Organizational structure

An organizational structure consists of activities such as task allocation, coordination and supervision, which are directed towards the achievement of organizational aims.[1] It can also be considered as the viewing glass or perspective through which individuals see their organization and its environment [2] Many organizations have hierarchical structures, but not all.[citation needed] Organizations are a variant of clustered entities.[citation needed] An organization can be structured in many different ways, depending on their objectives. The structure of an organization will determine the modes in which it operates and performs. Organizational structure allows the expressed allocation of responsibilities for different functions and processes to different entities such as the branch, department, workgroup and individual. Organizational structure affects organizational action in two big ways. First, it provides the foundation on which standard operating procedures and routines rest. Second, it determines which individuals get to participate in which decision-making processes, and thus to what extent their views shape the organizations actions.[2]

Operational organizations and informal organizations

See also: Informal organization and Formal organization

The set organizational structure may not coincide with facts, evolving in operational action. Such divergence decreases performance, when growing. E.g. a wrong organizational structure may hamper cooperation and thus hinder the completion of orders in due time and within limits of resources and budgets. Organizational structures shall be adaptive to process requirements, aiming to optimize the ratio of effort and input to output.

History
See also: Hierarchical organization and Flat organization

Organizational structures developed from the ancient times of hunters and collectors in tribal organizations through highly royal and clerical power structures to industrial structures and today's post-industrial structures. As pointed out by Mohr (1982, pp. 102103), the early theorists of organizational structure, Taylor, Fayol, and Weber "saw the importance of structure for effectiveness and efficiency and assumed without the slightest question that whatever structure was needed, people could fashion accordingly. Organizational structure was considered a matter of choice... When in the 1930s, the rebellion began that came to be known as human relations theory, there was still not a denial of the idea of structure as an artifact, but rather an advocacy of the creation of a different sort of structure, one in which the needs, knowledge, and opinions of employees might be given greater

recognition." However, a different view arose in the 1960s, suggesting that the organizational structure is "an externally caused phenomenon, an outcome rather than an artifact."[3] In the 21st century, organizational theorists such as Lim, Griffiths, and Sambrook (2010) are once again proposing that organizational structure development is very much dependent on the expression of the strategies and behavior of the management and the workers as constrained by the power distribution between them, and influenced by their environment and the outcome.[4]
[edit] Organizational structure types [edit] Pre-bureaucratic structures

Pre-bureaucratic (entrepreneurial) structures lack standardization of tasks. This structure is most common in smaller organizations and is best used to solve simple tasks. The structure is totally centralized. The strategic leader makes all key decisions and most communication is done by one on one conversations. It is particularly useful for new (entrepreneurial) business as it enables the founder to control growth and development. They are usually based on traditional domination or charismatic domination in the sense of Max Weber's tripartite classification of authority
[edit] Bureaucratic structures

Weber (1948, p. 214) gives the analogy that the fully developed bureaucratic mechanism compares with other organizations exactly as does the machine compare with the nonmechanical modes of production. Precision, speed, unambiguity, strict subordination, reduction of friction and of material and personal costs- these are raised to the optimum point in the strictly bureaucratic administration.[5] Bureaucratic structures have a certain degree of standardization. They are better suited for more complex or larger scale organizations. They usually adopt a tall structure. Then tension between bureaucratic structures and non-bureaucratic is echoed in Burns and Stalker[6] distinction between mechanistic and organic structures. It is not the entire thing about bureaucratic structure. It is very much complex and useful for hierarchical structures organization, mostly in tall organizations. The Weberian characteristics of bureaucracy are:
y y y

Clear defined roles and responsibilities A hierarchical structure Respect for merit.

[edit] Post-bureaucratic

The term of post bureaucratic is used in two senses in the organizational literature: one generic and one much more specific.[7] In the generic sense the term post bureaucratic is often used to describe a range of ideas developed since the 1980s that specifically contrast themselves with Weber's ideal type bureaucracy. This may include total quality management, culture management and matrix management, amongst others. None of these however has left behind the

core tenets of Bureaucracy. Hierarchies still exist, authority is still Weber's rational, legal type, and the organization is still rule bound. Heckscher, arguing along these lines, describes them as cleaned up bureaucracies,[8] rather than a fundamental shift away from bureaucracy. Gideon Kunda, in his classic study of culture management at 'Tech' argued that 'the essence of bureaucratic control - the formalisation, codification and enforcement of rules and regulations does not change in principle.....it shifts focus from organizational structure to the organization's culture'. Another smaller group of theorists have developed the theory of the Post-Bureaucratic Organization.,[8] provide a detailed discussion which attempts to describe an organization that is fundamentally not bureaucratic. Charles Heckscher has developed an ideal type, the postbureaucratic organization, in which decisions are based on dialogue and consensus rather than authority and command, the organization is a network rather than a hierarchy, open at the boundaries (in direct contrast to culture management); there is an emphasis on meta-decision making rules rather than decision making rules. This sort of horizontal decision making by consensus model is often used in housing cooperatives, other cooperatives and when running a non-profit or community organization. It is used in order to encourage participation and help to empower people who normally experience oppression in groups. Still other theorists are developing a resurgence of interest in complexity theory and organizations, and have focused on how simple structures can be used to engender organizational adaptations. For instance, Miner et al. (2000) studied how simple structures could be used to generate improvisational outcomes in product development. Their study makes links to simple structures and improviseal learning. Other scholars such as Jan Rivkin and Sigglekow,[9] and Nelson Repenning [10] revive an older interest in how structure and strategy relate in dynamic environments.
[edit] Functional structure

Employees within the functional divisions of an organization tend to perform a specialized set of tasks, for instance the engineering department would be staffed only with software engineers. This leads to operational efficiencies within that group. However it could also lead to a lack of communication between the functional groups within an organization, making the organization slow and inflexible. As a whole, a functional organization is best suited as a producer of standardized goods and services at large volume and low cost. Coordination and specialization of tasks are centralized in a functional structure, which makes producing a limited amount of products or services efficient and predictable. Moreover, efficiencies can further be realized as functional organizations integrate their activities vertically so that products are sold and distributed quickly and at low cost.[11] For instance, a small business could start making the components it requires for production of its products instead of procuring it from an external organization.But not only beneficial for organization but also for employees faiths.

[edit] Divisional structure

Also called a "product structure", the divisional structure groups each organizational function into a division. Each division within a divisional structure contains all the necessary resources and functions within it. Divisions can be categorized from different points of view. One might make distinctions on a geographical basis (a US division and an EU division, for example) or on product/service basis (different products for different customers: households or companies). In another example, an automobile company with a divisional structure might have one division for SUVs, another division for subcompact cars, and another division for sedans. Each division may have its own sales, engineering and marketing departments.
[edit] Matrix structure

The matrix structure groups employees by both function and product. This structure can combine the best of both separate structures. A matrix organization frequently uses teams of employees to accomplish work, in order to take advantage of the strengths, as well as make up for the weaknesses, of functional and decentralized forms. An example would be a company that produces two products, "product a" and "product b". Using the matrix structure, this company would organize functions within the company as follows: "product a" sales department, "product a" customer service department, "product a" accounting, "product b" sales department, "product b" customer service department, "product b" accounting department. Matrix structure is amongst the purest of organizational structures, a simple lattice emulating order and regularity demonstrated in nature.
y

Weak/Functional Matrix: A project manager with only limited authority is assigned to oversee the cross- functional aspects of the project. The 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 the functional managers. It brings the best aspects of functional and projectized organizations. However, this is the most difficult system to maintain as the sharing power is delicate proposition. Strong/Project Matrix: A project manager is primarily responsible for the project. Functional managers provide technical expertise and assign resources as needed.

Among these matrixes, there is no best format; implementation success always depends on organization's purpose and function.
[edit] Organizational circle: moving back to flat

The flat structure is common in enterprenerial start-ups, university spin offs or small companies in general. As the company grows, however, it becomes more complex and hierarchical, which leads to an expanded structure, with more levels and departments. Often, it would result in bureaucracy, the most prevalent structure in the past. It is still, however, relevant in former Soviet Republics and China, as well as in most governmental organizations all

over the world. Shell Group used to represent the typical bureaucracy: top-heavy and hierarchical. It featured multiple levels of command and duplicate service companies existing in different regions. All this made Shell apprehensive to market changes,[12] leading to its incapacity to grow and develop further. The failure of this structure became the main reason for the company restructuring into a matrix. Starbucks is one of the numerous large organizations that successfully developed the matrix structure supporting their focused strategy. Its design combines functional and product based divisions, with employees reporting to two heads.[13] Creating a team spirit, the company empowers employees to make their own decisions and train them to develop both hard and soft skills. That makes Starbucks one of the best at customer service. Some experts also mention the multinational design,[14] common in global companies, such as Procter & Gamble, Toyota and Unilever. This structure can be seen as a complex form of the matrix, as it maintains coordination among products, functions and geographic areas. In general, over the last decade, it has become increasingly clear that through the forces of globalization, competition and more demanding customers, the structure of many companies has become flatter, less hierarchical, more fluid and even virtual.[15]
[edit] Team

One of the newest organizational structures developed in the 20th century is team. In small businesses, the team structure can define the entire organization.[14] Teams can be both horizontal and vertical.[16] While an organization is constituted as a set of people who synergize individual competencies to achieve newer dimensions, the quality of organizational structure revolves around the competencies of teams in totality.[17] For example, every one of the Whole Foods Market stores, the largest natural-foods grocer in the US developing a focused strategy, is an autonomous profit centre composed of an average of 10 self-managed teams, while team leaders in each store and each region are also a team. Larger bureaucratic organizations can benefit from the flexibility of teams as well. Xerox, Motorola, and DaimlerChrysler are all among the companies that actively use teams to perform tasks.
[edit] Network

