MGT504 - Organization Theory and Design - Lecture Handout 03

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The system view pertains to dynamic, ongoing activities within organizations. The next step for understanding organizations is to look at dimensions that describe specific organizational design traits. These dimensions describe organizations much the same way that personality and physical traits describe people.

Organizational dimensions fall into two types: structural and contextual, Structural dimensions provide labels to describe the internal characteristics of an organization. They create a basis for measuring and comparing organizations. Contextual dimensions, characterize the whole organizations, including its size, technology, environment, and goals. They describe the organizational setting that influences and shapes the structural dimensions. Contextual dimensions can be confusing because they represent both the organization and the environment. Contextual dimensions can be envisioned as a set of overlapping elements that underlie an organization. One must examine both structural and contextual dimensions. These dimensions of organization design interact with one another and can be adjusted to accomplish the purposes listed earlier.


  1. Formalization pertains to the amount of written documentation in the organization. Documentation includes procedures, job descriptions, regulations, and policy manuals. These written documents describe behavior and activities. Formalization is often measured by simply counting the number of pages of documentations within the organization. Large state universities, for example, tend to be high on formulation because they have several volumes of written rules for such things as registration, dropping and adding classes, student associations, dormitory governance, and financial assistance. A small, family-owned business, in contrast, may have almost no written rules and would be considered informal.
  2. Specialization is the degree to which organizational tasks are subdivided into separate job. If specialization is extensive, each employee performs only a narrow range. Of tasks if specialization is sometime referred to as the division of labor.
  3. Hierarchy of authority describes who reports to whom and the span of control for each manager. The hierarchy is depicted by the vertical lines on an organization chart, as illustrated in Exhibit 1.5. The hierarchy is related to span of control (the number of employees reporting to a supervisor).When spans of control are narrow; the hierarchy tends to be tall. When spans of control are wide, the hierarchy of authority will be shorter.
  4. Centralization refers to the hierarchical level that has authority to make a decision. When decision making is kept at the top level, the organization is centralized. When decisions are delegated to lower organizational levels, it is decentralized. Organizational decisions that might be centralized or decentralized include purchasing equipment, establishing goals, and choosing suppliers, setting prices hiring employees, and deciding marketing territories.
  5. Professionalism is the level of formal education and training of employees. Professionalism is considered high when employees require long periods of training to hold jobs in the organization. Professionalism is generally measured as the average number of years of education of employees, which could be as high as twenty in a medical practice and less than ten in a construction company.
  6. Personnel ratios refer to the deployment of people to various functions and departments. Personnel ratios include the administrative ratio, the clerical ratio, the professional staff ratio, and the ration of indirect to direct labor employees. A personnel ration is measured by dividing the number of employees in a classification by the total number of organizational employees.


  1. Size is the organization’s magnitude as reflected in the number of people in the organization. It can be measured for the organization as a whole or for specific components, such as a plant or division. Because organizations are social systems, size is typically measured by the number of employees. Other measures such as total sales or total assets also reflect magnitude, but they do not indicate the size of the human part of the social system.
  2. Organizational technology refers to the tools, techniques, and actions used to transform inputs into outputs. It concerns how the organization actually produces the products and services it provides for customers and includes such things as computer-aided manufacturing advanced information systems, and the internet. An automobile assembly line, a college classroom, and an overnight package delivery system are technologies, although they differ from one another.
  3. The environment includes all elements outside the boundary of the organization. Key elements include the industry, government, customer, supplies, and the financial community. Environmental elements that affect and organization the most are often other organizations.
  4. The organization’s goals and strategy define the purpose and competitive techniques that set it apart from other organizations. Goals are often written down as an enduring statement of company intent. A strategy is the plan of action that describes resource allocation and activities for dealing with the environment and for reaching the organization’s goals. Goals and strategies define the scope of operations and the relationship with employees, customers, and competitors.
  5. An organization’s culture is the underlying set of key values, beliefs, understandings, and norms shared by employees. These underlying values may pertain to ethical behavior, commitment to employees, efficiency or customer services, and they provide the glue to hold organization members together. An organization’s culture is unwritten but can be observed in its stories, slogans, ceremonies, dress, and office layout.

The eleven contextual and structural dimensions discussed here are interdependent. For Example, large organization size, a routine technology, and a stable environment all tend to create an organization that has greater formalization, specialization, and centralization.

These dimensions provide a basis for the measurement and analysis of characteristics that cannot be seen by the casual observer, and they reveal significant information about an organization. Consider, for example, the dimensions of W.L. Gore & Associates compared with those of Wal-Mart and a governmental agency.

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