Organizational Structure

Organizational structure: An organizational structure defines how job tasks are formally
divided, grouped, and coordinated. The structure an organization adopts plays a crucial role in
determining the effectiveness and efficiency of its operations, as well as how information flows
within the company.
Key elements
1. Work specialization/ Division of Labor: Tt describes the degree to which activities in the
organization are divided into separate jobs and steps, each completed by a separate individual. It
makes employees to be experts in their specific tasks, thus increases efficiency and effectiveness.
2. Departmentalization: Once jobs have been divided through work specialization, they must be
grouped so common tasks can be coordinated and complexity can be reduced. The basis by
which jobs are grouped is called departmentalization. Common ways to departmentalize include:
 Functional: Employees are grouped by similar functions or activities (e.g., marketing,
production, finance).
 Divisional: Grouping is based on products, geographical areas, or customer segments
(e.g., product divisions, regional divisions).
 Matrix: Combines functional and divisional approaches, where employees report to both
a functional manager and a project or product manager.
3. Chain of command/Hierarchy of Authority: This refers to a clear chain of command
ensures that every employee knows who to report to, and who is responsible for decision-
making. The chain of command is an unbroken line of authority that extends from the top of the
organization to the lowest echelon and clarifies who reports to whom.
4. Span of control: The number of subordinates that a manager can direct efficiently and
effectively. A wide span of control means one manager supervises many employees, whereas a
narrow span indicates fewer subordinates per manager. The span of control affects the speed and
effectiveness of communication and decision-making.
 Figure: Contrasting Spans of Control

5. Centralization and decentralization:

 Centralization: Decision-making authority is concentrated at the top levels of
management. This can provide consistency but may slow down decision-making.
 Decentralization: Decision-making is distributed to lower levels in the hierarchy. It
allows for quicker decisions, more flexibility, and empowerment at lower levels, but may
reduce consistency.
6. Formalization: Formalization refers to the degree to which jobs within the organization are
standardized. If a job is highly formalized, the employee has a minimal amount of discretion
over what to and when and how to do it, resulting in consistent and uniform output. Highly
formalized organizations have a clear set of rules that govern employee behavior, while less
formalized organizations allow for more flexibility and innovation.

7. Boundary spanning: Boundary spanning occurs when individuals form relationships with
people outside their formally assigned groups. These activities help prevent formal structures
from becoming too rigid and, enhance organization and team creativity, decision making,
knowledge sharing, and performance.
Common Organizational Frameworks and Structures
Organizational designs are known by many names and are constantly evolving in response to
changes in the way work is done. The three common organizational frameworks: the simple
structure, the bureaucracy, and the matrix structure.
1. Simple Structure
 Definition: An organizational structure characterized by a low degree of
departmentalization, wide spans of control, authority centralized in a single person, and
little formalization.
 Features: Few rules and formalities; centralized decision-making usually falls to the
owner or top manager.
 Advantages: Flexibility, quick decision-making.
 Challenges: Often lacks clear role definitions, making it unsuitable for larger, more
complex organizations.
 Example: Local Restaurant or Small Retail Store, or startups.

Figure: Simple Structure

2. Bureaucratic Structure
 Definition: An organizational structure with highly routine operating tasks achieved
through specialization, much formalized rules and regulations, tasks that are grouped into
functional departments, centralized authority, narrow spans of control, and decision
making that follows the chain of command.
 Features: Defined roles, rigid operational procedures, specialization.
 Advantages: Efficient in stable environments where tasks are routine.
 Challenges: Can stifle innovation and responsiveness due to rigidity.
 Example: Government Agencies or Large Corporations.

3. Matrix Structure
 Definition: Blends functional and product-based structures, creating a dual authority
system where employees report to both functional and project/product managers.
 Features: Flexibility, cross-functional collaboration.
 Advantages: Promotes resource sharing across departments, effective for project-based
work.
 Challenges: Complexity in reporting relationships can lead to role ambiguity and
potential conflicts.
 Example: IBM or Google’s Project Teams.

Figure: Matrix Structure

Newer Trends in Organizational Design

With the increasing trend toward flatter structures, many organizations have been developing
alternative options with fewer layers of hierarchy and more emphasis on opening the boundaries
of the organization. In this section, we describe three such designs: the virtual structure, the team
structure, and the circular structure.

1. The Virtual Structure

 Definition: A small, core organization that outsources major business functions.
 Features: Highly adaptable, reduces physical and administrative overhead.
 Advantages: Cost-effective, flexible, and ideal for global reach.
  Challenges: Communication and control are more challenging, with risks related to team
cohesion and performance management.
 Example: Recently, streaming services like Netflix, Hulu, Amazon Prime, and Disney+
etc.

