In this lesson, you will learn how the size of an organization impacts the structure and design of that organization in the areas of work specialization, departmentalization, and formalization.
How Size Affects Structure
When an architect plans a new building, the size of the building being planned will have a considerable impact on how the building is designed and the type of foundation that is used to support the building. A small building typically requires a simple design with a shallow foundation, and a larger building requires a more complex design and a deeper foundation.
In the same vein, when determining the most effective structure and design for an organization, the number of people that belong to the organization has a major impact on which structure works best. The typical structure of a small business is flat since there are a limited number of people who are responsible for many tasks. The typical structure of a large organization is tall, with several vertical levels, or management layers, which represent a more complex structure.
In short, when determining what type of structure works best for an organization, size matters. Let's take a look at two different sized companies that operate in the same industry and learn how the size of these organizations impact how they are structured.
How Size Affects Work Specialization
One factor of organizational structure that is impacted by the size of an organization is work specialization, which determines how tasks are subdivided into separate jobs. The more a job is broken down into small tasks, the more specialization is required by each individual worker. Small organizations have fewer people to divide tasks among, so the jobs in small organizations have a lower degree of work specialization than the jobs in large organizations.
For example, the Droopy Dog Motel is a small motel that operates off Interstate 88 near DeKalb, Illinois. The Droopy Dog has 22 rooms and 19 employees. The structure of this organization is comprised of a general manager, four front desk workers, six housekeepers, three maintenance people, three security staff members, an accountant, and a night auditor.
At the Droopy Dog Motel, there are usually two members of the housekeeping staff on duty, and each is assigned 11 rooms to clean in addition to cleaning the common areas of the motel. The job description of a housekeeping staff member in this organization includes making beds, cleaning rooms, stocking supplies, washing linens, and cleaning the front desk area and other general areas of the motel. It takes a member of the housekeeping staff an average of 45 minutes to clean a room.
The Silver Spike Resort is a big hotel and spa in Reno, Nevada, with over 1,000 rooms, a fully staffed spa and fitness center, an 18-hole golf course, and eight swimming pools. The Silver Spike employs over 2,000 people and has six vertical levels of management. Housekeeping at the Silver Spike is done in teams of three with each housekeeper performing a specialized task. One person cleans the bathroom, one person cleans the bedroom and makes the bed, and the third person vacuums and washes the windows. Because the jobs are much more specialized, it takes an average of 12 minutes for a team of housekeepers to clean a room at the Silver Spike Resort.
How Size Affects Departmentalization
Another aspect of organizational structure that is affected by the size of an organization is departmentalization, which establishes how jobs are grouped together. Large organizations use a high degree of departmentalization when defining jobs since they need to provide their large workforce with clearly defined tasks in order to keep the organization running efficiently. Small organizations require less departmentalization since there are a small number of people available to achieve the organization's goals, and departmental functions often overlap.
For example, Jack Johnson is one of the night auditors at the Silver Spike Resort. He works from 11:00 pm to 6:00 am along with the night audit supervisor. Jack's job description is to audit the receipts for the day and assist the front desk people if they get busy.
Woody Thomas is the night auditor for the Droopy Dog Motel. Woody's job is to audit the receipts for the day, make the night deposit, take reservations over the phone, answer calls from guests, set up the breakfast area, and make coffee in the morning. Sometimes, after a bad snow storm, he has to shovel snow in the parking lot so that guests can get their cars out. Woody does many jobs that would typically be handled by several departments in a large organization because he is the only employee at the motel during his late night shift. Woody's job description is loosely defined as 'do whatever is necessary to keep guests happy.'
How Size Affects Formalization
A third aspect of organizational structure that is affected by the size of an organization is formalization, which determines to what degree the jobs in the organization are standardized and to what extent members of the organization are governed by rules and regulations. Since large organizations have taller structures, they have a longer and more structured chain of command, which results in highly structured jobs that are governed by many rules and regulations. Small organizations are less formal and typically have fewer rules and regulations, since they are less bureaucratic and simply do not have the manpower to enforce a long list of rules and regulations for each and every job.
Rodney Long works as a security officer for the Silver Spike Resort. He reports directly to his supervisor who reports to the director of security who reports to the resident manager who reports to the assistant general manager who reports to the general manager. Rodney is required to fill out a series of reports any time he is called by the front desk to handle even the smallest of situations, like helping a guest who has lost his room key.
Tom Short is a security guard for the Droopy Dog Motel. He reports directly to the general manager and is only required to file a report if there is an incident at the motel so severe that the local police are called.
We have learned that the size of an organization affects the structure of an organization in three ways: work specialization, departmentalization, and formalization. It is also important to understand that the relationship between the size of an organization and its structure becomes less significant as the size of the organization increases.
In other words, the structure of a small organization will change drastically as the size of the organization goes from small to large. The structure of a large organization, however, will not change much as the size of the organization increases, since the existing structure is already designed to accommodate a large number of people. So although the size of an organization affects the structure of an organization, it does so at a decreasing rate.
Let's review. The size of an organization dictates the type of structure that works best for that organization. Small organizations and large organizations differ significantly in three specific areas of organizational structure:
Small organizations use much less work specialization when defining tasks for organizational members. Since there are fewer people available to achieve the goals of the organization, everyone performs more tasks. Large organizations use a high degree of work specialization in order to operate more efficiently.
Large organizations use a high degree of departmentalization since they need to provide clearly defined tasks for the large amount of workers they employ in order to keep the organization running efficiently. Members of small organizations perform a much larger array of tasks, and therefore have less departmentalization in their organization.
Large organizations use a high degree of formalization in order to manage the large number of people they employ, and workers are typically governed by a large number of rules and regulations. Small organizations are less formal and have fewer rules and regulations since jobs are less standardized and the organization does not have the manpower to enforce a large number of rules and regulations.
When a small organization becomes a big organization, the change in size will have a large impact on the structure of the organization. The organization will have to use more work specialization, more departmentalization, and more formalization in order to operate efficiently. When a large organization adds a significant amount of new members, the increase in the size of the organization will have a reduced impact on its structure, since the structure that was originally in place was designed to support a large number of people. So, although the size of an organization affects the structure of an organization, it does so at a decreasing rate.
After watching this lesson, you should be able to explain how an organization's size affects the structure and design in work specialization, departmentalization, and formalization.