Lesson 2: Organizational Structure

Basic Definition

• Formal system of 1) Tasks & 2) Forming Relationships

• A pillar of Organizational Architecture

• 3 Tasks:

  • Grouping Tasks into Individual Jobs

  • Grouping Jobs to specific functions

  • Allocating authority over functions and divisions

• Extremely resource intensive to change

6 Key Elements

1. Work Specialization

2. Departmentalization

3. Span of Control

4. Chain of command

5. Centralization and Decentralization

6. Formalization

Work Specialization

• Division of Labor

  • Degree to which tasks are subdivided into specialized jobs

• High Specialization = Efficiency that can lead to boredom

Formalization

• Degree of Standardization for Tasks & Roles

• Higher = Stronger Bureaucracy

Departmentalization Definition

• How the different Units of a company are structured

Functional Structure Definition (Departmentalization)

• All Activities grouped by function/department (Marketing)

• Best Environment:

  • Stable, Few Competitors, Simple Product/Services, Non Innovative

Pro’s Functional Structure

• Pros:

  • Economies of scale + Specialization

  • Strong communication, coordination, control inside the function

  • Managers can monitor, evaluate and teach effectively

Cons Functional Structure

• Cons:

  • Cross Function communication is difficult (Sometimes they don’t even work together and compete for resources)!

  • Workers more focused on function than their Organizational Goals

  • Adaptation takes a long time

Divisional Structure

• Company has Separate Business Units (Divisions) → Each contain functions (Marketing/HR etc.)

  • Can be regional, customer types, product types divisions

Divisional Structure