2. The Team Structure

 Definition: Centers on cross-functional teams responsible for specific tasks or projects,
often used in organizations that prioritize collaboration.
 Features: Flexible, emphasizes horizontal coordination.
 Advantages: Enhances innovation, allows for rapid adaptation to change, fosters
empowerment.
 Challenges: Can lack clear leadership and accountability, potentially resulting in
coordination issues.
 Example: IDEO (Design Firm).

3. The Team Structure

 Definition: An organizational structure in which executives are at the center, spreading
their vision outward in rings grouped by function (managers, then specialists, then
workers).
 Features: Centralized Vision, Functional Rings, Collaboration Focused, Flexible
Communication.
 Advantages: Aligned Culture, Increased Collaboration, and Enhanced Agility, Employee
Empowerment.
  Challenges: Role Ambiguity, Scalability Issues, Slower Decision-Making,
Accountability Gaps
 Example: Google X Lab Project.

Figure: Circular Structure

Authority and Responsibility: Authority and responsibility are two key concepts in
management that work hand in hand to ensure effective task execution within an organization.
While they are distinct, they are interdependent and must be balanced for successful leadership
and organizational performance.
Authority:
 The rights inherent in a managerial position to give orders and to expect the orders to be
obeyed.
 Authority is the formal right or power that is given to a manager or leader to make
decisions, give orders, and allocate resources to achieve organizational goals. It is derived
from the position the person holds in the organizational hierarchy.
Characteristics: Legitimacy, Decision-Making Power, Influence over Subordinates, and
Hierarchy.
Example: A production manager in a manufacturing company has the authority to decide on
production schedules, assign tasks to workers, and allocate resources to meet deadlines.

Responsibility:
 Responsibility refers to the obligation or duty of an individual to carry out tasks assigned
to them.
 It is the commitment to perform a specific role or activity and ensure that objectives are
met.
Characteristics: Obligation to Perform, Accountability, Non-transferable, Commitment.
Example: The same production manager, after assigning production tasks to a team leader, still
holds the responsibility to ensure the production targets are met, even though the tasks have been
delegated.

Authority delegation:
 It is the process by which a manager or superior transfers responsibility and the
corresponding decision-making power to a subordinate to perform specific tasks.
 Delegation allows managers to allocate work and focus on higher-level tasks while
empowering subordinates to take ownership of certain responsibilities.
Steps in the Delegation Process
1. Identify the Task: The manager selects the task or responsibility to be delegated. This
involves determining which tasks are appropriate for delegation, usually those that are
routine or can be handled at a lower level of the organization.
2. Select the Right Person: The manager identifies the appropriate subordinate to take on
the task. It is important to match the task with the skills, experience, and capabilities of
the employee.
3. Assign the Task: The manager clearly communicates the task to the chosen employee,
specifying the expectations, desired outcomes, and deadlines.
4. Grant Authority: The manager empowers the subordinate by providing the necessary
authority to make decisions related to the task. This includes access to resources,
information, and the right to take necessary actions.
5. Monitor and Support: While authority is delegated, the manager should still provide
oversight and support when needed. This involves tracking progress, providing guidance,
and offering assistance if challenges arise.
6. Evaluate and Provide Feedback: After the task is completed, the manager evaluates the
employee’s performance and gives feedback. This is an important step for reinforcing
accountability and learning.
Principles of Effective Delegation
1. Clarity of Task and Authority: The task to be delegated, along with the scope of
authority, must be clearly defined. The subordinate should know exactly what is
expected, including deadlines and performance standards.
2. Matching Skills with Responsibility: Tasks should be delegated to employees with the
skills, knowledge, and competence to complete them. Poor delegation can result in
mistakes, inefficiencies, and frustration for both the manager and the subordinate.
 3. Monitoring without Micromanaging: While the manager should provide support and
monitor progress, excessive interference can undermine the benefits of delegation.
Subordinates need the space to take ownership of the task and make decisions
independently.
4. Accountability: Managers must ensure that the delegated tasks come with clear
accountability for the results. Even though the authority is delegated, the manager retains
ultimate responsibility for the outcome and should ensure proper evaluation of the
subordinate’s work.
Feedback and Recognition: After the task is completed, managers should provide constructive
feedback to subordinates. Recognizing successful completion of delegated tasks boosts employee
morale and builds trust.