Another modern structure is network. While business giants risk becoming too clumsy to proact (such as), act and react efficiently,[18] the new network organizations contract out any business function, that can be done better or more cheaply. In essence, managers in network structures spend most of their time coordinating and controlling external relations, usually by electronic means. H&M is outsourcing its clothing to a network of 700 suppliers, more than two-thirds of which are based in low-cost Asian countries. Not owning any factories, H&M can be more flexible than many other retailers in lowering its costs, which aligns with its low-cost strategy.[19] The potential management opportunities offered by recent advances in complex networks theory have been demonstrated [20] including applications to product design and development,[21] and innovation problem in markets and industries.[22]

[edit] Virtual

A special form of boundaryless organization is virtual. Hedberg, Dahlgren, Hansson, and Olve (1999) consider the virtual organization as not physically existing as such, but enabled by software to exist.[23] The virtual organization exists within a network of alliances, using the Internet. This means while the core of the organization can be small but still the company can operate globally be a market leader in its niche. According to Anderson, because of the unlimited shelf space of the Web, the cost of reaching niche goods is falling dramatically. Although none sell in huge numbers, there are so many niche products that collectively they make a significant profit, and that is what made highly innovative Amazon.com so successful.[24]
[edit] Hierarchy-Community Phenotype Model of Organizational Structure

Hierarchy-Community Phenotype Model of Organizational Structure

In the 21st century, even though most, if not all, organizations are not of a pure hierarchical structure, many managers are still blind-sided to the existence of the flat community structure within their organizations.[25] The business firm is no longer just a place where people come to work. For most of the employees, the firm confers on them that sense of belonging and identity- the firm has become their village, their community.[26] The business firm of the 21st century is not just a hierarchy which ensures maximum efficiency and profit; it is also the community where people belong to and grow together- where their affective and innovative needs are met.[4] Lim, Griffiths, and Sambrook (2010) developed the Hierarchy-Community Phenotype Model of Organizational Structure borrowing from the concept of Phenotype from genetics. "A phenotype refers to the observable characteristics of an organism. It results from the expression of an organisms genes and the influence of the environment. The expression of an organisms genes is usually determined by pairs of alleles. Alleles are different forms of a gene. In our model, each employees formal, hierarchical participation and informal, community participation within the

organization, as influenced by his or her environment, contributes to the overall observable characteristics (phenotype) of the organization. In other words, just as all the pair of alleles within the genetic material of an organism determines the physical characteristics of the organism, the combined expressions of all the employees formal hierarchical and informal community participation within an organization give rise to the organizational structure. Due to the vast potentially different combination of the employees formal hierarchical and informal community participation, each organization is therefore a unique phenotype along a spectrum between a pure hierarchy and a pure community (flat) organizational structure."[4
The framework, typically hierarchical, within which an organization arranges its lines of authority and communications, and allocates rights and duties. Organizational structure determines the manner and extent to which roles, power, and responsibilities are delegated, controlled, and coordinated, and how information flows between levels of management. An structure depends entirely on the organization's objectives and the strategy chosen to achieve them. In a centralized structure, the decision making power is concentrated in the top layer of the management and tight control is exercised over departments and divisions. In a decentralized structure, the decision making power is distributed and the departments and divisions have varying degrees of autonomy. An organizational chart illustrates the organizational structure. Organizational structure is a formal system of job relationship that coordinates employees to achieve a company's goals.

1. History
o

At the beginning of commerce, merchants declared structure important in distinguishing talents among workers in order to promote talented individuals. The idea of organizational structure has evolved into an array of divisions to improve company functions through cooperation.

Significance
o

The significance of an organizational structure is establishing a clear form of operations so employees understand their responsibility and tasks in alignment with accomplishing company goals.

Types
o

Certain organizational structures include matrix, functional and divisional. Each structure offers a unique reporting sequence to manage a company's operations by influence employees to perform at their best.

Misconceptions
o

Many business owners consider organizational structure unimportant for running and managing a company. Some must grasp the reality of structure in order to manage operations effectively.

Considerations
o

Business owners must consider the purpose of the business and determine what matters most, which positions are vital for success and which positions are mediocre for company progress. Once evaluated, the company structure should be reconfigured for better results.

Expert Insight
o

Organizational structure determines how functional a company is in developing, pursuing, and executing missions necessary for growth. Without the proper organizational structure or chain of command, a company loses its foundation through organizational conflict

Definition of an Organizational Structure

?
An organizational structure is a hierarchical concept commonly visualized as an orderly system of objects and sub-objects collectively working toward an ultimate goal. An organizational structure varies in complexity and is limited only by the individual's capacity to conceptualize the phenomena. For example, a government is a "bureaucratic type" organizational structure where decision making is implemented from the top down. Tasks within bureaucratic organizations are usually routine, formal and closely supervised.

1. Bureaucratic Organizational Structures

o

Bureaucratic organizations are usually mature structures that have been around a while, and are easily identified by a strong centralized authority. Even though the term "bureaucracy" is often used derogatorily to describe inefficacy, highly specialized and tightly supervised tasks are often critical to the final objective of bureaucratic-type organizations and may be the difference between success or a system collapse (i.e., a simple design flaw producing 100,000 useless automobiles resulting in a significant decline in net profit).

Functional Organizational Structures

o

A functional organizational structure isolates specific tasks and then further divides those tasks into highly simplified duties best suited for particular talents. Activities within a functional organizational structure are divided into "functional departments," for example: marketing, information technology, customer service, accounting and research-anddevelopment.

Virtual Organizational Structures

o

Virtual organizational structures are "borderless" by design and usually maintain a small staff (skeleton crew) while outsourcing the majority of tasks to independent specialists, volunteers or both. Communication is usually informal and provided by information technology services, for example: email, voice-over-Internet-protocol, chatting and remote conferencing. The complexity of virtual organizational structures can rival any traditional structure in scope and effectiveness.

Matrix Organizational Structures

o

Matrix organizational structures are complex and incorporate many aspects of organizational structures: virtual, functional and product structures. For example, project managers assigned to a particular task will report to a functional manager; this interaction between functional manager and product manager are indications of a classical matrix organizational structure.

Post-bureaucratic Organizational Structures

o

Post-bureaucratic organizational structures are similar in scope to bureaucratic structures, with both sharing hierarchical divisions, and are usually hallmarks of longevity. However, a classical distinction between the two is the "culture" within the two organizations. For example, bureaucratic structures sometimes experience rigid formalities, and an oversaturation of regulations causes a sort of "innovation gridlock." In contrast, post-bureaucratic organizational structures adopt decision-making policies involving constructive-conflict strategies where innovations and the encouraged expression of ideas trump rigid formalities that are meant to empower, but don't.

Organizational structure can be underlying cause of workplace issues

Organizational structure, much like a human skeletal structure, determines what shape an organization will take. We don't spend much time thinking about our skeletal structure until something breaks, and so it goes with organizations. How an organization is structured basically means how the reporting relationships and work teams are organized. It reveals a great deal about the culture, function and leadership of a company. When I work with an organization, structure is one of the components I examine, since it can be an underlying cause of problems. Perhaps it is a cause of problems where you work. Here are a few examples I've come across: Too many levels of hierarchy slow decision-making and are a barrier to empowerment. One of the best examples of the impact structure has on operations is the transformation that began in the 1970's and is still going on today: flattening. In the early part of this century, companies had many levels between the worker in the shop or office and the President. Decisions had to pass through many levels of approval before anything got done. Organizations grew larger and the bureaucracies ballooned until some of them were crushed under their own weight. Roughly fifteen years ago, Fortune Magazine ran a cover story about the huge reorganization efforts in GM and IBM, in which one executive was quoted as saying, "Trying to get a decision made was like swimming through peanut butter."

Multiple bosses can be confusing.

Sometimes it makes sense to have several people share the leadership position. For instance, when the two founders retired from their highly collaborative architectural firm, three people assumed the CEO job. They call themselves the 3EO's. In their culture, it works. In most others, it doesn't. For example, one of my clients stepped into a new job at a technical company. He is the Director of over 100 specialists, working three shifts. The group had been leaderless for some time, due to the illness of the former Director. When we looked at some of the people problems he inherited, it became evident that some of the problems stemmed from the way the organization was structured: all 100 people reported to all four managers. In other words, each technician had four bosses, depending on who was around.

Some of the employees played one manager against the other, policies were not consistently applied, power plays between the managers were a regular occurrence and the resulting dysfunction hampered their effectiveness.

Structure by purposenot necessarily by specialty.

People trained in a specialty often have a strong identity with their profession. When this focus is the primary criterion for how they structure themselves within a business, it can have a negative affect on outcomes. For example, a 40-person department was organized into 20 teams, comprised of two people each. One of each pair had training in a specialty I'll call "A" and the other person was trained in "B." Each "AB" team was assigned to work on a medical unit in a hospital. There were two supervisors, one trained in A and one trained in B. The teams were complaining of poor communication, inconsistency and a host of other problems. A closer look at some of the root causes revealed that the structure was part of the problem: Each member of the two-person team reported to a different supervisor. Since the team's purpose is to work together to serve the unit, both parties needed to report to one person, in order to get clear, consistent expectations, resolve problems quickly and simplify communications. When structuring an organization, how your customer uses your services should "trump" orderly internal efficiency. If you've ever called a company with a complaint or a question, and been passed from department to department, with no resolution, you can bet their internal structure is partly to blame. Customers want onestop shoppingwe want to call one person and have that person figure out how to get our needs met. For example, in one organization the Human Resources Department was getting bad marks from the rest of the company for the service they provided. Among other things, internal customers complained that calls weren't being returned, requests took weeks and policies didn't fit their needs. We reorganized HR and created generalist "consultants." Each department in the company was assigned a consultant. This consultant was their point person, who got to know their needs and helped them with such basics as recruiting and employee relations, and tapped into the experts back in HR for more specialized help with things such as compensation and benefits. So, the next time you have a "people problem" take a look at the underlying structure. It may be the cause no one thought of.

Organizational Structure March 14, 2011

The End and the Beginning

Seeing what's coming What if our past experience instead of illuminating the future, obscures it? What if the way we have always approached a problem, or the conduct of a single day, or the organization of our work makes it more likely that we end up not accomplishing what we envision?

