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2.2. Organizational Structure

  • Organizational Structure
    • Way in which the company is organized and the consideration of its internal workings in an attempt to find an efficient operational practice
    • Provides accountability (who is answerable for a specific job) and responsibility (who is in charge of whom)
    • Necessary for: stability, consistency, continuity, unity, efficiency, etc.
  • Organizational chart
    • Shows different functional departments, chain of command, span of control, and channels of communication
    • Ways to structure a business:
      • By function: production process (e.g. editing, printing, sales, etc)
      • By product or activity: organizing according to the different products made
      • By area: geographical or regional state
    • Role of Organizational Chart
      • Visual representation of business – see main line of communication
      • Shows promotion prospects
      • Shows immediate superior for clear communication
      • Shows employees their role in the business
      • Shows who to pass info to given a problem
  • Span of control
    • Refers to the number of people who are directly accountable to a manager
    • Affects whether an organization is wide/flat or narrow/tall
    • Factors:
      • Manager’s experience, competence, traits
      • Nature of management styles (amount of control needed)
      • Skills and dynamics of subordinates (better team, less people)
      • Nature of work
      • Type of production method used
    • Wide/flat organizations – wide span of control
      • Direct communication between different levels (fast and accurate)
      • Cost control (less managers needed)
      • Delegation is more important
      • Longer decision making
      • Eliminate feeling of alienation of workers from senior management
    • Narrow/tall organizations – narrow span of control
      • Easier to control smaller amount of subordinates
      • May be more productive/efficient (team cohesiveness and specialization)
      • Fast communication within team
      • More costly (more managers needed)
      • More motivation for employees – many promotion opportunities
  • Delegation
    • Extent a superior passes work down the hierarchy to subordinates
    • Can motivate and develop employees while saving time for managers
    • May lead to confusion and inadequacy (in case of failure)
    • This includes accountability but responsibility still stays with higher authority
    • Delegation Checklist (SMARTER)
      • Specific – tasks clearly defined
      • Measurable – quantifiable results
      • Agree – on amount of power and freedom
      • Realistic – depends on the ability to carry out the task
      • Time Bound – task completion
      • Ethical – tasks fairly delegated
      • Recorded – documented
  • Levels of hierarchy
    • Organizational structure based on rank
    • Shows clear lines of communication
    • Establish departments or teams (motivation and sense of belonging)
    • BUT
      • Rivalries may occur
      • Rigid in terms of scope and authority
      • Response to change may be slower
      • Departmentalization
  • Delayering/downsizing
    • Process of removing levels in the hierarchy/reducing managerial levels
    • Achieves flatter structure for more flexibility
    • Advantages
      • Reduce costs
      • Improve speed of communication
      • Encourage delegation
    • Disadvantages
      • Can cause job insecurity, demotion, redundancy
      • Overstretching of employees
      • Costs to train employees
  • Chain of command
    • The way authority and responsibility pass up and down the organization
    • Formal line of authority
  • Bureaucracy
    • Set of detailed methods and routines to carry out a specific activity
    • Involves clear division of roles for a hierarchical system in the organization
    • Follows several principles:
      • Prioritization of continuity (less risk)
      • Rules and regulations
      • Formal hierarchy
      • Accountability
    • Advantages
      • Authority and levels of responsibility are obvious
      • Standardization of processes to ensure efficiency
      • Turns employees into specialists rather than generalists
      • Loyalty to department
    • Disadvantages
      • May stifle creativity
      • Rivalries between departments may ensue
      • Less job satisfaction; high labor turnover
      • Slow decision-making process
      • Salaries for the different layers of management increases costs
      • Red tape
  • Centralization and decentralization
    • Centralized structures
      • Executive board handles major decision making of the company
      • Majority of decision making by minority (senior mgmt.)
      • Advantages
        • Rapid decision making on single projects
        • Better control over all company activity
        • Better sense of direction
        • Suited for smaller businesses
        • Decisions are more consistent
      • Cons
        • Slow decision making on multiple projects
        • Stress for senior staff
        • Inflexible
        • Demotivating
        • Exclusion of other people’s ideas that may be better
    • Decentralized structures
      • Some decision making is delegated
      • Freer communication process
      • All employees get to have a pitch in the decisions
      • Advantages
        • Input from employees
        • Speedier decision making
        • Improved Morale
        • Accountability
        • Teamwork
      • Cons
        • No control
        • Greater chance of mistakes
        • Reliance on communication
        • Redundancy
        • Lower standards of work (no governing body)
        • Inconsistency between company goals (regional managers)
    • Relevant factors
      • Size of organization
      • Scale of importance of decision
      • Level of risk
      • Corporate culture
      • Management attitude and competencies
      • ICT
  • Handy’s Shamrock Organization
    • People – important resource
      • Have to be satisfied through job enrichment and flexible practices
    • 3 main groups of staff
      • Core staff (full time)
        • Managers, technicians
        • Must be well compensated and have job security
        • E-commerce and teleworking have reduced core staff – implies downsizing
      • Peripheral workers (part time, contractual)
        • Employed only when required
        • Less job security and morale but offer more flexibility
      • Outsourced workers (subcontracting)
        • Paid to do specialized tasks
  • Communication
    • Transfer of information from one party to another
    • Effectiveness depends on
      • Clarity of the message
      • Medium used (ie. e-mail, telephone, letter, face to face)
      • Ability of receiver to decode message
    • Cultural differences may affect communication
      • e.g. preference for oral communication, use of body language, directness of language used
      • Informal/unofficial communication channels may also emerge
    • Technology and innovation also affects communication
      • ICT (information and communication technology)