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An organizational structure is crucial for every business to function effectively, with defined roles, responsibilities, and communication channels. This structure determines how tasks are delegated, controlled, and coordinated within the organization. Whether centralized or decentralized, the organizational chart represents the hierarchy of authority and division of labor. Social structures impact activities and interactions within the organization, presenting both challenges and opportunities. Authority, work specialization, and span of control are important elements to consider in designing the organizational structure. The choice between tall and flat structures, as well as different structural approaches like functional, divisional, matrix, team-based, and network designs, can significantly impact the organization's efficiency and adaptability. Building a solid structural design is key to achieving organizational goals effectively and sustainably.
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Business? • Economic system in which goods and services are exchanged for one another or money, on the basis of their perceived worth. • Every business requires some form of investment and a sufficient number of customers to whom its output can be sold at profit on a consistent basis.
Organisation? • Definition 1 • Non-random arrangement of components or parts interconnected in a manner as to constitute a system identifiable as a unit. • Definition 2 • Sequential or spatial (or both) form in which a body of knowledge, data, people, things, or other elements, is purposefully arranged. • Definition 3 • Social unit of people systematically arranged and managed to meet a need or to pursue collective goals on a continuing basis. • All organizations have a management structure that determines relationships between functions and positions, and subdivides and delegates roles, responsibilities, and authority to carry out defined tasks. • Organizations are open systems in that they affect and are affected by the environment beyond their boundaries.
Organizational Structure? • Formal and informal framework of policies and rules, within which an organization arranges its lines of authority and communications, and allocates rightsand duties.
Organizational Structure? • Organizational structure determines the manner and extent to which roles, power, and responsibilities are delegated, controlled, and coordinated, and how information flows between levels of management. • This structure depends entirely on the organization's objectives and the strategy chosen to achieve them.
Organizational Structure? • In a centralized structure, the decision making power is concentrated in the top layer of the management and tight control is exercised over departments and divisions. • In a decentralized structure, the decision making power is distributed and the departments and divisions have varying degrees of autonomy. • An organization chart illustrates the organizational structure.
Social Structure • The duality of structure: • Constrains the choices about activities • But structures are created by the activities • Enabling interaction: • Can be seen as fixed immovable • Or as a moment of ever-changing interactivity
Two purposes Social structure is giving a picture of: • The differentiation between work activities • And at the same time indicating the major challenges of integrating the same activities
Organization Chart The Organizational chart is a representation of: • The hierarchy of authority: • the vertical structure or • the chain of command • The division of labour: • the horizontal coordination or • the work specialization
Chain of Command • Unbroken line of authority that links all persons in an organization. • Shows who reports to whom. • Associated with two underlying principles. • Unity of Command. (no one has more than 1 boss) • Scalar Principle. (communication follows chain of command)
Work Specialization • Tasks are subdivided into individual jobs. • Division of labor concept. • Employees perform only the tasks relevant to their specialized function. • Jobs tend to be small, but they can be performed efficiently. • Many organizations are moving away from this principle.
Authority • Formal and legitimate right of a manager to make decisions, issue orders, and to allocate resources to achieve organizationally desired outcomes. • Authority is distinguished by three characteristics: • Authority is vested in organizational positions, not people. • Authority is accepted by subordinates. • Authority flows down the vertical hierarchy.
Span of Control • The number of employees reporting to a supervisor. • Traditional view, seven or so per manager. • Many organizations today, 30 or more per manager. • Generally if supervisors must be closely involved with employees, span should be small.
Tall versus Flat Structure • Span of control used in an organization determines whether the structure is tall or flat. • Tall structure has a narrow span and more hierarchical levels. • Flat structure has a wide span, is horizontally dispersed and fewer hierarchical levels. • The trend has been toward wider spans of control.
Five structural alternatives • Vertical functional approach. People are grouped together in departments by common skills. • Divisional approach. Grouped together based on a common product, program, or geographical region. • Horizontal matrix approach. Functional and divisional chains of command. Some employees report to two bosses. • Team-based approach. Created to accomplish specific tasks. • Network approach. Small, central hub electronically connected to their other organizations that perform vital functions. Departments are independent, and can be located anywhere.
