Organizational Size, Complexity and Formalization

PGP-1, Batch 2015-17

Section 5

Group AB2

Khushboo Langalia(15F526)

Mayank Srivastava (15F529)

Samarth Gattani (15F540)

Siddharth Varma (15F549)

Vidit Jain (15F556)

Richard H. Hall University of Minnesota

Norman J. Johnson University of Pittsburgh

J. Eugene Haas University of Colorado

Target audience

Managers of small, medium, large scale industries, the researchers and the students.

StudyThe study is based on empirical analysis. They first identify a list of 75 organizations which covers various organization types. After selection of the organization included in the study, they find the value of complexity and the formalization indicators for different sizes of organization.

The complexity indicators used are as follows:

Division of labour - General & Specific

Hierarchical Differentiation

Spatial Dispersion

The formalization indicators used are as follows:

Roles

Authority relations

Communications

Norms and sanctions

Procedures

Findings

Size is not a factor for inferring the formalization and complexity of the organization.

Increased organization formalization tends to control the behaviour of the employees which further affects the discretion power of the employees.

Large organization does not have to depend upon the increased formalization. More professional staff exhibit less formalization.

The findings suggest that there is only a weak relationship between size and structural characteristics. It is said that size should not be taken as an indicator of organizational structure.

Size

According to them, size is a factor which determines the complexity of an organization. The idea

is the more the number of people in an organization, more the number of teams and groups. This

makes the organization more complex in terms of structure. But simultaneously they quotes

arguments in favour of an alternate hypothesis to make sure both sides of the argument are

present.

Complexity

Complexity should not be considered as a by-product of size. Certain indicators can be used to

check for complexity. These indicators are as follows :-

a) Division of labour - General & Specific

Based on the general and specialised work of an organization, the employees are categorised into

multiple departments. And the work is highly specialised in nature.

Case in Study – Grasim Cellulosic Division

The division of labour in this case is stark. The structure is extremely functional in nature and the

people right from the grass root levels need to be specialised in some particular work.

b) Hierarchical Differentiation

These are the number of different levels in an organization. This is the vertical linkage which

decides the course of action an organization has to take to advance in its particular industry.

Case in Study – Accenture Services Ltd.

The team with whom we checked had the given hierarchy. A team consisting of 6 members report

to a Team Lead who in turn reports to a Project Manager.

c) Spatial Dispersion

It essentially talks about the geographical dispersion of an organization’s branches. So more

widely spread the organization is, more complex it becomes.

Case in Study – CapeGemini

The company has clients from different parts of the world. To facilitate work, multiple offices

have sprung up to ease financial and legal constraints it would have otherwise faced if it had not

moved out of its headquarters.

FormalizationFormalization of an organization is based on the roles, authority relations, communications, norms

and sanctions and procedures of the organization. These indicators play a vital role in large

organizations. In case of small organization, these indicators become trivial. Unlike small and

emerging organizations, roles were well defined in most big organizations. Also, bigger the

organization more will be the norms, sanctions and procedures within it.

Case in Study: Tata Consultancy Services

The company has an employee base of 319,000+. It is a role based driven organization. Well-

defined human resource policies are maintained for both employees and managers. All the

policies, norms and procedures are as per TATA code of conduct.

Relevance in today’s worldWe think that in today’s world the organization size plays an important role in defining the

complexity of the organization. The organization structure tends to become more complex with

increase in size and well defined roles and responsibilities are required at different levels in the

organizational hierarchy. Large organizations are rather more formalized compared to smaller

ones. The rules, policies, norms and procedures have to be maintained for smooth functioning of a

concern. It helps in defining the workflow process for any organization.