2.2 Organizational Structure

Organization Chart

A diagram that outlines the formal roles, responsibilities, and reporting lines.

Levels of hierarchy: the levels of responsibilities that exist in the business.

Chain of command: The formal route by which a decision must travel through the organization. (how messages pass from the managers to the employees)

The span of control: how many subordinates are directly under the authority of a manager and whom managers are responsible for.

Delegation: When managers give authority to employees to make particular decisions. (without being responsible for making the decision)

Centralization: high degree of centralization→restricting the authority of subordinates (HQ makes all major decisions, the manager makes the final decision)

Decentralization: Senior managers may maintain core strategic decisions, but other decision-making authority is delegated to middle managers. (allow subsidiaries to make)

Floor managers (supervisors), middle, senior.

De-layering: decreasing the levels of hierarchy, in order to make the decision-making process faster and more efficient.

Matrix structure: combines individuals across different functional teams to work on different projects, enables managers to oversee multiple projects simultaneously, is suitable for organizations that operate in rapidly changing environments, relies on collaborations, and help to utilize the synergies. But can lead to confusion or conflict, and challenge decision-making.

Bureaucracy: A business with many levels of authority and a rigid hierarchy (strict rules), held together by a central administration.

Minimize confusion, and easily reach expectations.

Reduced creativity, anti-democratic, hard-to-imply feedback. 

Types of Organization Charts

Tall organizational structure

  • Many levels of hierarchy

  • Narrow spans of control

  • Centralized decision making

  • Autocratic leadership

  • Limited delegation

Flat organizational structure

  • Few levels of hierarchy

  • Wider spans of control

  • Decentralized

  • Shorter chains of command

  • Democratic leadership

  • Increased delegation

Hierarchical organizations

  • Based on powers and authorities.

Organization by-products

  • Employees working in different sections of products.

  • The most popular one.

  • Combine different employees from different departments to different projects, especially for a business that has multiple parallel projects.

Organisation by-region

  • Based on different offices.

  • Geographical locations.

Shamrock Organizations (Charles Handy)

  • Helps to be more flexible in terms of matching external challenges and by focusing more on core activities using the resources.

Two parts: Multiskilled core and periphery

Shamrock model

Core (core managers, technicians, and employees essential to the business), contractual (non-core activities are subcontracted out to specialist businesses), and temporary (part-term flexible workforce)

Professional core (full-time, experienced and essential staff), contingent workforce (peripheral workers, temporary and portfolio workers on a short-time basis), and outsources vendors (business hired on a contract basis to do specific tasks).

Communication

With the business’s stakeholders (internal and external).

Integral to how a business functions.

5 elements: sender, media (medium), receiver, receiver background (should be able to understand the message), and the feedback from the receiver to the sender.

Forms of communication:

1. Verbal 2. Visual 3. Written