Organisational Structure

Organisational Structure Ownership & Environmental Implications



Organisational Structure Ownership & Environmental Implications

Introduction

Literature relating organisational economics characterises the organisation as a team comprising a large number of suppliers of inputs. This approach requires a coordinator to measure, monitor, and reward each team member appropriately (known as the metering problem). Team production, developed by Cyert (2004), uses transaction-specific investment, a type of asset specificity, to explain the existence of the organisation in which individuals in these teams have specific skills whose value is greater in current combination than in other exchange arrangements (McGregor, 2005). That is to say, externalities arising from the activities of team members could then be better monitored in organisations such as firms. However, whilst cooperation among the team members does not require a hierarchical structure, a hierarchy could nevertheless emerge to reduce opportunism or shirking by assigning to a member or members the responsibility of monitoring the performance of the team members (Argyris, 2004). Property rights could then be structured to reduce the likelihood of shirking by the monitor(s) by making them bear the costs of such behavior. This is then extended to explain why a variety of ownership structures exist.

Organisational structure encompasses the relationships of authority and communication, both formal and informal, that exist within an organisation, as well as the rules, procedures, routines, norms, and other practices that guide and constrain the behavior of organisational participants. Organisational structures comprise both social structures and rational-legal structures that are independent of any particular social actor. The latter get passed down from one generation to the next, enabling an organisation to survive despite changes in participation. The way in which organisational structures are designed is important because different designs can either facilitate or impede the ability of an organisation to pursue its goals. Additionally, organisational structures can be highly dependent upon and influenced by their external environments (Hannan, 2003).

Scholars have conceptualised organisational structure in different ways. The most important is the “hierarchy,” which is generally characterised by a top-down authority structure, centralised coordination, and vertical communication. There are different views about how relationships are organised within a hierarchy. Max Weber described hierarchies in terms of their command and control functions—one person at the top directs and coordinates everyone below. Herbert Simon, on the other hand, conceptualised the hierarchy as a system of interrelated subsystems organised from top to bottom. In this model, each person at any given level is connected to many people within that level, but relatively fewer people between levels. Aside from the hierarchical model, scholars have also conceptualised organisational structure as: mechanistic (characterised by high task specialisation, vertical coordination and control, and management by plan and command), organic (characterised by multitasking, lateral coordination, and facilitative leadership), matrix (characterised by project-oriented teams comprising individuals detailed from other divisions), and M-form (characterised by multiple divisions organised according to the type of output they produce) (Cyert, 2004).

The core of the paper discusses types of ownership, organisational structures and environmental implications for modern business setups in 21st ...