Understanding Organizational Design
How organizational designs explain the relevance of economic, social and political context of organizations? What are the environmental tools that apply to the work organization? The hub of these questions has something to do with the depth and extent of understanding of the theory related to organizations and in the context of its organizational design.
(Kennedy 2010: 145).The purpose of this paper is to obtain explanation how these organizational “design fit” on the organizational realities (Shibata: 1991) vis-a-vis its relevance to economic, social, and political context of organizations, the effect on labour market and the applied paradigm.(Smith et al 1993: 61)
The Organisational Design
According to Robbins (2001) an organizational formation describes how tasks are grouped and organized and there are six important elements that managers need to deal with in designing organization form, such as: work specialization, departmentalization, chain of command, span of control, centralization and decentralization, and formalization. On this context, this paper using a choice business organization explores the essential elements involved in designing organizational structure.
According to Daft (1991), ‘departmentalization’ is the starting point for clustering positions into different departments into the total organization. Five approaches to structural design are used to replicate chain of command in departmentalization; the functional, divisional, matrix, teams and network approaches that rely on the chain of command to define grouping and reporting relationship. Let us take the first (functional) approach in the context of American Airlines Company vis-a-vis to the creation of a system of hierarchical superiors who closely monitor the performance standards (Ouchi: 1980).
Functional Approach is the grouping of positions into departments based on skills, expertise, and resource use. People and facilities representing a common organizational resource are grouped together into a single department. Example of functional structure for American Airlines is presented in appendix
1. The major departments under the CEO are groupings of similar expertise and resources, such as employee relations, government affairs, operations, information systems, and marketing.
Each of the functional departments at American Airlines is concerned with the airlines as a whole. The employee relations vice-president is concerned with employees in all areas including the problem on labour disputes, and the marketing department is responsible for all sales and marketing. Bureaucracy. AMR or American Airlines is one of the major names in the airlines industries. AMR holds assets of $29,495 million, has 88,400 employees, and operates in virtually all the major continents of the world. Read about the Evolution of Job Design
American Airways was formed in the 1920’s. In 1934, American Airways became American Airline, Inc. In 1982, a new holding company, AMR Corp. , was formed and became the parent company of American Airlines. AMR expanded into training and Consulting Group in 1993 and on the same year formed the SABRE Technology Group including its Information Services (AMRIS), SABRE Travel Information Network (STIN), SABRE Computer Services (SCS), SABRE Development Services, (SDS), and AMR Project Consulting and Risk Assessment Units.
In MaY 2004, Gerard J. Arpey was elected Chairman of AMR Corporation and American Airlines, Inc. (Maps of World Finance: 2010) How suitable is the organisational design for the environment in which the organisation operates? To determine whether American Airlines organizational design fits the environment in which the organization operates the use of PEST analysis is must, to wit;