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 implications

Key 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

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.


Decentralization

Decentralization occurs when decision-making authority is dispersed among the lower organizational levels. With decentralized authority, important decisions are made by middle-level and supervisory-level managers. Because there are fewer hierarchical layers to navigate, this kind of structure helps to enable adaptability, quick reactions to lower level issues, and more empowered employees. However, making organization-wide changes that are implemented homogeneously can become quite difficult in this system.