Organizational Structure
| Site: | Saylor Academy |
| Course: | BUS402: Project Management |
| Book: | Organizational Structure |
| Printed by: | Guest user |
| Date: | Wednesday, 2 April 2025, 10:42 PM |
Description
Read each of the four sections of this chapter on organizational structure. Having a basic understanding of organizational design will help you strategize risk management, project initiation, leadership, and more. What is the most important aspect of understanding organizational design you would take away from this section? Why?
The Role of Management in an Organization
Management is tasked with generating an organizational system and integrating operations for high efficiency.Learning Objectives
Categorize the three primary managerial levels in an organizationKey Takeaways
Key Points
- Management may be described as the the people who design an organization's structure and determine how different aspects of the organization will interact.
- Management entails six basic functions: planning, organizing, staffing, leading, controlling, and motivating.
- Different levels of management will participate in different components of this design process, with upper management creating the initial organizational architecture and structure.
- Organizational design is largely a function based on systems thinking: identifying the moving parts within an organization that add value and ensuring that these parts function together as an effective and efficient whole.
- Organizational design is less static in modern organizations; therefore, management must actively adapt organizational design to various challenges, opportunities, and technological improvements to maintain competitive output.
Key Terms
- organization chart: A graphic display of reporting relationships, which sometimes displays position titles and position holders.
- systems thinking: The process of understanding how parts influence one another within a whole.
Management and Organizational Design
Management can be described as the people who design an organization's structure and determine how different aspects of the organization will interact. When designing an organization, managers must consider characteristics such as simplicity, flexibility, reliability, economy, and acceptability. Different levels of management will participate in different components of this design process, with upper management creating the initial organizational architecture and structure.Organizational design is largely a function based on systems thinking. Systems thinking involves identifying the moving parts within an organization that add value and ensuring that these parts function together as an effective and efficient whole. Perspective is essential in systems thinking: a manager's role in organizational design is to refrain from thinking of departments, individuals, processes, and problems as separate from the system and instead think of them as indivisible components of the broader organizational process.
Modern organizations exist within a framework of globalization and constant technological disruptions; as a result their organizational design is less static than in the past. Management must actively adapt organizations to meet various challenges, opportunities, and technological improvements to maintain competitive output. Because the organization is always changing, the problems of process and design are essentially limitless. Using a systems approach, managers view their objectives as moving targets and actively engage in expanding the organization day by day.
Management Processes
Organizations can be viewed as systems in which management creates the architecture for the system of production. Managers' role in organizational design is central but must be understood in the context of their overall responsibilities within the organization.
Management operates through functions such as planning, organizing,
staffing, leading/directing, controlling/monitoring, and motivation.
These functions enable management to create strategies and compile
resources to lead operations and monitor outputs.
The functions of management:
Management operates through four main functions: planning, organizing,
directing (i.e., leading), and controlling (i.e., monitoring and
assessing).
Management Hierarchy
All levels of management perform these functions. However, the amount of time a manager spends on each function depends on the level of management and the needs of the organization - factors which play a role in organizational design.- Top-level managers include the board of directors, president, vice-president, CEO, and other similar positions. They are responsible for planning and directing the entire organization.
- Middle-level managers include general managers, branch managers, and department managers, all of whom are accountable to the top-level management for the functions of their departments. They devote more time to organizing and directing.
- First-level managers include supervisors, section leads, foremen, and similar positions. They focus on controlling and directing.
Source: Boundless, https://www.coursehero.com/study-guides/boundless-management/defining-organization/
This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 3.0 License.
Basic Types of Organizations
Most organizations fall into one of four types: pyramids/hierarchies, committees/juries, matrix organizations, and ecologies.
Learning Objectives
Describe the basic types of organizations using four common structuresKey Takeaways
Key Points
- Organizations fall into one of four basic types: pyramids/ hierarchies, committees/juries, matrix organizations, and ecologies.
- From a business perspective, the choice of organizational design has substantial implications for strategy, authority distribution, resource allocation, and functional approaches.
- A pyramid/hierarchy has a leader who is responsible for making all decisions that affect the organization. This leader manages other organizational members.
- Committees/juries consist of groups of peers who decide collectively, sometimes by casting votes, on the appropriate courses of action within the organization.
- Matrix organizations assign workers to more than one reporting line in an attempt to maximize the benefits of both functional and decentralized organizational forms.
- In ecologies, each business unit represents an individual profit center that holds employees accountable for the unit's profitability.
Key Terms
- common law: A precedent or policy developed by judges through decisions of courts and similar tribunals.
- functional: A structure that consists of activities such as coordination, supervision, and task allocation.
