Organizational Structure of Companies 

Organizational Structure of Companies 

1. Designing an Effective Organization Structure. Any company has a well-defined structure which depicts the flow of information – this is used to maximize productivity and eliminate any role confusion.

   1. Definitions

      1. organization structure = “a framework that enables managers to divide responsibilities, ensure employee accountability, and distribute decision-making authority”

      2. organization chart = “a diagram that shows how employees and tasks are grouped and where the lines of communication and authority flow”

      3. agile organization = “a company whose structure, policies, and capabilities allow employees to respond quickly to customer needs and changes in the business environment”

   2. Structure goals

      1. basic setup so managers can assign work effectively

      2. assign manager duties

      3. improve communication and control

      4. hold employees accountable

   3. Organizational charts

      1. visual on which employees solve which tasks

      2. formal organization = official design framework for organization 

      3. informal organization = personal interactions in a network among workers (includes sports, social life, charities, social media, etc.)

   4. Agile organizations 

      1. employees solve customer needs efficiently

      2. employees adapt to work changes

      3. create the best teams (bring different strengths together)

   5. Designing the best structure

      1. organizations goals?

      2. command chain?

      3. effectiveness & efficiency is key

2. Identifying Core Competencies. Core competencies are prioritized and include competitive advantages.

   1. Definitions

      1. core competencies = “activities that a company considers central and vital to its business”

   2. Core competencies

      1. company’s strengths

      2. company’s competitive advantages

3. Identifying Job Responsibilities. Job responsibilities differ but are usually assigned to play to strengths.

   1. Definitions

      1. work specialization = “specialization in or responsibility for some portion of an organization’s overall work tasks; also called division of labor”

   2. Work Specialization

      1. organization tasks broke down into separate jobs

      2. employees receive tasks which they excel at

      3. ex: design employees work on Instagram posts, marketers work on marketing, etc.

      4. end goal is effectiveness and efficiency

      5. prevents overlapping responsibilities & miscommunication

   3. Overdoing Specialization

      1. too specific jobs bore employees

      2. especially those with repetitive tasks

      3. leads to alienated, unchallenged employees

      4. solution? team-based approach with a bigger range of responsibilities so things can be switched up!

4. Defining the Chain of Command. Chain of command is the flow of authority used to maximize communication of vital information

   1. Definitions 

      1. chain of command = “a pathway for the flow of authority from one management level to the next”

      2. line organization = “a chain-of-command system that establishes a clear line of authority flowing from the top down”

      3. line-and-staff organization =  “an organization system that has a clear chain of command but that also includes functional groups of people who provide advice and specialized services”

   2. Chain of Command

      1. who reports to who reports to who reports to who?

      2. who is responsible? who has authority? 

   3. Employee Necessities

      1. responsibility – preforms tasks respectfully, efficiently, and effectively. essentially achieve workplace goals willingly

      2. accountability – report results of work to next person in change of command

   4. Manager Necessities

      1. authority – make decisions, issue orders, carry out orders, distribute necessary resources. flows down management pyramid

      2. delegation – assignment of work, how authority is carefully placed throughout company

   5. Line Organization

      1. simplest form of organization

      2. teams report to team managers / VPs of projects. 

      3. sometimes fall short because of lack of communication

      4. which leads to…

   6. Line-and-staff Organization

      1. specialization + management control

      2. managers served by staff, but not in chain of command – etc., directors of projects

5. Span of Management. 

   1. Definitions

      1. span of management = “the number of people under one managers control; also known as the span of control”

   2. Span of Management

      1. large team = wide span, common in flat organizations

      2. flat organizations = less management (missing middle management)

      3. small team = narrow span, common in tall organizations

      4. tall organizations = more management (less people per team)

   3. Flat Organization Structures

      1. less time to make decisions

      2. senior executives have more communication & authority to teams & daily business actions

      3. increased manager demand

      4. less time per employee

6. Centralization Versus Decentralization 

   1. Definitions: 

      1. centralization = “concentration of decision-making authority at the top of an organization”

      2. decentralization = “delegation of decision-making authority to employees in lower-level positions”

   2. Centralization

      1. + top management experience

      2. + broad view of goals

      3. + large products more efficient 

      4. + reduced overlapping tasks

   3. Decentralization

      1. + more responsiveness

      2. – top authority needed to keep goals in check

      3. – overlapping tasks

7. Organizing the Workforce

   1. Definitions:

      1. departmentalization = “grouping people within an organization according to function, division, matrix, or network”

   2. Departmentalization

      1. vertical structure – layers in chain of command from top to bottom

      2. horizontal structure – work specialties and functions divisions

      3. hybrid structures = combination of structures (usually functional, division, matrix, and/or network)

8. Functional Structures

   1. Definitions:

      1. functional structure = “grouping workers according to their similar skills, resource use, and expertise”

   2. Functional Structures

      1. groups employees by skills, resource use, & job requirement. ex: R&D, production/manufacturing, marketing/sales, H&R

      2. + efficient use of resources

      3. + development of skills

      4. + unified direction

      5. + more communication & coordination

      6. – problems with communication, direction, coordination as growth continues

      7. – narrow focus on department views, loss of big pictures

      8. negatives combatted by cross-functional teams

9. Divisional Structures

   1. Definitions:

      1. divisional structure = “grouping departments according to similarities in product, process, customer, or geography”

   2. Divisional Structures

      1. self-contained organizations, major functional resources. ex: R&D, manufacturing, finance, marketing. sometimes called business units

      2. product divisions – grouping based on products

      3. process divisions – grouping based on major production steps

      4. customer divisions – satisfying specific groups of customers

      5. geographic divisions – local customs easily recognized

      6. + react quickly to change

      7. + better service

      8. – duplication

      9. – poor coordination can cause narrow focus

      10. – divisions competitions

10. Matrix Structures    

    1. Definitions:

       1. matrix structure = “a structure in which employees are assigned to both a functional group and a project team (thus using functional and divisional patterns simultaneously)”

    2. Matrix Structures

       1. share resources across groups

       2. can be permanent or temporary

       3. + devotion to specific customers temporarily

       4. + easier to distribute limited resources

       5. + mix of skills

       6. – more than one person to report to

       7. – more communication necessary

       8. – can create tension, competition

11. Network Structures

    1. Definitions:

       1. network structure = ”a structure in which individual companies are connected electronically to perform selected tasks for a small headquarters organization’

    2. Network Structures

       1. also called virtual organizations

       2. outsource engineering, marketing, research, accounting, production, distribution, etc.

       3. stems from core goals & necessities

       4. functions can outsource OR be internal

       5. + lower costs

       6. + flexibility

       7. + competitiveness compared to other companies

       8. – outsider help can leave company vulnerable

       9. – outsourcing can destroy competitive distinctions (what makes the product their product. specialty)