-style structure, where there was one bureaucratic head managing over many bureaucracies. In this theory, the head of the organization is in the central authoritative role and below him are all the various managers he presides over. Managerial duties can be broken down to serve one of the following functions: planning, organizing, staffing and controlling. Unfortunately, this type of organizational structure gives little credit to the human skills and motivations to be productive in the workforce. Employees are not looked upon as people, with the ability to self-govern, nor do they have managerial input. The business direction and strategy are dictated from the top, and the manager’s function is to carry them out.

Traditional organizational structure does not take into account the “human factor,” which is the emotions and motivators that drive people in the workplace, but the open-system theory does. Companies acknowledge the social and cultural motivators that drive individuals to succeed and use them to improve productivity at all managerial levels. In this theory, businesses aren’t closed (working autonomously); they have other forms of labor, divisions, subsidiaries, and facilities. Therefore, it isn’t feasible businesses to be centrally-run; it would need various managers in charge of its different operations, which makes understanding their motivations more important. The open-system theory not only gives managers more power, it gives out-sourced facilities more importance in the business’ operations. Additionally, the open-system embraces the ideology that every company is unique, and a unique system should be put in place to tackle its needs.

System design builds upon the open-systems theory, taking into account that there are many interconnected systems to operate a business effectively. The systems themselves have the most importance in this structure, with the heads of the business focused on keeping the various departments running efficiently. Since the focus is on running the interconnected, yet autonomous, units, there is a lot of importance placed on managerial duties. With a high probability of breakdown, as a result of problems in individual departments, it is important to keep on top of various problems or limitations that might arise in day-to-day interactions. System design is all about synergy, keeping the various autonomous systems working harmoniously to maximize the company’s resources.

The contingency theory takes into account the growth of the business rather than focusing on its resources. It assumes that once a business is experiencing growth in assets, capital and resources, remaining in a static (or unchanging) organizational structure is unproductive. Instead, businesses should continually assess their organizations' needs, and keep resources to meet the new opportunities and threats that come with expansion. In order to maximize performance, a company must constantly assess contingency variables--which could be new opportunities to outsource, expanding the facilities, rearranging the operational systems or upgrading to a more efficient business model.

One of the more sophisticated theories of organizational structure is Weick’s model of organizing. This theory takes into account the high-stressed, fast-paced nature of today’s business and reduces what is referred to as “equivocality.” The term “equivocality” boils down to any lack of productivity due to an employee, on any level, having to check with superiors. In the Weick’s model, there is an information system, which includes frequently and sometimes previously tackled issues. Employees have access to this information and use it to combat any ambivalence or inertia that might hinder making business decisions. The decisiveness gained by using the information system leads to higher productivity. Thus, it strengthens every employee and manager's ability to function more autonomously.