The Role of Organizational Structure in Decision-Making and Communication – Allison Osborne
Allison Osborne is a senior pursuing a double major in Business Administration and Accounting. She resides in New Paris, Ohio. Her submission, a term paper which she also presented via PowerPoint, was prepared for Professor Yan Liu’s BUS Z301. Professor Liu described Allison’s work as “exceptionally original and well organized” and notes that it “reflects creative thinking and excellent application of the course knowledge, demonstrating the student’s commitment to the course.”
The Role of Organizational Structure in Decision-Making and Communication
The Problem
The number of people ACM serves is growing exponentially. As a result, ACM has outgrown its current building. Along with outgrowing the building, there have also been communication break downs and slow decision-making that has led to missed opportunities. There are times when people call in with an emergency and need help immediately, but an answer cannot be decided upon quickly. This has led to people not receiving help they desperately need. Besides emergency situations not being handled in a timely manner, the construction of the new building has been slowed down by every decision having to go through all four members for approval. This has resulted in missed deadlines and little progress.
The board has a simple organizational structure, yet there is not one central decision-maker who has authority to make decisions on their own. The board meets together periodically to review, discuss, and vote on presented issues. However, there are some instances when time-sensitive decisions need to be made. In these cases, there is no time for the board to gather and discuss the issue before acting. There are also decisions regarding the new building and construction that need to be made quickly.
Unfortunately, due to a lack of a central figure and low formalization on standard issues, some of these important decisions cannot be made in a manner that is timely for the person facing the time sensitive issues. When a person calls with an emergency need, the communication process involves sending a group email or text and waiting on a response from all members. There are times when members of the board are unable to answer these emails or texts for various reasons. There has even been admission of not checking email due to forgetfulness or busyness.
When communication must pass between four people before a decision can be made, decisions and actions are slowed down immensely and opportunities to serve are missed. It has also led to missed or extended deadlines as well as frustration among donors who do not understand the delay in construction or why the organization was not able to quickly help in an emergency. Not having a chain of command also causes confusion among the donors with not knowing who to bring issues to when they arise. Frustration is high as well as an answer or decision cannot be given right away due to having to go through the board first. The lack of chain of command leads to slow communication, slow decision-making, and frustrated members. The problems here can be linked to communication (Chapter 12), organizational structure (Chapter 15), and organizational culture (chapter 16). After briefly looking through each chapter, I have decided to focus on organizational structure to solve this problem. As the authors point out, structure provides the foundation for almost every aspect of OB behavior, including communication patterns between employees (Colquitt et al., 2021).
Organizational Structure
According to the authors (Colquitt et al., 2021), “Organizational structure formally dictates how jobs and tasks are divided and coordinated between individuals and groups within the company”. ACM has a simple, flat organizational structure. The structure is appropriate for the organization; however, a crucial part of the structure is missing – a central decision maker. Most traditional organizations have an organizational chart that displays the chain of command. It is an important aspect of an organization for employees to know who they report to, but ACM’s board report to each other without a hierarchal design. For most operating decisions, this is appropriate and achieves a high level of success. Nevertheless, ACM’s chain of command is weak in time-sensitive decision-making since there is no clear layout of who reports to whom.
In a simple structure, an employee may give input, but the top manager is the one who has the authority to make the decision. This type of organization is highly centralized. Centralization is an appropriate structure for ACM, as the power and authority should be concentrated to a close group of individuals who have formal authority to make important decisions (Colquitt et al., 2021). However, without one central decision maker who can make decisions with autonomy when necessary, confusion about who to communicate the need with slows down the decision-making process even more.
Another aspect of organizational structure is formalization. A high degree of formalization means a company standardizes behaviors and decisions with many specific rules and procedures (Colquitt et al., 2021). ACM has a low degree of formalization. While for the most part a low degree of formalization in this type of organization is normal and acceptable, there are occasions where a higher degree of formalization is necessary in a service organization, especially when delivering a standardized service (Colquitt et al., 2021). Many of the decisions needed in emergency situations can be automated to be made quickly by one board member when the need arises.
One final structure to mention is organic structure. This type of structure describes ACM very well, as they operate more organically than mechanistically. Organic structures have low levels of formalization and weak chains of command. However, many of the decisions they make, along with the stability of their environment, fall more into the mechanistic structure. While ACM does fit into some levels of a mechanistic structure, as most companies have combinations of qualities of both structures, their current structure favors an organic structure (Colquitt et al., 2021).
Recommendations
The first recommendation is to reconsider the organizational design of ACM. One element of organizational design is the process of changing the structure of the organization. ACM needs to proactively design the structure to meet specific circumstances and needs, rather than letting the structure develop on its own as the organization continues to grow. With a stable business environment, ACM can focus on efficiency that will require very little change over time once developed (Colquitt et al., 2021).
Secondly, in changing the organizational design, ACM should establish a true, simple organizational structure and appoint someone as the top level in the organizational chart such as the example in Figure 1. This person would be the decision-maker when time is of the essence and all board members cannot be reached to give input. Since the board is not elected and does not change often, this position could be rotated periodically between the board members. It would also eliminate the need for all board members to be on every email or text and free up their time for other tasks within the organization.
