Understanding Organizational Systems,

Structure and Design

INTRODUCTION

In simple terms organization is made of group of people with some specific

goals and objectives. It is defined as relations among components of a system.
Organization structure denotes the components and relations that bind people
working with the organization.
Three pillars of organization are the people, the organization itself (considering it
as a separate entity) and the technology.
People issues encompass education, training and attitudes. Organization issues
cover strategy, policy, culture and bureaucracy. Technology issues are hardware,
software, telecommunications and information systems.
Three different levels of organization structure are strategic, tactical and
operational.
Strategic level represents decision making level, i.e., the corporate or the top level
of an organization.
Tactical or business level is the middle management level, where strategic
decisions are transformed into tactics to achieve the strategic intents.
Operational level represents the actual implementation level, where first level
employees and workers, execute the tactics, adopting the actions plans.

ORGANIZATION STRUCTURE

Organization structure helps us to determine the authority

relationships among the members of organization, and hence it
influences the behaviour of individuals, groups and divisions within
the organizations.
Among others, structure of an organization affects the division of
tasks, communication systems, decision making patterns and finally
the way how people relate to each other.
Global competition now requires many organizations to re-define
their structure and even to relocate, taking advantage of state of art
technology and communication support.

What is an organization?
Organization is essentially a formal structure of people, which is set
up to achieve some defined goals. Commonly we use following
terms to define any organization.

Organization is a group of people who are organized to achieve a common

purpose.
It is an entity, a unit or a establishment, which utilises resources to achieve
some common purpose.
It shows a structure of relationship in an enterprise
It is a process, which facilitates to relate tasks and facilities of people
working in an enterprise, to achieve intended goals.

According to Arthur Young to create an organization, we group the

activities, establish authority and responsibility, and describe the
working relationships

Organization, Organizing and Organization Structure

The term organization is used to refer a social group, which is
deliberately created and maintained to achieve some intended goals.
More specifically it is defined as a formal social group. Also the
term organization is referred as a process of determining activities
that are required to achieve intended goals, creating various roles
and ensuring effective operation of the total system.
Organizing is a management process of identifying; classifying,
grouping and assigning various activities with adequately defined
authority relationships to achieve intended goals.
Organization structure is the outcome of organizing process. It is
a framework of decision-making authority, i.e., a system of
relationships, which govern the activities of the people working in
the organization to achieve some intended goals.

Systems view of Organization

Organizations are viewed from systems perspectives, as systems
is a collection of parts (or sub-systems), which is integrated to
accomplish the goals and objectives of the organization.
Systems have inputs, processes, outputs and outcomes, with
ongoing feedback among these various parts. If one part of the
system is removed, the nature of the system is changed.
Organization is viewed as a system, as organization is a unitary
whole. It consists of arrangement of activities to achieve its
objectives.
Systems theory also provides new perspective for managers to
interpret patterns and events in their organizations.

Attributes of a System
The system is goal oriented.
The whole is more than the sum of all parts in a
system.
A system is engaged in processing or
transformation of inputs into output.
Various components of a system are interrelated
and interdependent.
They interact with each other.
A system acts upon its environment and is also
acted upon by the environment.

Why Organization is a System?

Organization is a system as it draws input from the environment also and with
other resource inputs like; men, materials, machines and knowledge; processes
those and then get the output, i.e., the end product or services. Finally with
feedback in its loop, it again tries to adjust with the environmental requirements.

Why Systems Approach for Organization?

It emphasizes on the dynamic character of business, considering it as a living
organism.
It focuses on the inter-relationship between business and the environment.
It stresses on the changing environment and accordingly adjusts through
managing the change.
It provides information inputs for decision making and managerial control.
It guides formulation of business objectives, which are sustainable, keeping
pace with the environment.
It subsumes organization as a whole, considering each unit or department of
an organization as part of the sub-system, which is inter-related and interdependent.
Finally it frames an integrated structure, incorporating each sub-system as part
of the total system.

