As organizations grow from being a new venture to adding employees and departments, they often change...

As organizations grow from being a new venture to adding employees and departments, they often change their organizational structures. How do organizations typically change their structures over time, and why?

Expert Solution

Organization from being a small entity often grow becoming large entities having huge workforce, departments and process. For this there is a change in the organization structure in the following ways:

1. Decentralisation of authority:

Small companies are often centrally powered and one person makes decision for every thing but as the organization grows the hierarchy grows as well which needs decentralisation of authority.

2. Outsourcing of processes:

As the organization grows their is a need to perform only those activities in which you specialise. The companies try to outsource all the supporting activities like logistics, construction and sometimes recruitment to focus on their core competencies.

3. Raising of capital through sources of debt and equity for expansion: Small turned big companies go for public equity like issue of shares (equity and preference) and also go for long term debt through commercial banks.

4. Getting more capital intensive technology: The money raised by the company is utilised in investing towards technology which increase the productivity to a new level, thereby catering the increase in demand and achieve economies of scale.

5. Compliance rules and maintaining books of accounts for regular reviews: The bigger companies specify the compliance duties for all and also go for regular reviews of accounts, performance and operations to make sure there is no wastage.

These changes are required because of the following reasons:

1. Decision Making: it helps in making quick decisions thereby taking advantage of the situations.

2. Time saving: through decentralisation they helped in time saving thereby helps in first mover advantage.

3. To work with ethics and strict compliance of rules: It helps follow strict compliance thereby working according to the rules and regulations.

4. To attain economies of scale: Through large operations they would be able to attain economies of scale and attain efficiency.

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