Dimensions of Organization Design

OrganizationsOpens in new window shape our lives, and well-informed managers can shape organization. The first step to understand organizations is by examining the features that describe specific organizational design traits.

These features describe organizations in much the same way that personality and physical traits describe people.

Figure X-3 illustrates two types of interacting features of organizations: structural dimensions and contingency factors.

contingent factors of organizational design Figure X-3. Credit — Slideplayer Opens in new window
  1. Structural dimensions provide labels to describe the internal characteristics of an organization. They create a basis for measuring and comparing organizations.
  2. Contingency factors encompass larger elements that influence structural dimensions, including the organization’s size, technology, environment, culture, and goals.

Contingency factors describe the organizational setting that influences and shapes the structural dimensions. Contingency factors can be confusing because they represent both the organization and the environment.

These factors can be envisioned as a set of overlapping elements that shape an organization’s structureOpens in new window and work processes, as illustrated in Figure X-3.

To understand and evaluate organizations, one must examine both structural dimensions and contingency factors. These factors of organization design interact with one another and can be adjusted to accomplish the purposes listed earlier in Figure X-2Opens in new window.

Structural Dimensions

Key structural dimensions of organizations include the following:

  1. formalization,
  2. specialization,
  3. hierarchy of authority,
  4. complexity, and
  5. concentration.
  1. Formalization

Formalization pertains to the amount of written documentation in the organization. Documentation includes procedures, job descriptions, regulations, and policy manuals.

These written documents describe behavior and activities. Formalization is often measured by simply counting the number of pages of documentation within the organization.

Large universities, for example, tend to be high on formalization because they have several volumes of written rules for such things as registration, dropping and adding classes, student associations, dormitory governance, and financial assistance. A small, family-owned business, in contrast, may have almost no written rules and would be considered informal.

  1. Specialization

Specialization (sometimes referred to as the division of labor) is the degree to which organizational tasks are subdivided into separate jobs.

  • If specialization is extensive, each employee performs only a narrow range of tasks.
  • If specialization is low, employees perform a wide range of tasks in their jobs.
  1. Hierarchy of Authority

Hierarchy of authority describes who reports to whom and the span of control for each manager.

The hierarchy is depicted by the vertical lines on an organization chart, as illustrated in Figure X-4. The hierarchy is related to span of control (the number of employees reporting to a supervisor).

A sample of organization chart Figure X4 | A Sample of Organization Chart

When spans of control are narrow, the hierarchy tends to be tall. When spans of control are wide, the hierarchy of authority will be shorter.

  1. Complexity

Complexity refers to the number of distinct departmental units or activities within the organizations. For example, GEOpens in new window was incredibly complex.

Complexity can be measured along three dimensions: vertical, horizontal, and spatial.

  1. Centralization

Centralization refers to a setup in which the decision-making powers are concentrated in a few leaders at the top of the organizational structure.

Centralization is characterized by the degree of delegation of decision making authority. Whereas low degrees of centralization means that employees have high discretion over decisions; high degrees of centralization means that employees have little discretion over decisions.

A high degree of centralization means that there are few decisions makers in the organization.

For reason of space, we will discuss the contingent factors of organizationsOpens in new window in the next postOpens in new window.

    Research data for this work have been adapted from the manual:
  1. Managerial Accounting: Tools for Business Decision Making By Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso