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ORGANIZATIONAL SIZE, COMPLEXITY AND FORMALIZATION

In the research paper on Organizational Size, Complexity and
Formalization, the author has put forward analysis done by various other authors
regarding the size of the organization and its impact on complexity, formalization
and various other structural components is discussed.
The central idea of the paper is whether large size organizations are more
complex and formalized than smaller counter-parts or not. On one hand authors like
Caplow and Grusky support the fact that larger the size more complex and
formalized is the organization, whereas on the other hand authors like Blau and
Scott, and Zelditch and Hopkins contradicts the assumed fact stating that size is not
a critical factor. Also studies that had been carried earlier state that size is a prime
factor considering one or few organizations as the sample and by targeting specific
types of organization such as mental hospitals, manufacturing and schools thereby
limiting the scope and drawing unappropriated inferences. Another prospect that
states the presence of size as a major factor inconclusive is its effect on
administrative components. Some authors have suggested that the administrative
component increases disproportionately with increase in size while others have
suggested that large organizations contain a smaller portion of personnel engaged
in administration. However recent studies by Hawley, et al and Haas, et al suggests
that this relationship is curvilinear.
Studies carried out by authors, Richard H. Hall, J. Eugene Haas and Norman J.
Johnson suggests that there exist a relatively weaker relationship between size and
structural characteristics like complexity and formalization, hence it should not be
taken solely as an indicator of organizational structure however it can be taken as a
factor in morale and interorganizational relations. The study also states that an
organization tends to exhibit less formalization with more professionalized staffs.
Another major inference that can be inferred from the study is that complexity leads
to increase in size of organization rather than the reverse, i.e., increase in size leads
to increase in complexity because an organization tends to enlarge first and then
increase its size rather than increasing in size and then enlarging its business.
The methodology that has been used by authors, Richard H. Hall, J. Eugene Haas
and Norman J. Johnson in order to infer the above suggestions includes data from 75
organizations in different sectors such as educational, commercial, military, etc.
with size ranging from 6 members to 9000 members. Complexity with respect to the
study has been defined as the degree of internal segmentation and the number of
independent parts as reflected in terms of the division of labor, the hierarchical
differentiation and the spatial dispersion. Spatial dispersion is necessary as the
organization has no choice but to increase its size if it is dispersed across the
geographical boundaries. In order for smooth day to day functioning and proper
supervision of the work done by the subordinates, organizations do incorporate
hierarchical differentiation. Further as the size of the organization increases, the
specialization within the organization also increases leading to division of labor to
perform specific tasks and roles.

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Formalization includes roles, authority relations, communications, norms and

sanctions and procedures. The findings of the study suggests that there is a slight
tendency for larger organizations to be both more complex and more formalized but
only for very few variables this relationship prove to be strong. In general, the
relationship between size and the complexity and formalization indicators appear to
be limited to a few factors.
In order to validate the above study, some examples have been stated below:
Let us take up a small garment shop owned by a single proprietor for reference. He
has some employees working under him for carrying out day to day activities but
there isnt any necessity for any proper structure in place. The garment shop owner
himself can have control over his employees without any formal written down rules
and regulations in place.
For a medium sized university, there are several other factors along with size of an
organization that comes into play. These factors are professionalism of the
employees, planning and enforcement of the guidelines for individual colleges,
coordination required to work inter departments within same as well as other
colleges in the university. In the absence of a well-defined structure all these
activities would not be carried out seamlessly. To ensure the effectiveness and
efficiency a proper formal structure is put to place.
A medium sized university has a chancellor with several presidents under him with
each president responsible for a particular campus. We can refer to the below figure
for a scaled down version of a medium sized university. Here the extension of
authority of only Vice President for Administration in one of the colleges is shown
but the same analogy can be extended to Vice Presidents for other departments
and colleges. We would eventually be seeing the secretaries of various departments
and even the students on extending this figure. In such type of an organization
there is a high degree of formalization as everyone has their roles well defined and
also written most of the times for the smooth functioning and hassle free day to day
operation. It is required by everyone to go by the rules in order to maintain the
transparency in the system and uphold the trust of all the stake holders.

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For an MNC as it expands its business and spread across geographical location, it
keeps on adding more number of employees in order to cater to its requirements.
An IT company that we are going to refer here has its complexity also associated
with other factors like domain of the industry which it will serve, technologies to be
used, language barrier, geographical distance and quality assurance. Presently
almost in every IT company there is an onsite-offshore model is in place in order to
ensure round the clock delivery and real time issue fixing. The proper coordination
between the two sets of workforce onsite and offshore is necessary in order to
ensure a good quality service to its customer in order to build trust and keep the
business going. An organization has to take note of all the latest changes happening
in its market space so as to sustain in competitive market and maximize its
revenue.
In 1994, Cognizant started off as the in-house technology development center for
Dun and Bradstreet Corporation (D&B), a corporate and financial information
research firm. Francisco DSouza is the present CEO and Laxmi Narayanan is the
Vice Chairman and Ex-CEO. Initially it had around 200 people that time with a
revenue less than $2 million at the end of the first year of operation. There was no
need of any sort of formalization at that time as the number of employees and the
span of the projects were limited.
In 1996, owing to the split up of Dun and Bradstreet Corporation the company
became a division of the Cognizant Corporation. It started off adding third-party
clients and soon almost one third of its revenues started coming from the external
clients. It is one of the fastest growing top-tier consulting, IT services and BPO

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Company and is currently the second largest IT Company in India after TCS. In 2014,
it had more the 150,000 employees globally. The company is now providing IT
solutions practically across all domains with unique set of technical skills and
background knowledge required to serve hence the earlier structure will not hold
good.
The company had to change its organization structure because to the expansion in
terms of size and business. As the size of the employees increased and also the
span of technologies and industry segments which it caters (like BKFS, Insurance,
Health Care, etc.) also increased. Also the other reason being that the workforce is
separated by geographical distance as we can see that a person from onsite (lets
say in US) has to coordinate with the corresponding team at offshore (lets say in
India). It is required to have appropriate supervision mechanism both in offshore
and onsite but then the role that each of them has to play in their respective area of
specialization is not formalized to a great extent. It is up to the code developers
discretion to as to which approach he has to take to formulate his logic in order to
serve customers demand.
Presently it follows a matrix sort of structure where the various technologies form
the horizontals and the industry segment to which it caters is the vertical. Each of
the employee has a well-defined role that is expected of him for a smooth
coordination across different departments in a particular vertical (industry segment)
and also the same horizontal (technology area).
In all the examples that we have discussed we can see that size is not the only
criteria that can be used to conclude the extent of complexity or formalization. It
should also be noted that it is not necessary that a large organization has to be
highly formalized or a small or medium one to be less formalized. All these is
basically dependent on various other factors, out of all major being the type of
work. If there are other factors and mechanisms put to place properly then
formalization is not much required. To conclude we may say that size is undoubtedly
an important parameter when we study we study any organization structure but it
should not be often used to determine the complexity and formalization.
References:
1. http://home.iitk.ac.in/~amman/soc474/Resources/bureaucracy.pdf
2. http://www.thehindubusinessline.com/features/smartbuy/cognizant-from-astartup-to-a-multibilliondollar-giant/article5614907.ece

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