Critique on Organizational Structure


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The business managers in the modern days are keen to analyze and put into consideration the factors influencing the performance of their firms. Organizational design and structure are considered to be immensely valuable in this respect. The two aspects affect the stakeholder and their ability to execute their roles and responsibilities. The organizational structure adopted by an organization defines the formal division of jobs and the grouping and provides the description on how they are coordinated. According to Robbins and Judge (2014), a firm can design its organization’s structure based on work specialization, departmentalization, a chain of command, a span of control, centralization, and decentralization, as well as formalization.

Managers make use of both mechanistic and organic designs. The mechanistic design focuses on extensive departmentalization, significant formalization, limited information sharing, and centralization. On the other hand, low formalization, flat hierarchy, cross-functional teams, great information sharing, and decentralization typify organic design. A mechanistic design is good in keeping the costs of standardized products or services down. However, the design is objected at times because it inhibits innovation and creativity among the stakeholders involved. The organic design facilitates innovation, employees’ development, and quick in decision-making, but it is prone to errors due to limited in control measures. Therefore, the organizational structure adopted by an organization can influence the behavior of the stakeholders and the overall performance of the organization (Murray et al., 2006). In boosting the understanding of the role played by the structures, real life examples from existing organizations can be of great importance. The companies considered in this module include Quicken Loans, P&G, and Allstate Insurance.

Analysis Based on Three Organizations

Quicken Loans

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Quicken Loans uses the Job Characteristic Model in its organizational design. The model, in this case, constitute of dimensions such as Skills Variety, Task Identity, Task Significant, Autonomy, and Feedback. The workforce at the sales department is not autonomous; feedback can be easily determined because the sold houses can easily be determined, which make them not largely meaningful. However, the most important concepts include skill variety, task identity, and task significance. The sales department of the organization is critical for its profitability. The department plays a role in signing contracts and making agreements on payment. The reluctance of the employees in the department can lead to poor sales and low-profit levels (Quicken Loans Pressroom, 2014). The components used in the organizational design and, in particular, the sales department, encourage the workforce to spend time together and help each other to perform their tasks as expected. The experienced managers and salespersons undertake the role of supporting newcomers. The experience in such a working environment enhances job satisfaction, which is a key determinant of overall business profitability. Through the adoption of the organizational design and structure, the company reported above eighty-billion in revenue, in 2013 (Quicken Loans Pressroom, 2014).

Allstate Insurance

Allstate Insurance is a property and casualty insurer in Canada. The company developed a new comprehensive organizational design with the inclusion of Information Technology and Claim functions (Capelle, 2013). In the early 2000s, the industry was in the growth phase; hence, Allstate Insurance had to realign its strategies to optimize its profitability in the competitive world. The new organizational design and structure were developed with the aligning positions, aligning accountabilities and authorities, as well as aligning people to positions. The positions were aligned to facilitate the appropriate manager-direct reporting in addition to the creation of a new position, and the elimination of the redundant positions. The definition of the areas posed the opportunity of matching the positions held by employees and managers with the accountabilities and authorities (Capelle, 2013). With such an arrangement, a person holding either of the positions becomes aware of the expectations. Lastly, the rallying of people to the position was involved to ensure that the right persons take up the tasks they would perform effectively. The definition of the position and the alignment of accountability and responsibilities would provide an idea of the required capabilities, skills, and behaviors.

The organizational redesign, in this case, led to a modified structure upon which business planning and review improved significantly. The appropriate individual deliverables, clear corporate goals and better allocation of resources were some of the primary outcomes of the changed organizational design. The recognition of individualized contribution became formal, and feedback system significantly improved. The radical shift in the organizational design resulted in improved financial performance. By the end of 2007, the growth in revenue and profitability was relatively high and above the industrial performance (Capelle, 2013). Notably, due to the clear roles and responsibilities, the reporting to the appropriate managers, the timely individualized feedback, the employees’ motivation, and satisfaction to their work improved considerably.

Procter & Gamble

Procter & Gamble is an American company that produces and sells a variety of products across the world. In 1999, Jager became the CEO at the time when the restructuring process, which started in September 1998, was ongoing. The marketing practices and operations of the company required a massive change to revamp the performance of the enterprise (IBS Center for Management Research, 2003). Until the proposed amendments, P&G had all along used geographical, organizational structure, which had to change to product-based business units. As a result, the new company units defining the organizational structure include Baby, Feminine & Family Care, Fabric & Home Care, Food & Beverages, and Health Care. Each of the business units became a global business unit upon which manufacturing operations, sourced, as well as research and development, were managed and undertaken. Product development, supply chain management, and the marketing are the key functions that improved significantly with the new organizational design. Therefore, after the incorporation of the new design, the stakeholders were to operate with the particular business unit, making it possible for specialization (IBS Center for Management Research, 2003). It was easy to match the people to the business units where their skills and expertise would be required. As a result, the level of employees’ motivation and satisfaction improved, which translated to improved overall performance.

Recommendation and Conclusion

As is evident from the analysis and in particular, from the three case studies, it is clear that organizational design and structure influences the behavior of the stakeholder and the overall performance. The organizational design should be flexible to the dynamic in the operating environment to keep the operations relevant. The ability to change the structure enables managers to align their strategies with the right working environment. However, the design adopted should be in line with the nature of the business. In addition, the structure that motivates employees and enhances efficiency is appropriate to the business concerned. From the discussion, particularly in the case study, it is clear that there is no organizational structure, which can be suitable for all the organizations. Quicken Loans, P&G, and Allstate Insurance use different organizational design, but report favorable results altogether. In addition, the change from one organizational design to the other is a clear demonstration that the changes in business strategies and the operating environment are critical in defining the appropriate structure to adopt.

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