Design of organizational structures of industrial companies
Types of organizational structures and their changes
Types of organizational structures for enterprise management
Companies need a well-organized distribution plan to operate successfully. Employees must clearly understand their roles and responsibilities. A company, like a machine, requires proper distribution of tasks to effectively achieve goals.
An organizational plan describes how a team works: who does what tasks, who is responsible for what, and how decisions are made. Different organizations work differently. For example, military-industrial complex enterprises prefer centralization with clear instructions, while startups often choose the flexibility of decentralization. The size of the company does not affect the structure. As in the example of Johnson & Johnson, where each division has its own authority, but operates within the framework of an overall structure.
Diagrams and charts are used to understand the functions and relationships within a company. They help to visualize the organization and understand how to achieve strategic goals. In business, just as good product and marketing are important, proper organizational structure is critical. This helps to hire the best employees and clearly assign roles. Basically, structures are bureaucratic or adaptive (Fig. 1). Bureaucracies are characterized by strict rules with little room for innovation. For example, such companies value following instructions rather than innovation. Adaptive structures, by contrast, offer flexibility, responding quickly to market changes and focusing on innovation rather than regulation.
When organizing management, companies consider different options, each with its own pros and cons. Consider a hierarchical model known as a vertical management system, with managers at the top and subordinate employees at the bottom. It resembles a pyramid with a clear distribution of responsibilities. This type of system is more common in large organizations such as the military and government, where each role is clearly defined. It helps establish order and understanding of career development. But this model has weaknesses. Hierarchies can slow down decision making due to bureaucracy and negatively impact the overall interests of the company. In addition, a hierarchical structure can reduce the motivation of lower-level employees to contribute to the company outside of their position.
In the functional organizational structure, companies are divided into specializations. Each group is focused on its work and reports to its manager, who, in turn, reports to senior management.
This approach has its advantages:
Departments become deep experts in their field;
Tasks and responsibilities are clearly distributed among employees.
But there are also disadvantages:
Poor interaction between departments;
Departments may be too busy with themselves, which interferes with the rest of the company;
Bureaucracy can slow down decision making.
The line-functional model combines the management of line managers with the expert support of functional specialists in specialized issues.
Advantages:
Careful and detailed development of solutions;
Line managers relieve themselves of the planning burden;
Clearly established hierarchy.
Flaws:
Narrow focus of departments on personal goals;
Lack of horizontal communication between departments;
A confusing communication network that hinders efficiency.
Large companies often organize their work into departments, each of which operates like a small company with its own tasks and resources. The main advantage of such an organization is that departments can quickly adapt to innovations and individual problems do not affect the entire company. These departments are also capable of trying new things to differentiate themselves in the market. But there are also difficulties. Departments may not communicate well with each other. Each of them pays taxes separately, which can increase the company’s overall tax burden. In addition, such an arrangement can create competition between departments, making it difficult to work together against external competitors.
The matrix structure of the organization allows employees to simultaneously belong to their own department and work for different managers on numerous projects. Example: Engineers in one department may receive assignments from the chief engineer, but also follow instructions from different managers on other projects. The advantages of a matrix structure include the rapid formation of teams and the enrichment of employee experience through their participation in various tasks. Disadvantages of such a system include the frequent need to change work organization and the risk of conflict due to reporting to multiple managers.
In a project-oriented structure, work is organized around individual projects with centralized control in the hands of project managers. This approach speeds up communication and decision-making, increases engagement through a sense of urgency, and teaches employees to be flexible. But it also comes with the stress of tight deadlines and an increased risk of excessive concentration of power, which limits career advancement once projects are completed.
When choosing an organizational structure, it is important to consider various aspects, such as the level of employee autonomy and the need for innovation. The structure can always be changed according to the changing needs of the business (Sodatkadamova, 2021).
Types of Organizational Change
In organizations, change occurs either slowly and imperceptibly, like the growth of a “child” over time, or quickly and fundamentally, like a “revolution.” For example:
Gradual, evolutionary changes may be almost invisible day after day, but they accumulate significant results over time and have potential.
On the other hand, revolutionary changes are felt immediately, as with a merger of companies or a change in leadership.
It is also important to distinguish between discontinuous and continuous changes. Intermittent ones are associated with unexpected events, such as hardware changes, while continuous ones occur daily, such as regular software updates.
Episodic changes happen from time to time and are remembered for a long time, for example, a major marketing campaign. However, a constant policy of change includes small improvements that add up to a big result.
There are also transformational changes, which can be compared to a major renovation, while transactional changes occur regularly, like cleaning and replacing light bulbs.
Strategic initiatives describe plans for the future, such as a five-year development strategy, while operational actions concern the day-to-day routine.
Finally, system-wide changes affect the entire company, while local changes affect only specific projects or departments.
All these change methods are used in various combinations in companies to achieve goals.
R. Pascale and his colleagues in 2000 put forward the idea that companies must respond flexibly to change in order to remain successful. They pointed out the problems of rigidly following outdated rules and proposed using principles similar to the functioning of living systems to improve processes in companies (Pascale, 1999).
The authors distinguish between two types of change in organizations: revolutionary, such as major technological breakthroughs or innovations from competitors, and evolutionary, aimed at improving products and services. They recommend responding to disruptive change quickly and company-wide, whereas evolutionary change can occur gradually (Burke, 2023).
Factors influencing changes in organizational management structure
Many articles explore how businesses adapt their management to changing conditions, how the external environment influences managers’ decisions, and how companies, guided by the theories of A. Chandler and E. V. Lylova, modify the organizational structure in response to these changes (Polevaya, 2020) .
The study examines the influence of internal and external factors on companies’ strategic development and applies scientific methods to test hypotheses about the relationship between company adaptation and its goals.
The importance of quick and effective adaptation to market changes is emphasized through the concept of “management structure” – a mechanism for coordinating the work of the company, and “business environment” – external environmental factors affecting business. The article emphasizes that success in strategic planning helps companies remain competitive in the face of change.
A. Chandler and E. V. Lykova recommend that companies adopt flexible management as a key strategy for successful operation in the face of constant market changes (Polevaya, 2020).
Companies are often faced with the need to change the way they operate to meet new market conditions or regulations. This statement is confirmed by researcher L. E. Komaeva, stating the importance of timely adaptation for the successful functioning of the company (Fig. 2) (Polevaya, 2020).
The key to success in a constantly changing business is the company’s ability to change its internal structure in response to external factors. Thus, managers must be flexible in their management approaches to maintain competitiveness.
Adaptation processes can be measured using mathematical tools such as correlation matrices and regression models. They allow you to analyze the influence of the external and internal environment on the management structure. Using these methods, it is possible to identify the main directions for adaptation and optimize the management process in accordance with the company’s development strategy (Polevaya, 2020).