Working in planning processes over the years, I've concluded that people can see what they want, but fail to reach it because of how they go about it. We can imagine the future, but not see the path that will take us there. This gap in our abilities is becoming more acute as the ways we have worked are becoming less effective. From another perspective, we rarely see the end of something coming, or the beginning of the next thing. We tend to see in retrospect. Our aversion to change, I believe, is largely because we don't like surprises. We defend the past hoping that it is sustainable into the future, even if we see a better, different one.The past, even less than ideal, at least seems known and more certain, more secure, more stable, more predictable, more confortable, at one level. It does not mean that it is satisfying or fulfilling, but it seems safer. As a result, instead of providing us a sound basis for change, the past can inhibit us from achieving the vision that we see. Instead, we live by a set of cultural forms that must be defended against change. In other words, the form of the way we live and work remains the same even after its vitality has gone. Change that has come What impresses me about our time is how fast change is happening, and how quickly things we thought were normative seem less relevant. Ten years ago, websites were the rage. You weren't on the cutting edge of business without one. Today, Facebook, Twitter, LinkedIn and a host of other social media platforms are the norm for a business. Twenty years ago, CDs were the norm. Now, digital I-Tunes downloads. Thirty years ago, the Soviet Union was the West's nemesis, now militant Islam. Forty years ago, Vietnam and racial equality were the dominant issues of our time. Now we have an African-American President, and Howard Schultz wants Starbucks in Vietnam. Fifty years ago, President Kennedy was challenging the nation to go to the Moon within the decade. Today, the government is putting space exploration on the back burner as space travel is becoming privatized. Could we have imagined these changes? Possibly. We'd probably not be able to see how they'd happen. That is the curious thing about visions and visioning. We can imagine the end, but not the means. The pathway to the future goes through today and tomorrow. Yet, we are captives of our past thinking and experiences. They are the measure of what is possible and what can be done. The End and the Beginning I have been reflecting, in particular, on these thoughts over the past several months. I've tried to step back without prejudice and identify what I see without reducing it down to a few simple categories. What I do see are the markers of change in three broad areas. For one it is the The Beginning of the End, for another The End of the Beginning, and for another, surprisingly, The Beginning of a long delayed Beginning.

Some of this reflection was prompted by a conversation about a project event to take place later this year. It was a discussion about how businesses function. The contrast was between a focus of work as a set of tasks to be done and the importance of human interaction in meeting organizational goals. I realized coming out of that conversation that this project, for me, represented a turning point in human and organizational development. It provided a picture of the past and the future. The past as the Industrial model of business organization and the future of organizations as communities of leaders. That last phrase was what I envisioned a decade and a half ago when I began my consulting business. Only now, after all these years, do I see that simple idea beginning to have relevance for the way we live, work, organize and lead organizations. What I see is: The Beginning of the End of the Progressive ideal. The End of the Beginning of the Capitalist model. The Emergence of freedom and democracy on a global scale. The first two, Progressivism and Capitalism, along with modern Science, are the principal products of the age of Enlightenment. The Progressive ideal believed, and still does by many of its advocates, that through government control of science and industry a free, equitable and peaceful world could be achieved. Conceived during the 19th century as a belief that society could be perfected, and as a counterbalance to the industrialization taking place in Europe and the United States, it was an utopian belief in a well-order, controlled, uniform world. The Capitalist model was born in a belief that each individual should be free to pursue their own economic welfare, and not be forced by government rules or economic servitude to do that which they choose not to do. It was the ideology that provided the basis of the industrialization out which has come prosperity for more people in history and the rise of the modern middle class. Both the Progressive ideal and the Capitalist model have brought great benefits and liabilities to society. They form the two sides of virtually every divisive issue confronting the world today. They are quite similar, yet in very different ways. Both are organized around the control of power and wealth. Both have been institutionalized in the large, hierarchical organizations in Washington and on Wall Street, and in similar institutions throughout the world. Over the past decade, the Progressive ideal and the Capitalist model have begun to show their age. The assumptions that underlie these ideologies are being challenged by forces of change that are beyond their control. Because the control of global forces of change is problematic and less realistic. A principal assumption of the Enlightenment is that we can know what we need to know by analytical decision making. In other words, by identifying the parts of a situation, we understand

it, and therefore can design a strategic mechanism for controling the outcome. This analytical process works very well in the realm of the natural sciences, less so in the realm of the social sciences. To paraphrase novelist Walker Percy, "Science can tell us how the brain functions, but not about the functioning of the mind." At the beginning of this essay, I wrote of what I was seeing The Beginning of The End of the Progressive ideal and The End of the Beginning of the Capitalist model. Neither of these observations are political statements. I am not a Democrat, nor a Republican. I am not a Progressive nor a Libertarian. I find none of the current choices of political affiliation representative of my own perspective and values. I speak as an outlier, not an antagonist. I see these ideological movements as products of a different time in history. The assumptions and the way of thinking that brought these ideologies into prominence are now receding in appropriateness. The conditions that gave rise to these ideas over the past three hundred years are now giving way to new conditions. If progressivism and capitalism are to survive, then their proponents must change. Emergent connection These ideologies born in the age of Enlightenment share a reductive approach to knowledge. In other words, we gain knowledge and understanding by breaking things into parts. The assumption is that things are collections of discrete parts. Yet, we know that in the natural sciences, the mixing of different chemical elements creates something new and different that cannot exist in any other way. Water being the most obvious example. However, in the social realm, there is a shift toward emergent knowledge as the basis for understanding what is. The emergent perspective sees connections and wholes rather than just parts. In a network of relationships, the value isn't one person, but rather the connections that one person has to other persons.

Think of it as the difference between those radio ads selling lists of sales leads, and knowing the person who has a relationship with 100 of those buyers. The former is a list of contacts, of names and addresses. It is a parts list. The other is a picture of a network of connections that one person has. This second picture is the picture of the future, for it is a picture of relationships.

We see emerging forces all around us. Again, this is not a political statement, but an observation. One difference between the Tea Party demonstrations and the Union demonstrations of the past year is the difference between an emergent organization and a traditional hierarchical one. The Tea Party organization is intentionally decentralized in local communities. Unions are designed as centralized concentrations of power. One body speaking for a host of organizations. The difference here is between a centralized and decentralized organizational structure, like that described in Ori Brafman and Rod Beckstrom's book, The Starfish and The Spider. The centralized structure (the spider) is vulnerable at the top. Take down the leader, and the organization suffers significant loss of prestige and power. The decentralized system (the starfish) is not vulnerable at the top, because there is none. In a decentralized system, no one expression controls the fortunes of the whole. The centralized is the industrialized model, and the decentralized, an emergent one. The system that the Progressive ideal and the Capitalist model share is one of centralization. Operating separate from both are independents and small business entrepreneurs. The difference is between a hierarchy of control and a network of collaborative relationships. The recent rebellions in the Middle East are also examples of this emergent model. The use of cell phone and internet technology to connect people in agile, less structured ways make these rebellions possible, not necessarily successful, but possible.Their desire is for a freedom that they see provided and secured by democracy. When thousands of demonstrators fill the streets of Cairo seeking the end of a repressive regime, their impact is far greater than their numbers. We see a visual counterpoint of the difference between being a nation of free people and one living under an authoritarian government. Even as the Progressive ideal and the Capitalist model decline, the impetus towards freedom and democracy grows. I heard recently that there are now more nations with democratic governments than at any time in history. Democracy that grows from a grassroots base is an emergent model. The impact is greater than the sum of its individual parts. In an emergent context, one person's actions can serve as a catalyst for thousands more. For example, the recent uprising in Tunisia was started when a street merchant Mohamed Bouazizi set himself on fire to protest the abusive treatment by police of his vegetable cart business. The Network is Emergent In business, the emergent model has relevance. When a business perceives itself to be a structure of parts, processes and outcomes, following upon the centralized industrial model, then it has a much more difficult time seeing the value that exists in the relational connections that exist both between people and within the structure itself. It is why so many businesses become siloed and turf battles insue.

However, when a business sees itself as a network of interactive individuals, then the whole is greater than the sum of its parts. The result is higher levels of communication, collaboration and coordination. While the Progressive ideal and the Capitalist model are products of the age of Enlightenment, emergence, freedom and democracy are even older ideas finding new ground and relevance. In the traditional business organization, their relevance can be seen in two ways. First, in the freedom of the individual to take responsibility through their own initiative. This perspective harkens back to the ancient Greek democracies where Greek farmers and small business owners participated in the governance and protection of their city-state. For businesses to replicate such an ethos requires a shift in perspective from employees as functionaries of the tasks of the company to a recognition of the potential contribution that each person offers. It is in this sense that each person leads out of their own personal initiative to give their best to the company. Second, in the emergence of businesses as human communities of shared responsibility. The traditional approach has been to break down the organizational structures into discrete parts of tasks and responsibilities, and to staff to that conception of the organization. This traditional hierarchical approach worked in simpler times when businesses were less global, more homogeneous, and employees less well trained, and had the technology to advance their contributions beyond their individual position in the company. Today, the environment of business has changed, as the context becomes more complex and change accelerates. Agility and responsiveness are not embedded in structure, but in human choice and in relationships that amplify those shared choices to make a difference. It is the freedom to take initiative to act in concert with others that creates the conditions of successfully managing the challenging environment of business today. The result of a greater emphasis on relationship, interaction and personal initiative is a shift in culture. One only has to select any page in the Zappos.com Culture Book to see the influence of genuine community upon the attitudes and behaviors of the company's workforce. The Keys to Change I began this post by saying that we rarely see the end of something coming or the beginning of something new. What I offer here has been germinating in my mind for the past three years. It is

