Effective Organizational Structures and Management Principles

Posted on Apr 6, 2025 in Business Administration and Management (BAM)

Defining an Organization

An organization involves two or more people working together in a structured manner to achieve specific objectives.

Basic Elements of an Organization

  • A Common Objective: No survival without an aim. Organizations evolve, but personal interests are dependent on a common objective.
  • People and Resources: Profile considerations include age. Cooperation can be imposed or spontaneous.
  • Combined Effort: How resources are combined to achieve the final objective. Each individual’s action is coordinated and associated with others. Effort may be programmed or spontaneous (showing cohesion).
  • Relationship System: A system of dependence and relationships coordinates all efforts to reach the objective. Unity in action is needed to divide functions.

Principles of Management

  • Parkinson’s Law: El trabajo se expande hasta llenar el tiempo disponible hasta que se termine (Work expands to fill the time available for its completion).
  • Unit of Command: Los empleados deberán recibir órdenes de un solo supervisor (Employees should receive orders from only one supervisor).

Organizational Structure Fundamentals

This refers to the harmonized relationship between different activities and the company’s departments/units.

The manager acts as a harmonizer by:

  • Dividing activities into individual tasks (creating production and management units).
  • Matching individual tasks to specific job positions (coordination).
  • Defining relationships: cooperation, authority, and subordination within the organization.

Elements of Structure

  • Division of work (labor specialization)
  • Departmentalization
  • Hierarchy (Chain of command)
  • Coordination/Control
  • Centralization or decentralization (Differentiation or integration)
  • Formality

Kinds of Relationships

  • Simple and Direct: Direct relationship with immediate subordinates.
  • Crossed: Subordinates are dependent on the same superior and keep contact with each other.
  • Direct and Complex (Group): Superior and subordinate interacting with other subordinates.

Delegation

Formal authority is delegated to a person who does not inherently possess it due to their hierarchical level. This allows them to perform certain actions for a specific time.

Committees

Groups of persons at the same hierarchical level who are given a specific task or assignment.

Models of Departmentalization

  1. Geographic Area (Territorial or Regional): Grouping by location.
  2. Product: Based on manufacturing and commerce of specific products.
  3. Functional: Based on grouping similar activities or functions.
  4. Customer: Departments organized based on specific customers’ features.
  5. Process: Grouping based on the production process.
  6. Time: Frequent for organizations working in shifts.
  7. Project: One department per project.

Types of Organizational Structures

Formal Structure

A planned structure characterized by:

  • Simple relationships between members.
  • Related activities.
  • A defined pattern of relationships (authority, communication, work).
  • Outlined by management.
  • Main Aim: Achieve business objectives efficiently through labor division and coordination.
  • It links all elements of an organization.

Informal Structure

Arises from interpersonal relationships.

Functional Organizational Structure

  • Based on labor division (functions).
  • Usually found in companies with few product lines.
  • Important to establish clear responsibilities.

Divisional Organizational Structure

  • Features semi-autonomous divisions: separate units for each type of business.
  • Each unit designs, produces, and markets its own products.
  • Each unit has its own management but may share some common functions.
  • Divisions operate at the corporate level.
  • Can be based on product, geography, or customers.

Matrix Structure

  • Authority is ‘superimposed’ over several functional departments.
  • The Unit of Command principle is broken (multiple managers/coordinators).
  • Nobody has absolute superior authority; nobody has only one subordinate.

Adhocracy

  • The flattest kind of organization.
  • Ideal for complex and particular activities.
  • Requires teams of experts from very different disciplines.
  • Projects usually need organization, flexibility, and easy communication.
  • Typical for innovative organizations in changing environments.

Considerations for Structure Design

Any organizational structure should consider:

  • Advantages of specialization.
  • Importance of control (results, supervision).
  • Contribution to coordination.
  • Relevance of each function and task.
  • Each organization’s specific circumstances.
  • Structural costs.
  • Efficiency through decentralization.

Modern Organizational Models

  1. Network: Offers flexibility in changing environments.
  2. ‘Club’ Structure
  3. Team-Based Structure
  4. Boundaryless Structure
  5. Federalist Structure: Extreme division into small autonomous units.

Why Organizations Might Fail

  1. Functional structure not revised or adapted to objectives.
  2. Inability to find skilled personnel for new managerial positions as the organization grows.
  3. Structure is not modified to consider staff capabilities or needs.
  4. No delegation or overly restrictive delegation practices.
  5. Authority granted without responsibility (or vice versa); responsibilities assigned without transferring necessary authority.
  6. Misuse of functional authority (authority not acknowledged by others).

Human Resources Management (HRM)

Traditional HRM

Focuses on best practices to achieve organizational goals, ensuring every person works efficiently and effectively.

Strategic Human Resources Management (SHRM)

Views human capital as a source of sustainable competitive advantage. Key functions include recruitment, motivation, development, and support.

Motivation

Aims to:

  • Get employee commitment to the organization.
  • Foster a desire to belong.
  • Encourage employees to give their best.
  • Trigger creativity and innovation.

Two big areas influence motivation:

  • Compensation System
  • Quality of Working Life

Compensation

  • Direct: Related and proportional to the job position (e.g., salary, bonuses).
  • Indirect: Common rewards for all employees (e.g., social benefits, insurance).

Recommendation: Create the right atmosphere for intrinsic self-motivation and use extrinsic motivation (like salary increases) occasionally.