- decentralized: A structure where business units operate autonomously and have greater decision-making power.
Basic Organizational Structures
An organization is a social entity with collective goals that is linked to an external environment. Most organizational structures fall into one of four types: pyramids/hierarchies, committees/juries, matrix organizations, and ecologies. From a business perspective, the choice of organizational design has substantial implications for strategy, authority distribution, resource allocation, and functional approaches.Pyramid/Hierarchy
An organization using a pyramid or hierarchy structure has a leader who is responsible for and makes all the decisions affecting the organization. This leader manages other organizational members. Pyramids and hierarchies often rely on bureaucratic practices, such as clearly defined roles and responsibilities and rigid command and control structures. Like a physical pyramid, these organizations need a sturdy base with sufficient members to support various levels of management within the overall structure so that the organization does not fall short of its goals.
From a business perspective, a hierarchy will often be divided according
to function or geography. For example, a global retailer may utilize a
geographic hierarchy at the upper level, with each geographic branch
creating a functional hierarchy beneath it. A smaller organization
operating in a single region may simply have a functional hierarchy.
The Iraqi Special Security Organization: This organizational chart of the Iraqi Special Security Organization illustrates a hierarchy. Note the multiple separate layers to the organization's hierarchy; the lowest layer includes individual branches, the next layer involves supervisory directorates, which report to the director's office, who is accountable to the scientific branch.
Committee/Jury
Committees or juries consist of groups of peers who decide collectively, sometimes by casting votes, on the appropriate courses of action within an organization. Committees and juries have a basic distinction: members of a committee usually perform additional actions after the group reaches a decision, while a jury's work concludes once the group has reached a decision. In countries with common-law practices, for example, a jury of peers render innocent or guilty verdicts in the court system. Juries are often used to determine athletic contests, book awards, and similar contests.In the business world, a committee structure is more commonly found in smaller institutions. A start-up company with three people, for example, may easily function as a committee in which decisions are made via discussion. Committees represent a decentralized approach to organizational design and tend to have a collaborative, often unstructured workplace. The more people involved, the more disparate and less effective committee structures become.
Matrix
Matrix organizations assign employees to two reporting lines, each with a boss representing a different hierarchy. One hierarchy is functional and assures that experts in the organization are well-trained and assessed by bosses who are highly qualified in the same areas of expertise. The other hierarchy is executive and works to ensure the experts bring specific projects to completion. Matrix organizations are by far the most complex and are more common in large corporations.Projects can be organized by product, region, customer type, or other organizational need. The matrix structure combines the best parts of both separate structures. In a matrix organization, teams of employees perform work to take advantage of the strengths and compensate for the weaknesses of both the functional and decentralized forms of organizational structure. Matrix organizations may be further categorized as one of the following types:
- Weak/Functional Matrix: A project manager with limited authority is assigned to oversee cross-functional aspects of the project. Functional managers maintain control over their resources and project areas.
- Balanced/Functional Matrix: A project manager is assigned to oversee the project. Power is shared equally between the project manager and functional managers, combining the best aspects of functional and project-oriented organizations. This system is the most difficult to maintain because of difficulties in power-sharing.
- Strong/Project Matrix: A project manager is primarily responsible for the project. Functional managers provide technical expertise and assign resources as needed.
Ecology
In ecologies, each business unit represents an individual profit center that holds employees accountable for the unit's profitability. These kinds of organizations foster intense competition, as all members are paid for the actual work they perform. Ineffective parts of the organization are left to fail and thriving parts are rewarded with more work. Companies that use this organizational structure define roles and responsibilities strictly, and each business unit tends to operate autonomously. In an ecology organization, clearly defined, measurable objectives that reflect the business's goals are critical.The Organizational Chart
An organization chart is a diagram that illustrates the structure of an organization.
Learning Objectives
Compare the various types of organization charts that describe company structuresKey Takeaways
Key Points
- Organization charts are a vital tool of management and can be classified into three broad categories: hierarchical, matrix, and flat (or horizontal).
- Organization charts illustrate the structure of an organization, the relationships and relative ranks of its business units/divisions, and the positions or roles assigned to each unit/division.
- Before working with an organization, employees should procure a copy of its organizational chart. A new employee or manager can then understand how authority is distributed within the organization and with whom to consult about various concerns.
Key Terms
- decentralized: Dispersed rather than concentrated in a single, central location or authority.