still not yet fully formed, and may never be. Yet, I am convinced that the changes that I see happening mean that there is no going back to the halcyon days of the 1990's or even the 1950's. Business organizations will not long succeed as mechanistic structures of human parts. Rather they must emerge into being communities of leaders, where individual initiative, community and freedom are fundamental aspects of the company's culture The keys to the future, in my mind, are fairly simple. 1. Leadership starts with individual employees' own personal initiative to make a difference. Create space and grant permission for individual employees to take initiative to create new ways of working, new collaborative partnerships and solve problems before that reach a crisis level. 2. Relationships are central to every organizational endeavor. Create space for relationships to grow, and the fruit will be better communication, more collaboration between people and groups, and a more efficient coordination of the work of the organization. 3. Open the organization to new ideas about its mission. Identify the values that give purpose and meaning to the company's mission. Organize around those values that unite people around a common purpose, that give them the motivation to want to communicate better, collaborate more, and coordinate their work with others. Openness is a form of freedom that releases the hidden and constrained potential that exists within every company. We are now at the End of an era that is unprecedented in human history. The next era is Beginning, and each of us has the privilege and the opportunity to share in its development. It requires adapting to new ideas, new ways of thinking, living and working. I welcome the change that is emerging, because I find hope that a better world can be gained through its development. Assumptions about the Product of an Effective Organizational Structure As I analyze organizations during various projects, I'm looking for various intangilbes that matter. Let's call them assumptions about what an organizational system should produce. 1. Initiative by employees measured by higher rates of engagement and contribution. 2. Interaction by employees that is open and collaborative and that transcends organizational barriers to achieve higher levels of efficiency and impact. 3. Impact awareness by employees who can express their own contribution to the organization's impact as a change that is a difference that matters. These assumptions are difficult to measure, yet relatively easy to see. The 7 Virtues

1. Collaboratively-led: This idea all encompasses the other six virtues into a singular perspective that defines what it means to be collaborative. It means, therefore, that a collaboratively leader will focus on aligning the three dimension and the three connecting ideas so that the people who are apart of the social and organization structures may have relationships that enable them to fulfill their shared vision for impact. This is what a collaborative leader does. 2. Decentralized, local control: This is a function of the structure of the organization is created by policy governance and design which creates appropriate lines of a communication and accountability. 3. Long tail internal operational structures: This is a function of the alignment of structure with relationships. This means that the people who are bound to one another by a clear purpose and set of values have the freedom and may take the initiative to organize how they work together. 4. Purpose-driven organic adaptability: This is also a function of the alignment of structure and relationships. In this context, the group or team adapts freely and with great agility to changing circumstances in order to keep their purpose foremost in their relationships. 5. Relational-asset based: It may seem that this is a function of the relationships, and at one level it is, but the importance to treating the group or company's network of relationships as a relational asset is that these connections bring value that does not exist when the people of an organization are viewed as human resources. Relational resources are the assets to come from having large, diverse, and widely dispersed network of relationships that feed information, insight, talent and business to the organization. From a structural point of view this is a fourth classification of resources, along side the financial, material, and human. The higher level of collaboration that takes place through these relational assets, the great value they bring to the company. 6. Values that are operational: This a function of the alignment of the Ideas and Relationships dimensions with the Structural. Values, which inform an organization's purpose, is the core strength of a business. It is the only thing that is unchangeable. An organization's purpose can change as circumstances change. The structure can change to remained aligned with a vision that is constantly adapting to the current context of business. But the values of a company remain constant, though not necessarily acknowledged or practice. This virtue, therefore, focuses on applying the company's values operationally. This done by asking the question how are our values represented in this decision or this policy? The greater alignment between values and practice, the greater integrity, confidence and impact from the collaborative work of the people of the company. 7. Ownership culture of giving: This virtue is a function of the whole community of the company, but it is a product of the company's leadership to form a culture of giving. The aim is to encourage the people of the company create an ownership culture of giving through their own

initiative and expression of gratitude. It is this kind of culture that is represented in the Five Actions of Gratitude (Say Thanks Every Day). The complaint that I've heard over the years about a more relationally oriented business structure is that these are soft skills, not the hard skills of finance. True they aren't the same, but they are also not contradictory either. Create a culture of the 7 Virtues, and you'll see not only a transformed workforce, but a transformed business environment. And if you do it sooner than later, you'll be ahead of the curve, and recognize for leading rather than following

Organizational Structure Problems

?
Organizational structure is a consideration of every company. The breadth of products/services offered, the range of markets targeted and the methods by which those markets are targeted are important considerations. A narrow focus can turn out to be a make-or-break venture, while too broad of a focus can erode competencies and brand image. Either extreme can lead to problems for the company.

1. Functions
o

The organizational structure of a company has many functions. The organizational structure determines the breadth of focus, the range of product/service offerings, the number of niches targeted and the variety of ways in which the market is targeted. Problems can arise at various points concerning organizational structure; these problems range from the appropriateness of markets targeted to whether certain products or services should actually be offered. Younger companies especially have a tendency to shift focus narrowly, which is a big issue if they miss the mark.

Market
o

Problems arise regarding the organizational structure and the market. It is common for a company--younger companies especially--to pursue the market too broadly, trying to be all things to all people. Companies that have adopted an overly broad approach tend to lose continuity in brand image and product advertisement, which can erode customer confidence and, thus, loyalty. Take, for example, Pepsi and Coca-Cola. Coke targeted adults (for example, jack-and-coke, images of Santa handing Cokes to adults) whereas Pepsi targeted youth (such as Mountain Dew and Pepsi points); neither company went after the same market and both profited.

Product or Service Offerings

o

It is important to consider the breadth of product or service offerings as well. Imagine walking into two restaurants and looking at their respective menus. In the first restaurant, the menu is seven pages long, offering everything from pizza and burgers to steak and lobster. In the second restaurant, the menu is two pages long and includes a third of specials; it is centered on wood-fired pizza, salads and appetizers. The diner is likely to choose the second restaurant, as it is indicating that it specializes (via the focused menu) and that it uses fresh ingredients (via the specials insert). Another example is an accounting firm. Imagine Bob is

looking for a firm to handle his payroll; is he likely to choose the firm that specializes in payroll or one that includes payroll services in a page-long list of service offerings? Keeping a relatively narrow focus on product or service offerings increases brand power by increasing perceived expertise. It also frequently lowers certain costs because of the commonality of parts required, it has a lower learning curve, and familiarity with the product or service builds efficiency.

Niches
o

Niches, although related to the market at large, represent those subsets of the population that are targeted through marketing; a niche is generally based on a demographic. The most common problem regarding organizational structure and niches is price points. When targeting a niche, a full demographic is imagined: double-earner household, corporate, yearly income > $100k, no children, owns home. The problem arises when a company tries to fit a wide range of these niches. An example of this is a retail clothing store where they sell $500 suits and $30 jeans. This combination does not go over well. Shoppers want to feel special. Higher price points eliminate certain customers, as does selective purchasing. While the general customer base may go down, the remaining customers will likely continue to shop at the same pricing level. This is why Gap offers Banana Republic, Gap and Old Navy or Ann Taylor offers Ann Taylor, Ann Taylor LOFT and Ann Taylor Outlet. Keep offerings within consistent price ranges. If a person in the targeted niche walks in, what is that person willing to spend (the range) and what standards qualify that price range?

Misconceptions
o

Although diversification can help increase company longevity, diversification for the sake of diversification is a recipe for disaster; projects should only be undertaken if they are seen as having a higher return. Also, it is unwise for a company to develop too broad of an organizational structure. Doing so risks a loss of focus necessary to perform each service or create each product to the best possible standard. It is also possible that a broad organizational structure may affect the company's target market; there are some benefits to having a more narrow focus. This is particularly evident in the effects of specialization on brand image and product innovation.

Organization structure deals with how a company operates. It involves a consideration of various factors to develop a structure with the most benefits.
Definition

Organization structure is more than a legal structure (i.e. C-corp vs. LLC). Instead, the term "organization structure" refers to the "chain of command" and represents the formal organization of business entities within the business,

whether formalized (different LLCs for each region), or informal, such as in business unit or departmental divisions.
Factors

There are a variety of factors that are considered as part of organization structure. These include the organization's environment, the technology it has and its business strategy. There are three general types of organization structure: functional, divisional and matrix.
Functional

A functional organization structure would mean that the company groups its employees by their functions. An example of this is having one accounting department, one human resources department, etc. The advantage here is that professionals with the same function can leverage each other's knowledge and motivate each other; however, communication problems can exist between functional departments.
Divisional

A divisional organization structure signifies that the company is divided by product (i.e., shoes, lingerie), market (i.e., kids, teens) or geography. In this type of structure, motivation and customer service tend to be high, but so do costs to maintain the structure.
Matrix

The matrix-type organization structure combines divisional and functional structures, so that employees are grouped by function within a division, such as Children's Books Marketing Department

Types of Business Organizational Structures

by Kathy on February 19, 2010 Every organization should have a defined organizational structure. A well thought out and strategic structure helps support good processes for communication and clarifies lines of authority and reporting relationships to assure that work processes flow in a defined process. An org structure shows lines of authority and reporting relationships. Having this mapped out helps to ensure efficient work flow and project management as well as elimination of duplicate systems and processes.

So what are the different types of org structures?

Org structures are defined by using different criteria. Things to think about are what is the functional grouping of work processes and are there natural groupings of teams, work groups or

units. This is a decision from senior management on how they would like work activities to be organized and carried out. This also identifies natural reporting relationships and chain of command. Reporting relationships can be both vertical as well as horizontal. The different structures are:
Matrix

A matrix structure provides for reporting levels both horizontally as well as vertically. Employees may be part of a functional group (i.e. production) but may serve on a team that supports new product development. This kind of structure may have members of different groups working together to develop a new product line.

Functional

Functional organizational structures are the most common. A structure of this type groups individuals by specific functions performed. Common departments such as human resources, accounting and purchasing are organized by separating each of these areas and managing them independently of the others.

Product

Another common structure is to be organized by specific product type. Each product group falls within the reporting structure of a senior leadership person and that person oversees everything related to that particular product line.

