Organizational Structure and Culture

Organizational structure

  1. Once the organization’s goals, plans, and strategies are in place, managers then must develop a structure that will best facilitate the attainment of those goals.
  2. Remember, organizing is one of the four management functions.
  1. When managers develop or change an organization’s structure, they are engaging in organizational design.
  2. The process involves making decisions about how specialized jobs should be, the rules to guide employee behavior, and at what level decisions are to be made.
  1. Organizational design decisions usually are made by top management.
  2. However, it is important that people at all levels understand the process in order to understand how and why things get done within an organization.

The consensus among management researchers over the years has determined that there are six basic elements of organizational structure (EOS). They are:

  1. Work specialization
  2. Departmentalization
  3. Authority and Responsibility
  4. Span of Control
  5. Centralization versus Decentralization
  6. Formalization

Work Specialization

  1. Definition: This is dividing work activities into separate job tasks. Individual employees specialize in doing part of an activity rather than the entire activity in order to increase work output.
    It is better known as “division of labor”.
  1. Work specialization makes efficient use of the diversity of skills that workers have. In most organizations, some tasks require highly developed skills; while others can be performed by employees with lower level skills.
  2. If all workers were engaged in all steps of the process, all would need the skills necessary to perform both the most demanding and least demanding jobs. Depending on the process, finding people who can do all of the jobs can be troublesome and costly.
  1. Since the acceptance of the idea of job specialization, higher worker productivity has followed.
  2. Every good thing though has its limits. If carried too far, human diseconomies may occur: boredom, fatigue, stress, low productivity, poor quality, increased absenteeism, high employee turnover, etc.

Departmentalization

  1. Definition: This is how jobs in an organization are grouped together.
  2. There is no one perfect method regarding departmentalization. The most efficient and logical arrangement usually depends on the circumstances of the organization. However, some popular types do exist.

Advantages:

  1. Specialization
  2. Growth and Expansion
  3. Fixing Responsibility
  4. Better Customer Service
  5. Performance Appraisal
  6. Management Development
  7. Optimum Utilization of Resources
  8. Facilitates Better Control

Popular types :

  1. Functional- grouping employees by work performed,
  2. Product- grouping employees based on major products,
  3. Customer- grouping employees based on customer problems and needs,
  4. Geographic- grouping employees based on location served,
  5. Process- grouping employees based on the basis of work or customer flow.
  1. Departmentalization remains popular and useful to organizations.
  2. However, a recent trend is the use of “cross-functional” teams. These are groups of individuals from various departments and cross traditional departmental lines. They often are used when new problems or opportunities arise.

Authority and Responsibility

Authority:

  1. It refers to the rights inherent in a managerial position to give orders and expect orders to be obeyed. It is delegated downward to lower-level managers, giving them certain rights while setting certain limits within which to operate.
  2. Each management position has specific inherent rights that are acquired from a position’s rank and title.
    Authority is related to one’s position within an organization and has nothing to do with the personal characteristics of an individual manager.

Responsibility:

  1. It is the obligation to perform. In other words, if one is responsible, then one must do the required duty.
  2. When managers delegate authority, they also must delegate responsibility. For every right, there should be an obligation.
  3. When authority and responsibility are not equally given, then abuse is common.

The chain of command

  1. Definition: The chain of command is the line of authority extending from upper organizational levels to lower levels and it also clarifies who reports to whom. Managers need to consider it when organizing work.
  2. Two types of authority exist: line authority and staff authority.

  1. Line authority entitles a manager to direct the work of an employee. It is the employer-employee authority relationship that extends from the top of the organization to the lowest levels, according to the chain of command.
  2. As a link in the chain of command, a manager with line authority has the right to direct the work of employees and to make certain decisions without consulting anyone.
  3. In the chain of command, every manager also is subject to the direction of his or her superior.
  4. Line managers have organizational functions that contribute directly to the achievement of organizational objectives.
  1. Staff authority functions to support, assist, advise, and generally reduce some of their information burdens.
  2. Staff authority exists when an organization becomes larger and more complex. As an organization grows, line managers often find that they do not have the time, expertise, or resources to get their jobs done effectively.

How do Authority and Power differ?

  1. Authority and power often are considered the same, but they are not.
  2. Authority is a right. Its legitimacy is based on an authority figure’s position in an organization. Power refers to an individual’s capacity to influence decisions.
  3. Authority is a part of power.
    The formal rights that come with an individual’s position in an organization are just one means by which an individual can affect the decision process.

Types of Power:

  1. Coercive power- power based on fear.
  2. Reward power- power based on the ability to distribute something that others value.
  3. Legitimate power- power based on one’s position in the formal hierarchy.
  4. Expert power- power based on one’s expertise, special skill, or knowledge.
  5. Referent power- power based on identification with a person who has desirable resources or personal traits.

Span of Control

  1. Span of Control basically is the number of employees a manager supervises. What is the number which a manager can supervise efficiently and effectively? It depends. No set number exists. Much depends on the position, the circumstances, and the manager’s ability.
  2. There is no set numbers for span of control.
    However, the more a manager’s decision is guided by rules and procedures the more employees will be within his or her span of control.

Centralization versus Decentralization

Definition:

  1. Centralization is the degree to which decision making takes place at upper levels of the organization.
  2. Decentralization is the degree to which lower-level managers provide input for or actually make decisions.
  1. Centralization-Decentralization is not an “either-or” idea.
  2. No organization is completely centralization or completely decentralized. All organizations have a some of each. How much of each depends on how the top management wishes the organization to operate.
  3. Remember, what works for one organization may not work for another.

Formalization

  1. Definition: Formalization refers to how standardized an organization’s jobs are and the extent to which employee behavior is guided by rules and procedures.
  2. Where the degree of formalization is high, employees have little discretion over what’s done, when it’s done, and how it’s done. When the degree is low, employees have more discretion.