Organizational Structure and Decentralization: A Comprehensive Guide
Organizational Structure and Hierarchy
Chain of Command/Hierarchy of Authority
The chain of command refers to the levels of hierarchical authority within an organization. Its length depends on the span of control.
Span of Control
The span of control refers to the maximum number of subordinates that can be effectively managed by a single manager.
Narrow Span of Control
A narrow span of control leads to a greater number of hierarchical levels and a longer chain of command. This results in a more clustered structure.
Advantages of a Narrow Span of Control
- Releases management duties and provides greater access to subordinates.
- Allows managers more time for planning and control.
Disadvantages of a Narrow Span of Control
- Lengthens communication channels, increasing the weight and cost of the structure.
- Limits the saturation of managerial posts, increasing the risk of interference in work by subordinates and the establishment of short circuits.
Wide Span of Control
A wide span of control shortens the chain of command and results in a more rigid structure.
Advantages of a Wide Span of Control
- Creates a lighter structure with fewer hierarchical levels and lower costs.
- Shortens information circuits, reducing the risk of mistakes and misinterpretation.
Disadvantages of a Wide Span of Control
- The accumulation of work in managerial posts may prevent timely action on important matters.
- Oversimplification of problems may lead to unsuitable solutions.
Types of Organizational Structures
Functional Structure
In a functional structure, tasks are grouped together based on the basic functions of the economic activity.
Divisional Structure
In a divisional structure, organizational units are formed by grouping tasks according to:
- Products
- Geographic areas or territories
- Types of customers
Matrix Structure
A matrix structure combines divisional and functional structures. Coordination occurs on two levels: divisional (product, territory, or customer) and functional (specialist knowledge). This structure promotes efficiency, innovation, and adaptability to the market.
Coordination Mechanisms
Mutual Adjustment
Coordination is achieved through simple, informal communication.
Direct Supervision
Coordination is achieved through the hierarchy of authority defined in the organization’s structure.
Standardization of Work Processes
Coordination is achieved by establishing a sequence of tasks and activities for each individual in the organization.
Standardization of Output
Coordination is achieved by clearly defining objectives or results for each individual within the organization.
Standardization of Skills and Knowledge
Coordination is achieved by ensuring that subordinates have the necessary knowledge and skills to perform their work effectively.
Organizational Liaison Devices
Liaison Roles
Liaison roles are used when significant contact is needed to coordinate the work of two units without resorting to vertical channels. They lack formal authority.
Integrating Managers
When coordination between organizational units requires a higher level of authority than can be provided by liaison roles, an integrating manager may be appointed. This role combines a liaison function with formal authority. Examples include product managers and project managers.
Committees
Committees are multi-individual groups that function as task forces. They are composed of members from different organizational units to exchange information, make decisions, or address problems.
Line and Staff Bodies
Line Bodies
Line bodies, including the strategic apex, middle line, and operating core, carry out the fundamental activities necessary to produce and distribute the company’s product or service.
Staff Bodies
Staff bodies, including the technostructure and staff support, have an indirect impact on the functioning of line bodies by improving their efficiency and coordination.
Types of Staff Relationships
Advisory
An advisory staff relationship involves providing specialist advice and opinions to another person or unit, both on their own initiative and at the request of others.
Service
A service staff relationship involves carrying out a specific activity on behalf of another person or unit, rather than providing advice on how to carry out that activity.
Coordination
A coordination staff relationship involves coordinating the work of others, even those belonging to different lines of activity and not hierarchically dependent on the staff unit.
Control
A control staff relationship involves exercising control over individuals or units, not through hierarchical authority, but through an independent person or unit.
Functional Authority/Planification
Functional authority involves a unit giving orders and instructions to another unit that is not hierarchically dependent on it. The receiving unit is obligated to respect these orders and instructions.
Technostructure
The technostructure is determined by the strategic apex to standardize the behavior of the operating core in specific areas. It provides support and serves as a control mechanism in various organizational areas.
Support Staff
Support staff centralizes support functions for the entire organization to ensure efficient performance. Due to its specialized nature, support staff cannot be developed internally due to a lack of resources.
Staff Assistant
A staff assistant is directly subordinate to a manager and provides advice and assistance in performing their duties. They lack formal authority and do not give orders or instructions.
General Staff
General staff have the same functions and position as a staff assistant but are a multi-person body. They are typically found at higher levels of the hierarchy.
Specialist Staff
Specialist staff assist the line in specialized areas. They are a multi-person group that provides support to the organization as a whole. They provide advice, consultation, and assistance but lack hierarchical authority.
Decentralization
Vertical Decentralization
Vertical decentralization involves dispersing power throughout the different hierarchical levels from top to bottom.
Horizontal Decentralization
Horizontal decentralization involves decision-making processes controlled by line bodies. Decision-making power flows from line bodies to specialists within staff bodies (technostructure). This requires high formalization and standardization.
Physical Dispersion of Services
Physical dispersion of services refers to the concentration or dispersal of services geographically. It has little to do with decision-making.
Advantages of Decentralization
- Improved decision quality by reducing the magnitude and complexity of problems.
- Timely decision-making without delays caused by contacting superiors or waiting in queues.
- Enhanced capacity to react to changes in a timely manner.
- Improved work at higher levels, allowing time for more important problems and long-term planning.
- Increased motivation and stimulation for the managerial team.
- Reduced bureaucratic costs.
Disadvantages of Decentralization
- Lack of uniformity.
- Difficulty in control.
- Risk that central staff are not fully utilized in a decentralized environment.
- Increased costs.
Factors Determining the Degree of Decentralization
Internal Factors
- Knowledge of the facts (decentralization)
- Cost of mistakes in decision-making (centralization)
- Availability of management (decentralization)
- Uniformity in decision-making (centralization)
- Control techniques and procedures (decentralization)
- Desire for independence among managers (decentralization)
- Size of the organization (decentralization)
- Variety of products, services, and customers (decentralization)
- Track record of the organization (centralization)
- Internal development (centralization)
- External development (decentralization)
- Evolutionary speed of the organization (decentralization)
- Geographic dispersion (decentralization)
External Factors
in determining the degree of decentralization:-Turbulence of the environment. (Decentralization)- Public Administration activity. (Centralization)- Economic trends:-Expansion. (Decentralization)-Recession. (Centralization).