Customer

Certain industries will organize by customer type. This is done in an effort to ensure specific customer needs are met by specific customized service approaches. An example of this would be in healthcare. A different customer type might be outpatient and their needs are very different than inpatient customers.

Geographic

For organizations that cover a span of geographic regions, it sometimes makes sense to organize by the region. This is done to better support logistical demands and differences in geographic customer needs. Typically a structure that is organized by geographical regions reports up to a central oversight structure.

Deliberate time and thought should always go into the design of an organizations structure. This is important so employees have a visual of how the organization functions and understands the chain-of-command. Operating within a defined structure with good communication processes and work-flows help to ensure more efficient management of resources people, time and money.

Type of Organizational structures

Need to set up a structure for your organization, here is a information regarding different type of organizational structures

Introduction Every organization to be effective must have an organizational structure. But what is an organizational structure? It is the form of structure that determines the hierarchy and the reporting structure in the organization. It is also called organizational chart. There are different types of organization structures that companies follow depending on a variety of things; it can be based on geographical regions, products or hierarchy. To put it simply an organizational structure is a plan that shows the organization of work and the systematic arrangement of work. Types of Organizational Structures There are different types of organizational structures and a company should choose the one that best suits their needs. Traditional Structures These are the structures that are based on functional division and departments. These are the kind of structures that follow the organizations rules and procedures to the T. they are characterized by having precise authority lines for all levels in the management. Under types of structures under traditional structures are: y Line Structure this is the kind of structure that has a very specific line of command. The approvals and orders in this kind of structure come from top to bottom in a line. Hence the name line structure. This kind of structure is suitable for smaller organizations like small accounting firms and law offices. This is the sort of structure that allows for easy decision making, and also

very informal in nature. They have fewer departments, which makes the entire organization a very decentralized one. Line and Staff Structure though line structure is suitable for most organizations, especially small ones, it is not effective for larger companies. This is where the line and staff organizational structure comes into play. Line and structure combines the line structure where information and approvals come from top to bottom, with staff departments for support and specialization. Line and staff organizational structures are more centralized. Managers of line and staff have authority over their subordinates, but staff managers have no authority over line managers and their subordinates. The decision making process becomes slower in this type of organizational structure because of the layers and guidelines that are typical to it, and lets not forget the formality involved. Functional structure this kind of organizational structure classifies people according to the function they perform in their professional life or according to the functions performed by them in the organization. The organization chart for a functional based organization consists of Vice President, Sales department, Customer Service Department, Engineering or production department, Accounting department and Administrative department.

Divisional Structures This is the kind of structure that is based on the different divisions in the organization. These structures can be further divided into: y Product structure a product structure is based on organizing employees and work on the basis of the different types of products. If the company produces three different types of products, they will have three different divisions for these products. Market Structure market structure is used to group employees on the basis of specific market the company sells in. a company could have 3 different markets they use and according to this structure, each would be a separate division in the structure. Geographic structure large organizations have offices at different place, for example there could be a north zone, south zone, west and east zone. The organizational structure would then follow a zonal region structure.

Matrix Structures This is a structure, which is a combination of function, and product structures. This combines both the best of both worlds to make an efficient organizational structure. This structure is the most complex organizational structure. It is important to find an organizational structure that works best for the organization, as the wrong set up could hamper proper functioning in the organization.

ORGANIZATIONAL STRUCTURE

Organizational structure depends on the product to be developed. Wheelwright and Clark define a continuum of organizational structures between two extremes, functional organizations and project organizations. Functional organizations are organized according to technological disciplines. Senior functional managers are respnsible for allocating resources. The responsibility for the total product is not allocated to a single person. Coordination occurs through rules and procedures, detailed specifications, shared traditions among engineers and meetings (ad hoc and structured). Products that need a high level of specialized knowledge require a functionally organized structure.

A light-weighted matrix organization remains functional and the level of specialization is comparable to that found in the functional mode. What is different, is the addition of a product manager who coordinates the product creation activities through liaison representatives from each function. Their main tasks are: to collect information, to solve conflicts and to facilitate achievement of overall project objectives. Their status and influence are less as compared to functional managers, because they have no direct access to working-level people. A heavy-weighted matrix organization exists of a matrix with dominant the project structure and underlying the functional departments. The product manager has a broader responsibility. Manufacturing, marketing and concept development are included. The status and influence of the product manager, who is usually a senior, is the same or higher as compared to the functional manager. compared to functional managers, because they have no direct access to working-level people. A project organization exists of product oriented flows: project and teams. The project members leave their functional department and devote all their time to the project. They share the same location. The professionals are less specialized and have brioader tasks, skills and responsibilities. The functional manager is responsible for the personnel development and the more detailed technology research in the functional groups. Companies can be classified to their organizational structures. Another variable companies can be classified to is the nature of the projects undertaken. We characterize projects by the number of employees needed to perform the tasks, or workload, and the number of tasks that are fundamentally different in nature. An example of the latter aspect is PCB development and structural design. Another way to classify organization structure is by one of the following four categories: I. The product to be developed is comprehensible for one person. One person is likely to have all the knowledge needed to develop Manufacturing and Assembly. The development department in companies that undertake these kinds of projects are usually very small. If a company consists of more than one department, it is usually structured as a functional organization. II. The product to be developed has a fairly low complexity, but total work is high. These kind of products are likely to be developed within one functional department. A research department may also be an example of a department in which type II projects are undertaken. Are more departments involved, then the light weighted matrix structure is preferable. Employees are involved on a full-time basis. Tasks may be performed concurrently. The sequence can be determined using the Design Structure Matrix. III. The product to be developed consists of a lot of different elements, such as software, PCB, power supply and mechanical structure. The product is however in the engineering phase, i.e. it is clear what needs to be done to get the product into production. Various disciplines perform their own tasks. These tasks have mostly a low workload. Employees cannot work full-timee on one project. This creates a complex situation, that may be compared to a job shop situation in production logistics. Though the comparison between manufacturing and product development is

not accepted by all product development managers, it may yield good results. Studying each step in the Product Development Process and fluctuations in workloads reveals ways to reduce variation and eliminate bottlenecks. It is necessary to view the Product Development Process as a process and not as a list of projects. Three important findings regarding this are:
1. Projects get done faster if the organization takes on fewer at a time. 2. Investments to relieve bottlenecks yield disproportionately large time-to-market benefits. 3. Eliminating unnecessary variation in workloads and work processes eliminates distractions and delays, thereby freeing up the organization to focus on the creative parts of the task.

Creating cross-functional concurrent engineering teams is the right way to develop products. However, the pitfall is too many project at the same time, so that key people from engineering, marketing and manufacturing work at five or more projects at once. This results in congestion. Striving to work at 100% of the product development capacity legthens product development lead times enormously. A more realistic percentage is 80%. Attention must be focused on bottlenecks, these days most commonly found at the software development side of the project. IV. The product is complex. Total work is high. Employees can thus participate on a full-time basis. A project organization is the most appropriate organizational structure for these kind's of products.

Variables to Consider When Designing an Organizational Structure for an International Organization

Organizational structure is the fundamental design of a company. A company's structure establishes lines of authority and decision making while describing where employees from different functional groups are located within the company. Organizational structure takes on an added level of complexity in international businesses, as employees from vastly different cultures, performing completely different tasks, are all part of the same organization.

Decision-Making Authority
International business structures must take into account the level of decision-making authority granted to managers in foreign markets. Decisions about the company's structure can be made in a centralized fashion, with executives at the home office making decisions that affect all foreign departments and subsidiaries; or decisions for each geographical unit can be made at the local level. If structure decisions are made in the home country for all company branches, the structure is likely to look similar across the board, although this is not always the case. If decisions are made locally, each branch is likely to have a structure that is custom tailored to the workplace and consumer culture of its own country.

Departmental Units
Deciding how to group employees according to their function is more complex in international operations. This decision can be highly influenced by the type of work performed in each geographic area. Work units can be structured functionally, so specific tasks are performed completely in one area. For example, you might decide to

locate your entire phone support team in India. Units can also be formed around products or regions. For example, you might group representatives from the marketing, accounting, human resources and supply chain management functions in the Indian branch to handle business in that country.

Layers of Management
You must decide how many layers of executive management are required to ensure each region benefits from effective and responsive leadership. Smaller international businesses may be able to remain competitive with a single chief executive officer (CEO), chief financial officer (CFO) and chief operations officer (COO), whereas larger international organizations may have one of each for every continent, with titles such as CEO North America and CEO European Operations. Defining multiple executives' reporting relationships can be tricky. Executives of foreign regions can report directly to their counterpart in the home country, or they can act autonomously. If regional executives have the power to act independently of their counterparts, there must be a way to ensure all executives are on board and have a similar set of strategic goals, with the welfare of the entire organization in mind. An experienced and active board of directors is one way to keep executive counterparts from going in different directions.

Operational Considerations
When operational functions are geographically dispersed in an international business, it can be beneficial to structure each unit according to its specific function and regional culture. A tech support group located in the Philippines, for example, may benefit from a decentralized, flat organizational structure, in which each employee is free to make decisions, try new things and contribute to the strategic management of the group. A production department in China, on the other hand, may benefit from a much more rigid structure, with decisions coming from top management and clearly defined job roles for front-line workers

How to Design an Organizational Structure

Organizational structure is used to develop how groups and individuals are arranged or departmentalized to help meet an organization's goals. It defines a reporting structure, jobs, compensation and responsibilities for each role. Designing an organizational structure requires consideration of an organization's values, financial and business goals. It should allow for growth for the organization and the ability to add additional jobs or departments.

Step 1
Define business units or departments. Each business unit should have similar goals and responsibilities that can be overseen and directed by one or several managers. The business units or departments will then align to assist in creating an appropriate organizational structure. Depending on which type of organizational structure is used, departments may align laterally with other departments or one may oversee another.