Components of Organizational Structure

According to Mintzberg (1981), organizational structure is the sum total of the
ways in which it divides its labour into distinct tasks and then achieves
coordination among them.
As Mintzberg believed organization structure is a configuration systems and
relationships, he suggested six components, as illustrated in the figure below:

people in the operating core part of the organization are involved in the production of goods
and services.
The strategic apex part of the organizations is involved with controlling.
The middle line managers aligns strategic apex with the operating core.
People at the techno-structure core, designs, plan, change or train the operating core. The
support staff provides support to the organization, which is outside of the operating core.
Finally ideology is the traditions and beliefs that make one organization distinctly different

Types of Organizational Structure

Organization structure can be classified into five different types:

Machine bureaucracy (standardized structure), Professional bureaucracy

Adhocracy or innovative forms
Simple or entrepreneurial forms
Divisional forms

Each structural form indicates different pattern of behaviour of the organization.

Organizational structure that conforms to machine bureaucracy emphasizes on:

Standardization of work
Centralized decision-making
Limitations of behaviour and procedures for members
Polarization of status (maintaining hierarchies)
Enforce internal and external control on stakeholders

Characteristically such organizations are secretive, narrow-minded, prevent

internal and external cooperation, and rigorously practice insularity (preventing
employees of one department to enter into another). Such organizations promote
competition, and not collaboration among employees.
Very large organizations like; GM and Ford, Tata Steel, Tata Motors, Hindustan
Motors, etc. are examples of machine bureaucracies.

Organizations that subscribe to the professional bureaucracy discard

formalizations. Professional people manage such organizations and hence
employees enjoy functional control and less control. Such organizations believe
in employees empowerment and total employee involvement (TEI) and even
they build employees capability to cope with the external eventualities. Free
and open culture promote learning environment, hence such organizations can
also practice knowledge management, competency development, and truly
transform people as good performers.
Organizations with innovative or adhocracy structure emphasize on
developing their distinctive cultural identity. They decentralize their decision
making, process, and promote open communication, discussion, negotiation and
interaction among people and divisions. They are more prone to alliance
building behaviour.
The entrepreneurial form or organization structure is simple, as a single
person (usually the entrepreneur himself/herself) directs the activities of the
firm.
The fifth and final type organizational structure is the divisional form. Such
form or organizational structure focuses on autonomous divisions, which,
however, may not always imply decentralization of decision-making. Often this
form of organization structure sparks intra-unit fighting.

Syndromes of Adhocracy Structure

More organic structure.
Less formalization of behaviour.
Specialization based formal training.
Encouragement of mutual adjustment.
Low standardization of procedures.
Roles are not clearly defined.
Selective decentralization
Work organization rests on specialized team; hence they
become the power-centre.
Horizontal job specialization
High cost of communication
Culture based on democratic and non-bureaucratic work
Cross-departmental task forces.

Organizational Effectiveness
Effectiveness is the extent of an activity that helps in achieving the long-term goals.
Since we measure effectiveness for specific activity, we can define activity specific
effectiveness is the outcome that support the broader goals of an organization.
To measure the effectiveness, we can use both the qualitative and quantitative tools.
Behavioural parameters like; values, attitudes, skills and behaviour are measured using
qualitative tools.
Value and volume of output changes, customer satisfaction, changes in the
profitability, etc. are measured using quantitative tools.
Organizational effectiveness is the extent to which the organization, as a whole,
achieves its goals optimizing its resources. It depends on the degree of interpersonal
skills, positive attitudes, technical competencies, small group activities, etc., which
together contributes to the achievement of organizational goals and objectives.
Organizational effectiveness refers to the corporate management systems that
produce development results of an organization. Among others, an effective
organizational structure helps in achieving organizational effectiveness.

Systems Theory Principles

Systems theory identifies certain commonalities in systems. Such commonalities are
developed based on certain well accepted principles of systems for organizations.
Behaviour of systems depends on the structure of the organization.
Organizational structure determines the various behaviours, and behaviour
determines various events in organizations.
Breaking organizational systems only by responding to the events become more an
effort like addressing to organizational problems, as and when they arise. Such
organizations, characteristically, adopt incremental strategies (short-term) to fix
some events.
Based on the above discussions, we can list the systems principles as under:
Organizational systems follow pattern of events in a cycle.
Each pattern of event indicates some specific phases, and at each phase, behaviour of the
organization changes
Systems interpret patterns and events in their organizations
Systems seek balance with the organizational environments
When systems do not interact with their environment, it becomes limited.
A circular relationship exists between the overall system and its parts.

