Managers design formal structures to organize a company’s resources, and structure influences innovative entrepreneurial orientation. Organizing, the second function of management, is defined as the process of delegating and coordinating tasks and resources to achieve objectives. Here are some things to consider and questions to answer when organizing the entire company.

As the structure of the firm must align with the environment in which it operates, overall there are two major forms of organization that are more effective in different environments—stable and dynamic. Mechanistic organizations are bureaucratic, focusing on following procedures and rules through tight controls and having specialized jobs, with decisions being made by top managers.

Conversely, organic organizations are flexible, with minimal focus on procedures and rules, broadly defined jobs, and decisions made at lower levels. This model tends to work well in the current trend of more dynamic environments. Although there are two forms, they are really on a continuum between being mechanistic and being organic. Many companies are organized somewhere between the two extremes but can be more identified overall with one form or the other.

Companies develop strategies, and thus, company organizational structure must be designed to achieve the strategic objectives. As companies change strategies to align with the external environment, they tend to change their structure. With innovative growth strategies in a dynamic environment, organic structures tend to work well, whereas with a stability strategy in a stable environment, mechanistic structures tend to work well. Generally, the larger the firm, the more mechanistic it becomes, but highly innovative companies can be organic. But again, most companies are between the two extremes.