Step 2

Determine which type of organizational structure best fits your business needs. The several types of organizational structure ensure an organization can successfully function with its reporting structure, expand if necessary and successfully meet its goals. For example, if your organization is small, it may simply require the organizational structure be broken into departments, such as production, human resources and finance. Your organization's business type, units and how it operates will determine which type of organizational structure to choose.

Step 3
Define the executive and management teams. Executives and managers are responsible for ensuring each business unit meets the organization's goals. This may include one or several top executives to oversee the entire organization and managers to direct each business unit within the organizational structure. the organization may require one supervisor to oversee all operations, or several supervisors to direct each business unit, ultimately reporting to a top executive or owner.

Step 4
Establish performance metrics and compensation. When the organizational structure is determined, job descriptions can be clearly defined and where each job fits in the hierarchy. Each job description should reflect the competencies required to do the job and the expectations of each job to meet the organization's goals. After each job within the structure is defined, compensation should be defined based on the responsibilities of each job.

Elements in Organizational Structure and Design

An organizational structure is the hierarchy companies develop to govern and manage business operations. Small or home-based businesses do not usually have much need for organizational structure since the company may only consist of the business owner and a few employees. Larger organizations develop the structure to ensure employees understand who is responsible for managing which business function. Many types of organizational structures exist in the business environment. Many organizations choose an organizational type based on their operations and the number of employees in the business.

Centralized
A centralized organizational structure often relies on one individual to guide the business through various economic or operational decisions. Many small businesses use centralized organizational structures since the business owner is primarily responsible for the company. Many business owners attempt to maintain a centralized structure as their business continues to grow and expand. This organizational structure can quickly become difficult to manage when companies expand into multiple locations in different geographic areas.

Decentralized
Decentralized organizational structures may use a team of directors or executive-level managers to make business decisions. This structure works well with individuals who have specific expertise in different business functions. A

decentralized structure also provides companies with multiple opinions about business expansion for selecting new business opportunities. Decentralized organizational structures can create difficulties if too many opinions exist about a business decision. Companies must often find ways to get all managers on the same page and agree on how to best approach business situations before making decisions.

Functional
Functional organizational structures allow several different business divisions to operate as unique and independent environments. This type of organizational structure can benefit companies requiring few internal functions to complete business processes. Separating the company by function can also provide managers with clear directions on how to manage employees and maximize the companys production output. However, communications can exist if one business function fails to act openly and transparently with other functions in the business.

Divisional
Divisional organizational structures separate companies by the types or numbers of products produced by the organization. Larger organizations can also create a divisional structure by separating the company into regional or international business groups. The divisional structure often creates several smaller organizations within one large business. This structure can benefit companies who have multiple locations or products produced in numerous facilities. Managers are expected to run profitable operations based on their division and report to the home office regarding operational issues.

Matrix
A matrix organizational structure is a combination of the functional and divisional structure types. The matrix structure may separate the company into separate divisions that only complete specific business functions. This organizational structure can benefit companies if a business function can be completed cheaper in a different geographic location. This organizational structure type also has the potential to increase business costs by creating duplicate positions in multiple business functions or divisional departments. This occurs because each of structure group often has their own sales, accounting and personnel departments.

Six Elements of Organizational Structure

Organizational structure determines corporate communication, and the executive and managerial hierarchy, and creates a plan for efficient growth for the future. The six elements of organizational structure come together to create the blueprint for how your company is laid out, and determine how your managerial staff goes about effecting change in your organization.

Geography
How your organization is structured can depend on how many corporate locations you need to account for in your planning. The more spread out an organization is, the more autonomy each location will need to be given in order for

the company to run efficiently. Hierarchy communication is also a challenge when creating an organizational structure over a large geographic area. Managers who report to executives in another location need to establish a clear line of communication in order to receive guidance and instruction.

Number of Employees
A large employee population can necessitate that there be several layers of management for a company to run efficiently. As a company grows, the organizational structure needs to be elastic enough to accommodate more employees and the potential need for a larger management structure.

Product Evolution
A company may start off with a small line of products that cover a general part of the industry. As the company grows, the need to create specified departments for product development and manufacturing can have an effect on the company's organizational structure.

Distribution of Authority
According to a study done by a group of college students known as Group A-Plus, a company's organizational structure is affected by whether the company wants centralized management or decentralized management. Centralized management keeps all major decisions with one specific executive group, while decentralized management allows company managers to have more say in the decision-making process.

Control
According to Management Guru, a company that requires a higher product quality will have stricter rules and a more regimented environment. This would apply to companies that manufacturer high tech products, hand-crafted products or critical products such as medical equipment. Companies that engage in the mass production of products may not exert as much control over the quality of their products and, subsequently, may create a different organizational structure.

Marketplace
The marketplace also has a bearing on how a company is structured. For example, a manufacturer may decide to sell products through wholesalers as well as directly to end users. In order for this model to be successful, the organizational structure of the company would need to be set up so as to keep these elements separate, including a separate marketing team and a separate sales force.

Organizational Structure & Effectiveness

A company can start out by using one of several organizational structures. However, companies can sometimes increase their effectiveness using multiple organizational structures. Other companies may switch from one type of

organizational structure to another to be more effective. The decision for organizational structure usually lies with top management. The size of a company is sometimes the determining factor as to organizational structure effectiveness.

Significance
Larger companies often benefit from a taller organizational structure. A tall organizational structure contains lots of management levels. Decision makers dole out tasks and projects in which they hold subordinates accountable. Upper management knows what strategies the wish to implement and, subsequently, get all subordinates working together to effectively meet company goals. Contrarily, small companies will often use flat organizational structures. It is more effective for smaller companies to complete task and projects without waiting on decisions from multiple managers. A flat structure is often more effective in completing tasks and projects faster. Small companies are often in a rapid growth state. Company owners and employees must make quick decisions.

Types of Structures
Some companies may feel a product organizational structure is most effective for their needs. For example, department stores are heavily focused on various product-oriented departments. Executives often hold titles such as vice president of housewares or vice president of sporting good. A product organization structure may work best for department stores because product expertise is required to effectively manage specific departments. For example, the buying process may vary by type of product. In addition, managers in certain departments may be more experienced in terminology related to their special products Contrarily, a company may deem a functional organizational structure works best for them. Departments that are divided by functional areas, including marketing and engineering, may be more effective in grouping people of special talents together, according to HRMguide.com. For example, a marketing team will often be much more effective working together when testing a new product concept.

Customers
Some companies may deal with a diverse group of customers. For example, a software company that sets up electronic bill-paying may target consumers, banks, corporations and health clubs. Consequently, the software company may organize its structure by customer type. Organizing by customer type may be more effective than other organizational structures because the products and procedures may vary greatly among customer type.

Benefits
The benefits that companies wish to achieve with various organizational structures include increased communication, efficient use of resources and even chain of command. For example, a company will usually develop an organizational structure that facilitates communication through various management levels. That way timely decisions can be made by the right individuals. Companies also want to make efficient use of resources and avoid any duplication of efforts. Therefore, these companies create their organizational structures accordingly. Companies that can eliminate duplication resources, including labor or raw materials, tend to operate more effectively.

Considerations
Some companies may need to decentralize their organizational structure geographically. For example, a company that relies heavily on direct sales may need to decentralize its sales and marketing functions by region. Consumer product companies sometimes decentralize sales and marketing functions because consumer tastes vary per region. A geographically decentralized organizational structure can also be more effective because production facilities are spread out. Consequently, a production facility in Ohio would likely get products to Kentucky quicker than one in California.

Problems Implementing an Organizational Structure

An organizational structure allows information to flow to different parts of your business and becomes the framework for your entire organization. When you are trying to implement an organizational structure, you will face problems because initially there is no structure in place. You appreciate the importance of a strong organizational structure when you are working without one and trying to get one functional.

Communication
Part of the purpose of a strong organizational structure is to facilitate smooth communication within departments and from one department to another. When you are trying to implement an organizational structure, you are working with a makeshift communication network until the planned network is put in place. This can cause information to be dropped or miscommunicated at every level of the company.

Hierarchy
A company runs smoothly when it has a hierarchy to follow. While it can be easy to understand the basic hierarchy of the company from the owner or president down to the rest of the executive staff, the hierarchy among managers and supervisors is confused without an organizational structure. While you are implementing a company framework, you will come across instances when various managers or supervisors may take on authoritative roles they were not intended to have, which can cause confusion among the staff.

Delegation
When you are trying to implement a new organizational structure, it can be difficult to properly delegate responsibility to departments or individual employees. It may be confusing for employees and managers to understand their responsibilities when there was no official delegation in the past. Staff members have been doing what they needed to get the job done, and it will be difficult to move responsibilities around when implementing a new structure.

Cost
Implementing an organizational structure can be expensive. During the time it takes to get a structure in place, productivity will be affected and your company's ability to generate revenue will drop. Implementing structure means

getting everyone on to the same software platforms for communication, bookkeeping, production and planning. Making sure everyone who needs a computer has one, and having all of the necessary software licenses, is also expensive. The planning time necessary to create the structure implement it costs you because your management staff is spending time on developing its part of the structure instead of making sure that company production numbers are achieved.

Factors That Affect Organizational Structure

The organizational structure of your business provides a foundation for lines of communication, responsibility and tasks. As the framework for your business, the organizational structure you select dictates the number of management layers, how your business is functionally divided and the overall reporting structure. Multiple organizational designs can be used to enhance your business's strategy including simple, functional, matrix, hybrid or a self-designed structure.

Geography
Companies that manufacture products, maintain multiple business offices or sell products in different geographic locations may need a different business structure than companies with centrally located business activities. An organizational structure that places some management decision making and control at the local level may be required to obtain talented employees and to enhance customer service. For example, a geographic functional structure provides local control for all activities, employees and reporting to ensure consistency, reliability and a locally focused support and sales staff. Companies with one primarily location can streamline their activities by using a simple structure that minimizes layers of management.

