Environment
The organizational environment provides a major influence on the design of organizational structure. The stability and predictability of the environment have a direct bearing on the ability of the organization to function effectively.
An unstable environment that changes rapidly and is less predictable raises two requirements:
- The organization must be able to adapt to change. It needs to be flexible and responsive.
- The organization needs greater coordination between departments. The individual departments cannot become isolated, creating their own goals and ignoring each other. In fact, departments tend to work more autonomously during periods of instability, which creates barriers.
The organizational structure must fit the environment for the organization to succeed. In a stable and predictable environment, the organization should have a mechanistic structure.
Centralized decision making, wide spans of control, and specialization fit in such an atmosphere. An uncertain environment calls for an organic structure that emphasis flexibility, coordination, and less formal procedures.
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