The Purpose of Organization Charts
An organization chart (sometimes called an organizational chart, an org chart, or an organogram) is a diagram that illustrates the structure of an organization, the relationships and relative ranks of its business units/divisions, and the positions or roles assigned to each unit/division.Examples of such roles include managers of various departments, subordinates within these departments, directors, and chief executive officers. When an organization chart grows too large, it can be split into smaller charts that show only individual departments within the organization.
Prior to applying for a job or beginning work with an organization, a prospective employee should procure a copy of the organization chart. New employees or managers can then know with whom to consult about particular issues, as well as understand the distribution of authority within the company. The org chart can also provide insight into the broader strategy of the company - such as the degree of innovation versus process control being pursued, the flexibility of project management, the degree of autonomy, and the broader company culture.
The different types of organization charts include hierarchical, matrix,
and flat (also known as horizontal). These are described briefly below.
Hierarchical Organization Charts
A hierarchical organization is an organizational structure with several reporting layers. Every entity within the organization - except for the owners - is subordinate and reports to a higher level entity.Matrix Organization Charts
A matrix organizational chart displays how people with similar skills are pooled together for work assignments.
Matrix organizational chart:
In a matrix structure, the organization is grouped by both product and
function. Product lines are managed horizontally and functions are
managed vertically. This means that each function - e.g., research,
production, sales, and finance - has separate internal divisions for each
product.
Flat or Horizontal Organization Charts
A flat organization chart shows few or no levels of intervening management between staff and managers. A flat chart will simply look like a line of boxes with no overt authority implied.Characteristics of Organizational Structures
Important characteristics of an organization's structure include span of
control, departmentalization, centralization, and decentralization.
Learning Objectives
Outline the departmentalization options available to corporations from an organizational structure perspective and differentiate between centralized and decentralized decision-making, and the resulting structural implicationsKey Takeaways
Key Points
- Organizational structures provide basic frameworks to help operations proceed smoothly and functionally.
- Span of control refers to the number of subordinates a supervisor has; it is used as a means of ensuring proper coordination and a sense of accountability among employees.
- Departmentalization is the basis by which an organization groups tasks together. There are five common approaches: functional, divisional, matrix, team, and network.
- Centralization occurs when decision -making authority is located in the upper organizational levels. Centralization increases consistency in the processes and procedures that employees use in performing tasks.
- Decentralization occurs when decision-making authority is located in the lower organizational levels. With decentralized authority, important decisions are made by middle-level and supervisory-level managers, thereby increasing adaptability.
Key Terms
- span of control: The number of subordinates a supervisor has.
Organizational structures provide basic frameworks to help operations
proceed smoothly and functionally. Types of organizational structures
include functional, divisional, matrix, team, network, and horizontal
structures. Each of these structures provides different degrees of four
common organizational elements: span of control, departmentalization,
centralization, and decentralization.
Span of Control
Span of control - or the number of subordinates a supervisor has - is used as a means of ensuring proper coordination and a sense of accountability among employees. It determines the number of levels of management an organization has as well as the number of employees a manager can efficiently and effectively manage. In the execution of a task, hierarchical organizations usually have different levels of task processes. Workers at various levels send reports on their progress to the next levels until the work is completed.
In the past it was not uncommon to see average spans of one to four (one
manager supervising four employees). With the development of
inexpensive information technology in the 1980s, corporate leaders
flattened many organizational structures and caused average spans to
move closer to one to ten. As this technology developed further and
eased many middle-managerial tasks (such as collecting, manipulating,
and presenting operational information), upper management found they
could save money by hiring fewer middle managers.
Departmentalization
Departmentalization is the process of grouping individuals into departments and grouping departments into total organizations. Different approaches include:- Functional - departmentalization by common skills and work tasks
- Divisional - departmentalization by common product, program, or geographical location
- Matrix - a complex combination of functional and divisional
- Team - departmentalization by teams of people brought together to accomplish specific tasks
- Network - independent departments providing functions for a central core breaker
Centralization
Centralization occurs when decision-making authority is located in the upper organizational levels. Centralization increases consistency in the processes and procedures that employees use in performing tasks. In this way, it promotes workplace harmony among workers and reduces the cost of production. Centralization is usually helpful when an organization is in crisis and/or faces the risk of failure.Centralization allows for rapid, department-wide decision-making; there is also less duplication of work because fewer employees perform the same task. However, it can limit flexibility and natural synergies. Autonomy in decision-making is reserved for only a small number of individuals within the workforce, potentially limiting creativity.
Centralization vs. decentralization:
This diagram compares visual representations of a centralized vs.
decentralized organizational structure. Notice how the representation of
the centralized organization looks like one large asterisk with many
spokes, whereas the representation of the decentralized organization
looks like many small interconnected asterisks.