Size
Larger business size often equates to a more elaborate or complex organizational structure. As your business expands, additional layers of management, business units and a formal chain of command are generally needed. While a small business may function on an informal structure with limited management oversight, a large business generally needs managerial control to help assign tasks, ensure quality and maintain a focus on business goals.

Environment
The competitive environment of your business can dictate the type of organizational structure you need. For established businesses with a basic business product and moderate competition, the need for innovation may not be as pressing as the need for consistency and customer support. Companies that routinely offer new products or are in highly competitive markets need to be nimble and responsive to changes in product demand. A more formal business structure that clearly dictates areas of responsibility may be suited to a more established business, while a functional structure that divides responsibility by product line may offer you increased flexibility.

Business Strategy

Aligning your strategy and business focus with your organizational structure can tie decision making and control to the needs of your business. Companies with multiple sales channels, product lines or methods of customer interaction may find a product-focused business structure can decrease response times and increase accountability. Fewer managers and employees specializing in one product may prove more effective than a group of employees that focus on multiple products at the same time. Businesses that focus on project-based activities may benefit from a matrix organizational design that provides a functional business manager and a project manager for each employee.

Steps to Manage the Transition From the Old Organizational Structure to the New Structure
Organizational structure is a formal outline of the managerial reporting relationships and information flows within a company. A company's organizational structure is a core component of its culture, and serves as a backbone for all operational activities. Because it is so deeply ingrained in organizations, a transition in organizational structure can present unique challenges to managers and business owners.

Preparing Employees
Gaining buy-in from employees at all levels of your organization is crucial to success in a transition as overarching as a change in organizational structure. Seek input from employees through formal feedback systems and informal conversations before beginning the planning process. Take employees' ideas seriously, and invite innovative ideagenerators to participate in planning meetings. Clearly explain the need for the change in structure to all employees. Explain the need in terms that relate to each employees' individual roles, as well as how the change will benefit the organization as a whole. Also explain how the change will positively affect each employee and enhance their positions in the company. Send regular updates on the planning process to all employees via email, company newsletters, company meetings and informal conversations. Always be open to feedback when sending updates.

Planning And Implementation

Take the time to create thorough, formal plans to implement the transition from your old organizational structure to your new structure. Map out how physical workspaces and work groups will be moved or reorganized. Create plans to transition managerial information and duties among employees, and to ensure that all department-relevant information is preserved and reorganized according to the new structure. Implement the transition one step at a time rather than throwing the entire package into the works all at once. As an example, consider that you wish to transition from a tall organizational structure to a flatter structure where front-line employees are empowered to make managerial decisions. It would be a good idea to make the transition in one department at a time, first putting employees through training sessions to give them the information and skills required in their new roles, then formally moving line managers into other positions in the company.

Monitoring

Keep feedback mechanisms in place after implementing the transition. Rather than viewing the transition as a finished project, consider it a work in progress; use feedback from employees to fine-tune or alter specific aspects of the new structure. Allowing employees a voice after the transition can add uniqueness to the structure, bringing it closer to a structure that is best suited to maximize the efficiency and effectiveness of your operations while keeping employees satisfied.

Compare Organizational Structure Types

Organizational structure types are the means by which companies group workers, processes and work flows to manage productivity. The three types of organizational structures are functional, divisional and matrix. Comparing these organizational structure types becomes a function of how best to organize employees to interact with each other, and the tasks they perform to generate products and services for the end consumers in the most efficient and effective manner possible.

Step 1
Understand the basic form of each structure. The functional structure organizes employees into departments based on the function they perform for the company--accounting, production or quality control, for example. The divisional structure organizes employees based on the product or service being produced, customer or market focus and the geographic market being served. The matrix structure is a hybrid of the functional and divisional structure, effectively creating independent business units for each product or service created or each unique market targeted.

Step 2
Identify the benefits associated with each organizational structure type. Employees operating within the functional structure support and enhance the knowledge and experience of each other within each function. For example, within the accounting department, all accountants will share information and support the training and development of each departmental employee. This creates greater competencies and economies of scale. A divisional structure is decentralized, enabling a greater level of flexibility when reacting to external market forces. The matrix structure will attempt to attain the benefits of the functional and divisional structure.

Step 3
Recognize the costs and weaknesses of each organizational structure type. If you select a functional structure, your business may have difficulties facilitating effective communication between departments. The greatest risk within the functional structure is departments developing a culture of independence vs. interdependence. Divisional structures create redundancies that increase operational costs. For example, each division could require its own warehousing facilities or shipping contracts. The matrix structure will require a functional manager and a production manager, increasing costs and the difficulty of implementation of the structure due to its inherent complexity.

Centralized Vs. Decentralized Organizational Structure

An organizational structure is the outline of a company's framework and guidelines for managing business operations. Small business owners are usually responsible for creating their companies' organizational structure, which is usually an extension of the owner's personality, management style and characteristics. Two types of organizational structures are found in the business environment: centralized and decentralized. Each structure offers advantages and disadvantages for business owners.

Definition
Centralized organizational structures rely on one individual to make decisions and provide direction for the company. Small businesses often use this structure since the owner is responsible for the company's business operations. Decentralized organizational structures often have several individuals responsible for making business decisions and running the business. Decentralized organizations rely on a team environment at different levels in the business. Individuals at each level in the business may have some autonomy to make business decisions.

Advantages
Centralized organizations can be extremely efficient regarding business decisions. Business owners typically develop the company's mission and vision, and set objectives for managers and employees to follow when achieving these goals. Decentralized organizations utilize individuals with a variety of expertise and knowledge for running various business operations. A broad-based management team helps to ensure the company has knowledgeable directors or managers to handle various types of business situations.

Disadvantages
Centralized organizations can suffer from the negative effects of several layers of bureaucracy. These businesses often have multiple management layers stretching from the owner down to frontline operations. Business owners responsible for making every decision in the company may require more time to accomplish these tasks, which can result in sluggish business operations. Decentralized organizations can struggle with multiple individuals having different opinions on a particular business decision. As such, these businesses can face difficulties trying to get everyone on the same page when making decisions.

Considerations
Business owners should carefully consider which type of organizational structure to use in their company. Small organizations typically benefit from centralized organizational structures because owners often remain at the forefront of business operations. Larger organizations usually require a more decentralized structure since such companies can have several divisions or departments. Business owners may need to consider changing the organizational structure depending on the growth and expansion of business operations.

Misconceptions

Organizational structures do not always require significant amounts of planning time. Many businesses have organizational structures that simply evolve during the business's lifetime. Business owners often set the tone based on how they manage employees. Employees will perceive how the owner handles different business situations and simply adjust their work style accordingly. This will create an organizational structure by default, with no serious planning involved.

Principles of Organizational Structure

Organizational structure is the framework by which a company communicates, develops goals and then works on achieving those goals. Within the framework of organizational structure are the principles by which that structure operates. The principles of organizational structure are the methods by which the organization maintains that structure, and the processes it uses to keep the structure efficient.

Hierarchy of Command
One of the principles that holds an organizational structure together is the hierarchy of command. Respect for the authority of management and the executive team creates a functional line of communication. Instructions and decrees given by the upper echelon are validated by the belief in the hierarchy structure of the organization. Everyone in the company can follow the trail of responsibility for projects, and employees understand who they report to and how the management structure affects their jobs.

Role Definition
According to the University of York in York, England, an efficient organizational structure helps to properly define everyone's role within the company. A clear definition of the responsibilities and standing of each person within the company creates an understanding of what is expected from each individual, and how individual performance can affect the efficiency of the entire organization.

Evaluating Outcomes
The RAND Corporation points out that monitoring the outcome of individual projects, as well as the ongoing performance evaluation of individual employees, helps to determine the strengths and weaknesses in the organizational structure. The weaknesses can be dealt with either through training, reallocation of company assets such as equipment, or eliminating ineffective employees or those performing duplicate tasks. The strengths of the organization can be amplified to help identify future managers of the company, determine successful processes that can be used in future projects, and improve the processes used to reach future company goals.

Altering Organizational Structure

One of the key principles of organizational structure is the ability to remain dynamic and change to suit the needs of the company. Some of the elements that necessitate change in an organizational structure include changing customer needs, a change in company management, new technology, and reacting to the activities of your competition.

What Impacts Organizational Structure?

Organizational structure is the method by which an organization communicates, distributes responsibility and adapts to change. According to the Reference for Business, organizational structure is how a company utilizes its resources to achieve its goals. A company needs to keep its structure dynamic so that it can respond to the things that impact organizational structure. The company that can adapt is better able to survive.

Growth
A major factor that impacts organizational structure is company growth. As a company grows, the impact on the structure of the organization is significant. This can be especially true when the organization begins to expand to other geographic regions and the structure of the organization is spread out over many miles. A company may start out small, but, as time goes by, more employees may be hired, necessitating the introduction of departmental managers to help create a managerial structure. Additionally, an executive team may be required to run the various aspects of the business, and there may be the need for middle managers who would report to the managers.

Customer Needs
Customer service is important in business, so many companies have created entire divisions dedicated to customer service and retention. If a particular customer awards a large contract to your company, you may need to rearrange certain parts of your organization to accommodate the contract. For example, there may need to be an entire sales division created just for that customer and manufacturing may need to create a sub-process to build specialized products as well. As the needs of your customers shift, so to will the structure of your organization.

Technology
Technology can have an impact on how your organization is structured and how work flows. The Reference for Business points out that when computer networks became popular, it became easier for people to work as groups. People did not need to be in the same room, or even the same building, to be efficient. Technology can create positions within your company and it can eliminate positions. When filing is done electronically, there is no longer a need for as many file clerks as you once had but there is a need for a department of technicians to maintain and grow the computer network. As technology

continues to change the function of jobs in the workplace, the landscape of organizational structure changes with it.

How to Change Organizational Structure

Organizational structure is the formal design of managerial hierarchies within a company, setting forth both reporting relationships and information flows. A company's organizational structure forms the base upon which operational policies are formed. Structure plays a large role in shaping organizational culture as well, and companies may find it necessary to change organizational structure to remain competitive or adapt to changes in the company, industry or marketplace.

