2.2.

Organizational Structure

 Organizational Structure
 Way in which the company is organized and the consideration of its internal workings in
an attempt to find an efficient operational practice
 Provides accountability (who is answerable for a specific job) and responsibility (who is
in charge of whom)
 Necessary for: stability, consistency, continuity, unity, efficiency, etc.
 Organizational chart
 Shows different functional departments, chain of command, span of control, and
channels of communication
 Ways to structure a business:
 By function: production process (e.g. editing, printing, sales, etc)
 By product or activity: organizing according to the different products made
 By area: geographical or regional state
 Role of Organizational Chart
 Visual representation of business – see main line of communication
 Shows promotion prospects
 Shows immediate superior for clear communication
 Shows employees their role in the business
 Shows who to pass info to given a problem
 Span of control
 Refers to the number of people who are directly accountable to a manager
 Affects whether an organization is wide/flat or narrow/tall
 Factors:
 Manager’s experience, competence, traits
 Nature of management styles (amount of control needed)
 Skills and dynamics of subordinates (better team, less people)
 Nature of work
 Type of production method used
 Wide/flat organizations – wide span of control
 Direct communication between different levels (fast and accurate)
 Cost control (less managers needed)
 Delegation is more important
 Longer decision making
 Eliminate feeling of alienation of workers from senior management
 Narrow/tall organizations – narrow span of control
 Easier to control smaller amount of subordinates
 May be more productive/efficient (team cohesiveness and specialization)
 Fast communication within team
 More costly (more managers needed)
 More motivation for employees – many promotion opportunities
 Delegation
 Extent a superior passes work down the hierarchy to subordinates
  Can motivate and develop employees while saving time for managers
 May lead to confusion and inadequacy (in case of failure)
 This includes accountability but responsibility still stays with higher authority
 Delegation Checklist (SMARTER)
 Specific – tasks clearly defined
 Measurable – quantifiable results
 Agree – on amount of power and freedom
 Realistic – depends on the ability to carry out the task
 Time Bound – task completion
 Ethical – tasks fairly delegated
 Recorded – documented
 Levels of hierarchy
 Organizational structure based on rank
 Shows clear lines of communication
 Establish departments or teams (motivation and sense of belonging)
 BUT
 Rivalries may occur
 Rigid in terms of scope and authority
 Response to change may be slower
 Departmentalization
 Delayering/downsizing
 Process of removing levels in the hierarchy/reducing managerial levels
 Achieves flatter structure for more flexibility
 Advantages
 Reduce costs
 Improve speed of communication
 Encourage delegation
 Disadvantages
 Can cause job insecurity, demotion, redundancy
 Overstretching of employees
 Costs to train employees
 Chain of command
 The way authority and responsibility pass up and down the organization
 Formal line of authority
 Bureaucracy
 Set of detailed methods and routines to carry out a specific activity
 Involves clear division of roles for a hierarchical system in the organization
 Follows several principles:
 Prioritization of continuity (less risk)
 Rules and regulations
 Formal hierarchy
 Accountability
 Advantages
 Authority and levels of responsibility are obvious
  Standardization of processes to ensure efficiency
 Turns employees into specialists rather than generalists
 Loyalty to department
 Disadvantages
 May stifle creativity
 Rivalries between departments may ensue
 Less job satisfaction; high labor turnover
 Slow decision-making process
 Salaries for the different layers of management increases costs
 Red tape
 Centralization and decentralization
 Centralized structures
 Executive board handles major decision making of the company
 Majority of decision making by minority (senior mgmt.)
 Advantages
 Rapid decision making on single projects
 Better control over all company activity
 Better sense of direction
 Suited for smaller businesses
 Decisions are more consistent
 Cons
 Slow decision making on multiple projects
 Stress for senior staff
 Inflexible
 Demotivating
 Exclusion of other people’s ideas that may be better
 Decentralized structures
 Some decision making is delegated
 Freer communication process
 All employees get to have a pitch in the decisions
 Advantages
 Input from employees
 Speedier decision making
 Improved Morale
 Accountability
 Teamwork
 Cons
 No control
 Greater chance of mistakes
 Reliance on communication
 Redundancy
 Lower standards of work (no governing body)
 Inconsistency between company goals (regional managers)
 Relevant factors
  Size of organization
 Scale of importance of decision
 Level of risk
 Corporate culture
 Management attitude and competencies
 ICT

 Handy’s Shamrock Organization

 People – important resource
 Have to be satisfied through job enrichment and flexible practices
 3 main groups of staff
 Core staff (full time)
 Managers, technicians
 Must be well compensated and have job security
 E-commerce and teleworking have reduced core staff – implies downsizing
 Peripheral workers (part time, contractual)
 Employed only when required
 Less job security and morale but offer more flexibility
 Outsourced workers (subcontracting)
 Paid to do specialized tasks
 Communication
 Transfer of information from one party to another
 Effectiveness depends on
 Clarity of the message
 Medium used (ie. e-mail, telephone, letter, face to face)
 Ability of receiver to decode message
 Cultural differences may affect communication
 e.g. preference for oral communication, use of body language, directness of
language used
 Informal/unofficial communication channels may also emerge
 Technology and innovation also affects communication
 ICT (information and communication technology)