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Organizational Design: Theory, Principles & Definition

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  • 0:00 What Is Organizational Design?
  • 0:05 Theories And Principles
  • 3:20 Lesson Summary
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Lesson Transcript
Instructor: Shawn Grimsley
What rules do people follow when planning a new business or organization? Find out by learning about organizational design: what it is, some theories that relate to it, and some important principles.

What Is Organizational Design?

Organizational design is the way an organization is to be structured and operated by its members. It is both a plan and a process.

Theories and Principles of Organizational Design

You will find that there is no one theory of organizational design. Some major theories you will run across include the following:

Weber's Bureaucratic Model is a classic model of organizational design that is still in use today. It involves structuring an organization hierarchically with formal rules and procedures that govern the organization and its members.

M-form, u-form, and matrix form describe different ways an organization may structure itself. A u-form, or unitary form, is an organization structured around units divided by function and is centrally managed. An m-form, or multidimensional form, of organization attempts to create quasi-independent businesses within the larger organization. Matrix form attempts to use the advantages of both u-form and m-form design by having each organizational unit answerable to different organizational leaders for different aspects of the work performed by the unit. However, the matrix form does have a disadvantage of having units and members answerable to more than one boss, which can create conflict and confusion.

Mechanistic and organic form are two general ways organizations can be designed. An organic structure is identified by little job specialization, few layers of management, decentralized decision-making, and not much direct supervision. Characteristics of a mechanistic organization include a high degree of organizational complexity, formalization, and centralization.

Heterarchy is where multiple people rule. You can see a great example of a heterarchy in the three branches of the United States government, none of which governs the United States alone. The important concept for you to note about this design is that it discards a strict hierarchy of authority where there is only one leader at each level of the organization.

Responsible autonomy is a design where an individual or group in an organization has autonomy to decide the best course of action but is accountable for the outcome of the decision. A good example of responsible autonomy would be an independent scientific researcher who decides what to research but is accountable to peer review that judges the worthiness of the research. Responsible autonomy is also a design that does away with hierarchy of authority.

PARC is an acronym that stands for people, architecture, routine, and culture. It's used by some theorists in the human relations school to define an organization to recognize the importance of the human element and organizational culture in organizational design.

Institutional theory proposes that the environment, including both hard external regulations and soft concepts that provide meaning, influence the design of an organization. Soft concepts can include stories, myths, and customs that can be copied from similar organizations. External regulations are imposed upon the organization rather than voluntarily integrated into it. External regulations can include laws, regulations, and professional requirements imposed on the organization and its members.

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