Step 1
Involve employees from all levels of your organization in the planning stage. Solicit feedback from key front-line managers and employees to gain deeper insight into practical operational issues. Invite one or two influential front-line employees to participate in planning meetings. In addition to offering unique insights, these employees can help to keep other employees informed of the planning process while spreading excitement about the change.

Step 2
Communicate planning progress across the organization regularly. Send company-wide updates via email or your company newsletter to keep the change fresh in employees' minds for some time before the implementation phase. Avoid making employees feel blindsided by the change, especially if they are a target for downsizing.

Step 3
Explain thoroughly the reasons for the change, as well as the benefits that the change will afford to individual departments and employees. Hold at least two meetings to detail the change; one with departmental managers and one with your entire office or organization, if possible. Send out an email further describing the change and how it will affect employees at all levels of the organization. Use positive language as much as possible to emphasize the benefits of the change rather than the possible drawbacks.

Step 4
Lead by example in the change initiative and enlist your top-level managers to do the same. Publicly show your commitment to the change through your informal conversations and the time that you spend planning for and communicating the details of the change.

Step 5
Roll out the change one department at a time, if possible, to identify and address logistical issues early. Alter your change implementation plans if necessary after the first department is reorganized. Roll out subsequent changes rapidly to move the process along and minimize the change's short-term impact on overall productivity.

Roles of Organizational Structure

Organizational structure pertains to the way in which companies arrange their departments. Smaller companies tend to have flatter organizational structures with few management levels. Larger companies use tall organizational structures with many echelons of management and employees. Companies use several types of organizational structure for specific roles. For example, companies using a geographic organizational structure decentralize various functions like marketing because of varying regional needs.

Efficiency
One role of organizational structure is efficiency. Most companies need to make the most of various resources. Duplicating raw materials or job duties is wasteful and inefficient. Consequently, a company will structure its organizational according to products and services it offers. A small software manufacturer may use a customer-oriented organizational structure because of its wide variety of customers. For example, the software company may sell to consumers, corporations, financial institutions, hospitals and health clubs. In this case, organizing departments by customers is efficient because of diversity. Product management duties may differ widely by customer type. Marketing to consumers is much different than targeting corporations.

Harnessing Experience
Another role of organizational structure is harnessing experience. Companies may arrange their companies by specific functions, such as marketing, accounting, finance and engineering. The purpose of grouping departments by function is to use the experience of groups to accomplish tasks and projects. A certain synergism exists when skilled employees of similar talents work together as a whole. For example, marketing and advertising managers can can better evaluate the potential success of a new product introduction as a group.

Decision Making
Organizational structure in a company also enhances decision making, according to Referenceforbusiness.com. Companies will often structure their organizations to make the best decisions possible. For example, a company may decentralize its marketing to make quicker decisions locally.

Consequently, the company may put marketing managers in one of four different regions. It is much easier for regional marketing managers to make local decisions about consumer needs than a marketing manager in a distant corporate office.

Communication
Companies also also use various organizational structures for communication purposes. Larger companies have many levels of management. Therefore, the most effective way to communicate is usually from the top of the organization down. Executives create certain operational procedures which they communicate to directors and managers. Managers, in turn, explain these operational procedures to subordinates or hourly employees.

Span of Control
Organizational structure is used for span of control. For example, a vice president of marketing may be in charge of four directors: One for marketing research, brand management, advertising and public relations. The directors may have three separate groups of managers reporting to them. Span of control pertains to the number of employees an executive or manager oversees. This reporting structure is how companies establish accountability.

The Differences in Large & Small Organizational Structure

Organizational structure is the framework companies use to govern their business operations. Business owners often set the tone for their companys organizational structure. The structural framework can vary based on the size of the company and the industry in which it operates. Several differences exist between large and small organizational structures. Although the basic business principles exist, differences occur with how the structure is created and maintained.

Types
Two basic types of organizational structures exist in the business environment: centralized and decentralized. Centralized organizational structures usually rely on one individual to make important business decisions. This structure is also known as a tall organizational structure with several layers of management beneath the primary decision maker. Decentralized organizational structures have several individuals responsible for various business divisions and departments. This structure is also known as a flat organization because many individuals can make business decisions.

Facts

Small business organizations usually have a centralized organizational structure. This structure is most common as small organizations because owners are usually responsible for making all business decisions. Owners may also distrust the decision-making ability of their managers or employees. Large business organizations often use a decentralized organizational structure because of the size of their business operations. Business owners, directors and executive-level managers must delegate responsibilities to lower-level employees to ensure a continuous flow of business operations.

Considerations
Small business owners can struggle when delegating managerial responsibility to employees. However, small businesses who continue to grow and expand can be severely hampered by business owners unwilling to delegate decision-making responsibilities to employees. Although it is possible, using a centralized organizational structure in a large business organization can retard business operations and growth. Business owners usually have several responsibilities on their plate. Trying to make every business decision in a large organization can be a time-consuming and arduous task.

Effects
Selecting the right type of organizational structure can help companies create and maintain a company culture. A company culture is the intangible environment in which owners, managers and employees work. Centralized organizational structures often have a formal company culture. This environment is usually more stressful than an open and friendly environment. Decentralized organizational structures allow multiple individuals to have input on creating the company culture. Multiple opinions can create a more balanced organization in company culture.

Misconceptions
Large and small organizational structures do not require owners or managers to sit down and write a formal document for this business practice. Many companies have an organizational structure that simply evolves as the business grows and expands. Business owners may also not need to spend copious amounts of time educating employees on the organizational structure. Individuals can quickly discern the type of organizational structure a company uses in its business operations.

The Importance of Organizational Structure

Small companies usually use one of two types of organizational structure: Functional and product. Functional areas such as marketing and engineering report to the president or CEO in a functional organizational structure. Product structures are used when a company sells numerous products or brands. It is important for companies to find the organizational structure that best fits their needs.

Function
Organizational structure is particularly important for decision making. Most companies either have a tall or flat organizational structure. Small companies usually use a flat organizational structure. For example, a manager can report directly to the president instead of a director, and her assistants are only two levels below the president. Flat structures enable small companies to make quicker decisions, as they are often growing rapidly with new products and need this flexibility. The Business Plan, an online reference website, says small companies should not even worry about organizational structure, unless they have at least 15 employees. The reason is that employees in extremely small organizations have numerous responsibilities, some of which can include multiple functions. For example, a product manager also might be responsible for marketing research and advertising. Large organizations often have many tiers or echelons of management. As a smaller organization grows, it can decide to add more management levels. Roles become more defined. Therefore, it is important to know which people oversee certain functions.

Communication
The importance of organizational structure is particularly crucial for communication. Organizational structure enables the distribution of authority. When a person starts a job, he knows from day one to whom he will report. Most companies funnel their communication through department leaders. For example, marketing employees will discuss various issues with their director. The director, in turn, will discuss these issues with the vice president or upper management.

Evaluating Employee Performance

Organizational structure is important for evaluating employee performance. The linear structure of functional and product organizational structures allow supervisors to better evaluate the work of their subordinates. Supervisors can evaluate the skills employees demonstrate, how they get along with other workers, and the timeliness in which they complete their work. Consequently, supervisors can more readily complete semiannual or annual performance appraisals, which are usually mandatory in most companies.

Achieving Goals
Organizational structure is particularly important in achieving goals and results. Organizational structure allows for the chain of command. Department leaders are in charge of delegating tasks and projects to subordinates so the department can meet project deadlines. In essence, organizational structure fosters teamwork, where everyone in the department works toward a common goal.

Prevention/Solution

Organizational structure enables companies to better manage change in the marketplace, including consumer needs, government regulation and new technology. Department heads and managers can meet, outline various problem areas, and come up with a solution as a group. Change can be expected in any industry. Company leaders always should strive to find the best organizational structure to meet those changes.

Indications of an Ineffective Organizational Structure

Your organizational structure is what maintains the hierarchy in your organization, facilitates communication and keeps your organization running smoothly. Effective leadership and strong organizational structure are more important to the success of a company than technology, according to the International Institute of Management. In order to address an ineffective organizational structure, you first need to learn to identify the signs of a failing company framework.

Breakdown in Communication
If departments are no longer efficiently sharing information and processing data as they should be, then that is a problem with organizational communication. One of the causes of a breakdown in company communication is that departments have begun to act on their own. There are many reasons why this could happen including a lack of trust between departments, the feeling by one department that another department is incapable of performing its job or incompetent management in the departments. The departments bypass the organizational structure and communication begins to break down.

Quality Control Issues

Organizational structure comes with a series of checks and balances that are designed to perform certain levels of quality control. The engineering department and the marketing department work together to create instruction manuals for products that the general public can use. Accounting works with sales to discuss client accounts and keep sales moving. When the organizational structure begins to deteriorate, these checks and balances will stop. The marketing group starts to create instruction manuals without extensive input from the marketing group and information gets left out. If quality control is becoming an issue, it may be because the organizational structure is breaking down.

Low Morale
When departments are not communicating and individuals within those departments are getting reprimanded, morale in the company will begin to suffer. Employees start to ignore the organizational structure because of fear of discipline, they do not trust their manager or they no longer feel included in the overall success or operation of the company. In some cases employees may have multiple managers due to a breakdown in the company hierarchy, and this will cause confusion, according to employment

expert Joan Lloyd writing on the Job Dig website. An alienated workforce with low morale is a product of a failing organizational structure.

Customer Service
An ineffective corporate structure sometimes lacks the ability to monitor interactions with the customers. If the sales group is not required to report customer issues to the customer service group, then the customer service people will be unaware of the problem if it should occur again. In an ineffective organizational structure, there is no cohesive way of handling customer issues. When customers contact the company, they may get three different answers if they talk to three different people. This causes a problem with customer retention and ongoing revenue. If you notice that your company is having a difficult time holding on to clients, you will want to check your organizational structure for problems.

Organization Chart of Air India Limited