Open Systems approach in organization

In todays changing world, open system approach to organization is
considered more relevant.
Open systems approach attributes are; energy, throughput, output, cycles of
events, negative entrophy, information input, steady or dynamic homeostasis,
differentiation, integration and co-ordination, and equifinal
Cycle of Events is a process in open systems organization, by which it
receives inputs from the environment and then transforms them and generate
output.
Negative Entrophy represents ability of the organization to autonomously
repair itself and then survive and grow by importing resources from its
environment and transforming them to outputs.
Organizations through steady or dynamic homeostasis maintain
equilibrium over a period of time.
Through differentiation, organizations develop structures and develop
specialized functions.
Equifinality principle of the open systems organization achieves their
objectives through several different courses of action.
Contd2/-

Systems engineering approach encompasses technological, organizational and

societal systems. It follows four different stages like; systems analysis, systems
design, implementation and operation.
At systems analysis stage, organization defines the systems, identify different
sub-systems and establish their inter-relationships.
At systems design stage, organization builds the systems model, optimizing
the resources.
At the implementation stage, final design is built, keeping in view various
eventualities, which could cope with uncertainties.
Finally at the operation stage supports are provided to continue with the
designed systems documenting the activities involved, user manuals, training
etc.
Thus both Systems Analysis and Systems Engineering provide a general way
of thinking about practical situations requiring the creation of a system that
achieves some pre-defined purpose.

Viable Systems Model, Organizational Cybernetics and Organizational Systems

Viable System Model (VSM) postulated by S. Beer (1979) VSM is an important instrument in the
operationalization of the organizational cybernetics approach.
According to Beer cybernetics is the science of effective organization. A system is said to be
viable when it is able to adapt effectively to environmental changes, even though such changes are
unforeseen.
VSM thus consists of operation (O) with embedded management (M) and environment (E). It is used
in organization to diagnose different elements, in designing information systems, designing
management structure, etc. Even in designing organizational vision, mission and structure it is used.
Therefore, VSM also helps in systematic thinking in organizations.
Thus VSM as an organizational framework of various functions and relationships, creates the
conditions, making use of which, organisations can diagnose the major dysfunctions, and develop
necessary intervention strategies.
Based on his study of organic systems, Beer observed organizational systems can sustain
independent existence despite the operations of Law of Requisite Variety.
The law describes how complexity could operate to overpower a system of management. In
cybernetics, the word variety denotes complexity, which is infinite. Management instead of dealing
with the environmental complexity should create the appropriate operating process, which can interact
with the environment, and sustain its independent existence.

Operations of the Law of Requisite Variety,

according to Beer exhibit following properties,
Maintenance of identity (every organization must have a purpose and
accordingly should organise its means to achieve the same).
Ability to self repair (organisation should be capable enough to selfrepair to sustain existence).
Self awareness (organization must aware of themselves on what they
comprise).
Self organising (organizational structure should be environment and
context specific).
Self balancing (homeostasis).
Open systems (adaptive to extract information from their environment)

5
Identity

Total Environment

The
Future?

4
Intelligence

Meta
System

3
Control

Audit
Coordination

3*

Env
A

1
Op A

Env
B

1
Op B

Viable System

Operating
System

Viable systemcontd.
As per the model, System 5 represents the identity, i.e., the total system
purpose and the measures of success. System 5 passes down to System
3, i.e., the policies and authority, which govern the overall system
outcomes. System 5 balances the present and the future, external and
internal perspectives, moderating its relationship between systems 3 and
system 4. Change in System 3, influence System 1 (operational systems,
i.e., A and management function, i.e., B). System 3 and each of System 1
(A and B) through interactions establish agreements, i.e., managed by
System 2. System 4 examines the external environment and gains the
intelligence about the totality and the future.
Therefore, in VSM, any of the six systems operate with a cybernetic
intervention at any point in time, and in the process ensure that the
organisation become a self-controlling system.

Orchestra Organization
The term orchestra organization is used in open system perspective, as like an open
system organization, an orchestra organization is a complex set of interdependent subsystems.
An open system organization takes input from the environment, processes those, and
produces output.
Efficient interactions with the environment and various subsystems, in an open
system, determine the success of an organization.
When the organization is efficient, it not only considers relationships and reciprocal
influences between the organization and its environment, it even considers extending
its sphere beyond the formal boundary, through an efficient boundary spanning sub
systems.
Boundary spanning subsystems play the buffering role to account for external
organizational uncertainty.
Processes or throughput, in a typical orchestra organization are specialized functions,
which are distinct and interdependent. Even the coordinating function is considered as
throughput, as it helps in the goal of achieving the output. The job of coordinating in
orchestra organization could be both formal and informal.
Depending on its structure and the use of physical space, an orchestra organization
may emphasize more on informal coordination. It, however, depends how they organize
their human resources.

