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Organizational design theory is a framework that outlines how a company structures itself for completing normal activities. Many types of organizational designs are available, with each one offering specific advantages and disadvantages. In some cases, there is no set meeting in a company where it decides on organizational design theory. Under these circumstances, the organization simply evolves into a model of efficiency or inefficiency, with no general direction given on activities. Those companies who lack specific organizational structure or knowledge on this topic may seek outside help for completing this administrative duty.
The type of goods a company produces and sells in the market or the business industry in which it operates can dictate its organizational design theory. Again, the structure here is not unique to the company; it simply replicates its organization after a previously successful business model. A drawback to this theory is that individuals who work in a company may not be suited to the type of organizational design that is common in the industry. When this occurs, the company and its employees have to change behavior or adjust to this specific structure. It can be difficult to change or alter a company’s structure once it is established and in place.
Two overarching theories in organizational design are tall and flat structures. These two names simply describe the amount of management layers within a company, with tall structures having more layers than flat structures. While neither of these structures is bad in principle, they each offer distinct disadvantages to operations. For example, organizational design theory states that a tall structure works well when increased management is necessary to control all employee activities. If a company desires more freedom and creativity in its operations, a flat structure with fewer management layers can be the best option, so long as execution works properly.
Other important elements in organizational design theory include span of control, authority given to each individual, and the accountability placed at each position. Span of control dictates how many employees a single manager or supervisor can direct effectively without losing control. The authority given to each individual or position is also important as too much authority given at the wrong level can restrict a company’s activities. Accountability represents the checks and balances a company places on all management positions. Not using all these elements effectively can result in poor business operations and a lack of focus in an organization.