Having a clear chain of command also eliminates confusion about whom to report because it establishes the specific flow of authority (Colquitt et al., 2021). Along with establishing the flow of authority, it also aids in attaining order, control, and predictable performance in the organization (Colquitt et al., 2021). Establishing a decision-maker would also clear up the confusion and frustrations felt by donors. Donors would be able to contact this person directly and receive an answer in a timely fashion.
Finally, formalization of routine services would allow for the one decision-maker to make decisions quickly by automating many of the decisions without having to go through all the members of the board. While formalization has a negative connotation in dealing with rules and procedures, it is a necessary mechanism for control in all organizations (Colquitt et al., 2021). ACM should identify services and decisions that are standard and create rules and procedures for the board members to follow.
These three recommendations would shift the organization’s structure more toward the mechanistic structure to aid in the decision-making process and away from some of the organic structure that currently hinders it. While both structures have characteristics and qualities that contribute to efficiency in an organization, they also have an important effect on the types of employee practices a company adopts (Colquitt et al., 2021). By looking at the structure of mechanistic organizations, adopting these three recommendations would be a good start to getting closer to the middle ground between the two structures.
Conclusion
The recommendations suggested would result in a more mechanistic structure that would aid in more efficient decision making and communication. When an organizational design is not efficient for the tasks at hand, the organization needs to be able to adapt. ACM’s parent organization has an organizational structure that worked well for its environment. However, adding ACM into the fold has led to complications with communication and decision-making. ACM needs to adapt to a different environment that involves these problems to continuing growing.
It is almost impossible to accurately represent the impact of organization structure on job performance and could say that job performance is determined by the structure (Colquitt et al., 2021). An organization’s structure can have a negative effect on the employees, particularly in the short-term. According to the authors (Colquitt, et al., 2021), there is a small negative effect on task performance when a company restructures, which may lead to confusion about how employees are supposed to do their jobs. This unfortunately hinders learning and decision making, the one thing we are trying to improve. So, restructuring has weak negative effect on job performance (Colquitt et al., 2021).
Restructuring also has a moderate, negative effect on organizational commitment, namely Affective Commitment (Colquitt et al., 2021). Affective commitment is the desire an employee has to remain a part of an organization due to either emotional attachment or involvement in the organization (Colquitt et al., 2021). The weak, negative correlation is in part because restructuring often increases stress levels of employees which can also threaten their trust in the organization. The lower levels of affective commitment can be from the employees feeling less emotionally attached to the organization because of the increased stress levels and lower level of trust.
For ACM board members, restructuring might increase stress levels, as board members may not feel as valued if they are not a part of every communication or decision. This could lead to problems, but hopefully their job duties will still feel rewarding enough for them to enjoy remaining a board member. Board members will need to remain adaptable throughout the restructuring process. Keeping board members in the loop and giving them a voice throughout the organizational design process is one way to give the board members a sense of importance. Honest and frequent communication is another key to the restructuring process to reduce stress and increase trust (Colquitt et al., 2021).
One way to frame the restructuring in a positive light is to focus on the increase in governance effectiveness that restructuring would provide. According to Ana Viader (Viader, 2014), an Assistant Professor at the Universidad del Este, IEN Business School in Carolina, Puerto Rico, governance is related to the performance, credibility, and image of the organization. In a study conducted by a group from the University of Florence (Italy) (Zollo, 2019), their results supported the positive influence governance effectiveness has on members’ organizational commitment. Overall, restructuring the organization to make it more effective in communication and decision-making should be the goal of the organization and its board members.
References
Abbott, T. (2015). One way to govern: The complementary model of board governance. Board Leadership, 2015(141), 4–8. https://doi-org.proxyeast.uits.iu.edu/10.1002/bl.30026.
Colquitt, J. A., Lepine, J. A., Wesson, M.J. (2021). Organizational behavior: Improving performance and commitment in the workplace, (7th ed.). McGraw-Hill: New York, NY.
Dent, G. W., Jr. (2014). Corporate governance without shareholders: A cautionary lesson from non-profit organizations. Delaware Journal of Corporate Law, 39(1), 93-116. https://proxyeast.uits.iu.edu/login?url=https://www-proquest-com.proxyeast.uits.iu.edu/docview/1716891093?accountid=11648.
McRay, G. (2015). A nonprofit board of directors – What is a board? https://www.501c3.org/nonprofits-board-directors/.
Viader, A. M., & Espina, M. I. (2014). Are not-for-profits learning from for-profit-organizations? A look into governance. Corporate Governance, 14(1), 1-14. doi:http://dx.doi.org.proxyeast.uits.iu.edu/10.1108/CG-11-2012-0083.
Zollo, L., Laudano, M. C., Boccardi, A., & Ciappei, C. (2019). From governance to organizational effectiveness: The role of organizational identity and volunteers’ commitment. Journal of Management & Governance, 23(1), 111-137. doi:http://dx.doi.org.proxyeast.uits.iu.edu/10.1007/s10997-018-9439-3.