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Organizational Design and Structure 1.0

Working Paper · September 2016

DOI: 10.13140/RG.2.2.36162.38089

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 Organizational Design and
Structure 1.0
Working Paper
September18, 2016

Mohammed R. Ahmed, DBA

Apple, Microsoft, Google, and Facebook are good examples of companies that
were started by individuals in their homes, garages, or dormitories. These
The five functions are companies have been very successful in the marketplace because their
embedded in all of the organizational designs and structures supported their respective strategies in the
generic organizational marketplace. A review of the organizational histories of these companies (or any
other startup) will show that designs and structures evolve with growth in business
designs and structures and changes in the environment.

The organizational design and structure process starts with the identification of the
basic functions in a business, including marketing, finance, human resources,
general operations, and technology. Management has to think about precisely how
to embed these five functions within the design and structure in order to ensure
survival in the marketplace and to generate profit and growth. A startup company
may choose to focus on only one of the basic functions, such as operations
management, while developing a product or service. Once the product or service is
developed and ready for marketing, the company then has to start thinking about
designing a business model that can effectively introduce the product or service
into the market.

As the startup company plans to enter the product or service into the market, it has
to include the five basic functions of organizational design and structure. The five
functions are embedded in all of the generic organizational designs and structures
because the businesses have to focus on marketing for generating revenue;
operations for developing products or delivering services; financing and investing
for raising money; managing costs to boost profit; human resources for motivating,
training, evaluating, and rewarding employees; and technology for establishing and
maintaining connections between the organization and customers or suppliers.

Each company develops its organizational design and structure in order to achieve
a specific organizational goal. The organizational goals are achieved through
formulating and implementing specific strategies. A company’s strategy is
developed by analyzing the strengths and weaknesses within the internal
environment of the company, and by assessing the opportunities and threats in the
external environment. The internal environment includes the five functional areas,

© 2016 Mohammed R. Ahmed

 2

including marketing, finance, human resources, and technology. This is one reason
why the organizational design and structure of all types must embed the five
functions.

A structure based on the five basic functions may be further divided based on the
size of the firm and the nature of the business. A sole proprietor may perform all
The organizational five functions for the organization, but in a large organization, these functions may
design and structure be divided into several sub-functions, and these sub-functions may be performed
must adapt with the by hundreds or even thousands of people. The organizational design and structure
for both small and large firms still includes the five basic functions of a business.
changing environment
The five basic functions are also present in all of the generic structures, such as
“The inclusion of five functions in the organizational design and structure builds
the foundation for designing and building an effective organizational structure.”

The process involved in designing and building a structure for a house is similar to
designing and building a structure for an organization. For instance, the structure
of a house includes four walls and a roof to provide protection against wind, rain,
and other external forces. Similarly, a business needs five basic functions embedded
within the design and structure to develop a solution to a customer’s problem, and
to deliver a product or service that is valuable for both the company and the
customer. Furthermore, these functions are important for the business to survive in
the marketplace and withstand economic, technological, social, cultural, political,
and legal threats from the external environment.

The organizational design and structure must adapt with the changing environment.
The theories and concepts that were developed decades ago may provide a basic
understanding of how organizations were designed then, given that a structure is
built based upon the environment surrounding the company. It is important to
understand that the generic designs and structures that were used in the past may
not fit the current environments surrounding the respective businesses. The process
of organizational design and structure development may still therefore be useful for
managers concerned with general business survival and improvement.

© 2016 Mohammed R. Ahmed

 3

Working Paper
Working paper # 17, version 1.

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