Factors Influencing Organisational Structure

Factors Influencing Organisational Structure

Designing an organizational structure requires proper attention and supervision. An inappropriate organizational structure may negatively affect the organization’s performance. Many factors influence the formation of an organization. Some of the important factors.

Let us discuss factors influencing organisational structure in detail.

• Environment
• Organizational size
• Organization’s strategy
• Technology

Environment

It is an aggregate of all the factors, conditions, events, and influences that surround and affect the activities of an organization. The organization should analyze the environment in which it operates while designing its structure. This helps an organization to collect information on the latest trends and changes in the market and develop its configuration accordingly.

The environment of an organization is divided into the internal and external environments. The internal environment includes all the factors within an organization’s control. It may be called the strengths and weaknesses of an organization. The external environment includes all the elements that are beyond the control of an organization. The external environment may either generate opportunities or pose threats to an organization.

The four environmental influences are discussed as follows:

• Strengths: These are the internal attributes of an organization that helps it to achieve its goals and objectives. Sound finances, low cost, flexibility, effective marketing, efficient administration, good relationships with suppliers, etc. are an organization’s strengths.
  
  
• Weaknesses: An inherent inadequacy brings strategic disadvantages to an organization. Insufficient funds, late response to customer requirements, limited product range, inefficient production, etc. are the weaknesses of an organization.
  
  
• Opportunities: These are external conditions that are favorable for an organization and may strengthen the position of the organization. Declining performance of competitors, access to potential customers, leverage in political and legal standards, and development of new distribution channels are examples of opportunities.
  
  
• Threats: These are the conditions that can cause trouble for organizations. For instance, a rise in raw material prices, a high attrition rate, improved competitive products, etc.

Organizational size

It is defined by the number of employees and an organization’s businesses. The size of the organization primarily influences the organizational structure. For example, the line organizational structure is preferred in a small organization comprising about 50 people. On the other hand, large-scale organizations generally prefer the matrix organizational structure.

Organization’s strategy

The strategy of the organization should be well-fitted with the organization’s structure. For example, if the process of an organization is to maximize overall productivity, all the departments are required to meet the desired level of productivity. In such a case, the functional organizational structure is followed which divides an organization into different departments such as marketing, finance, and operations.

Technology

The advent of advanced technologies has automated the different processes of organizations. This has created less need for human resources. For example, ATMs provide banking facilities such as money deposits and withdrawals to people without visiting banks. This has changed the organizational structures of banks.