Chaos Theory
Chaos theory studies the complexity of world to identify principles to understand the
organizations.
The theory of chaos deals with the structure of turbulence, i.e., study of unpredictable
complex systems. Edward Lorenz of MIT (quoted in Hilborn, 2004), a meteorologist,
simulating the weather pattern given a visual presentation to explain the theory of chaos
as under:

The picture resemble to a butterfly, hence it is also known as the `Butterfly effect.
"The Butterfly Effect" refers to the discovery that in a chaotic system, it is theoretically
possible that slight change would make no difference whatsoever, but when the system
is unpredictable at a certain stage, the future may unfold quite differently, depending
upon what little difference occurred.
The application of chaos theory to management depicts organizations as complex and
unpredictable because of the relations among constituents of a system.

Characteristics of a chaotic system are as follows:

It is sensitive to initial conditions: A complex system reacts to different variables
at the outset in unpredictable ways. Even starting with the same, exact or slightly
different variables in a model will not result in the same outcomes, if the system is
complex.
Same context may not hold good again and again: In a complex system, there
is never the same context twice. Hence in organizations, a team with essentially
identical personnel and similar characteristics will never perform exactly the same,
which means that a system is never exactly the same. In organization, a strategy or
decision will never be made twice even with the same context.
Set of values and strange attractors:: In chaos theory same set of values
migrates over a time in a given system. It means attractors (set of values) in chaos
theory act as the influence of gravity. Attractors can be a single fixed point, a
collection of points, a complex orbit, or an infinite number of points. In
organization, attractors, i.e., the set of values, cause the behaviour, which alter over
time, depending upon the social, economical, or other forces that drive the system
at a given point of time and how they interact.
Contd..2/-

Chaos is fractal: Literally fractal means a curve or surface that is independent of

scale. Any segment, if magnified in scale, appears identical to the whole curve. In
the management analogy, it is assumed that different levels of organization
resemble others, like a fractal in the managerial hierarchy. A form of social
structures can be examined in relation to characteristics of the whole system at the
macro and micro levels.
Theory of bifurcation: Bifurcation is the sudden appearance of qualitatively
different solutions to the equations for a nonlinear system as a parameter is varied.
In an organization, two different patterns (groups) can emerge to address an issue
differently, as complexity increases. This is often recommended as a source of
creativity.
Organizations are complex and adaptive systems that have behaviours similar to those
found in nature--different stages of stability and chaos.
Rather than control in organization, a manager is prompted to take advantage of its
complexity. Theorists in management and social organization now believe that
organizations are also non-linear dynamic systems, having the same characteristics as
natural phenomena.
The organization is often seen as complex adaptive system comprised of the formal and
shadow systems, and in this way the analogy is made between chaos in natural systems
and the social organization.

Stage III: High Performance (Outstanding, sustainable results) Clear statement of

mission that creates sense of esprit de corp.
Well defined values which result in distinctive culture
Respect for people that is a deeply ingrained part of culture
Good communication and information sharing systems
High involvement and empowerment of people
Design (work flow, structure, systems) that supports mission and values
Stage II: Stability (Back to the Basics)
Clarity of goals and direction
Consistency in priorities
Well-defined policies and procedures (technical and personnel)
Agreement on roles and responsibilities
Basic management processes rewarded and practiced (goal-setting, performance
reviews, etc.)
Stage I: Chaos (Fire-Fighting Mentality)
Crisis/short-term focus
Lack of clear direction and goals
Shifting priorities
Unclear policies and procedures
Us vs. them attitude
Blame and lack of ownership
Alienated work force

Socio-Technical Systems Thinking

Pioneered by the Tavistock Institute of London, as per the model the technical sub-system
consists of the devices, tools and techniques, which transform inputs to outputs to enhance the
economic performance of the organization.
The social system consists of employees, their knowledge, skills, attitudes, values and needs.
Integrating technical and social sub-systems, according to this model, organizations develop the
desired structure.
Technical sub-systems, therefore, consist of technology and tasks, and social sub-systems consist
of structure and people.
A schematic representation of the model based on Bostrom, Heinen and Stephen (1977), which
suggest developing management information systems, integrating social and technical subsystems.