Organizational Design refers to the structure and culture of an
organization, aspects that are key to determining organizational behavior.
For example, is the organizational structure formal or informal,
centralized or decentralized' What is the chain of command and how does it
An organization's structure determines job functions, role
responsibilities, and accountability. As such, the manner in which an
organization is structured determines whether decision making is
centralized or decentralized. In highly centralized organizations, the
chain of command is vertically structured, whereas flatter organizational
structures, on the other hand, emphasize far more on teamwork, and
integrated decision making. Thus, it is evident that organizational
structure determines the authority and power accorded to both job functions
and individuals. Organizational structure and culture also plays a role in
determining the type of power exercised by individuals in positions of
authority. For instance, flatter or boundary less organizations are more
likely to see an exercising of expert or referent power, whereas formal,
centralized organizations use more of a coercive or reward type of power.
Management can departmentalize activities on the basis of functions,
divisions, product, customers or geographies. Activities can also be
departmentalized using a matrix structure, which allows combinations of two
or more forms. Each method of departmentalization has its own advantages
and disadvantages. Thus, the choice of method really depends on the type of
market and business an organization is in. For example, cost efficiencies
and infrastructure requirements often entail geographical
departmentalization by businesses in sectors such as power and aviation.
Service intensive businesses such as management consultancies, on the other
hand, may necessarily need to departmentalize by customer specialization.