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 longer chain of command and a more clustered organizational structure.
Advantages of a Narrow Span of Control
- Greater access to management for subordinates.
- More time for management to focus on planning and control.
Disadvantages of a Narrow Span of Control
- Lengthened communication channels, increasing communication costs and complexity.
- Limited managerial capacity, increasing the risk of interference and short circuits.
Wide Span of Control
A wide span of control leads to a shorter chain of command and a more rigid organizational structure.
Advantages of a Wide Span of Control
- A lighter structure with fewer hierarchical levels, reducing costs.
- Shorter information circuits, reducing the risk of errors and misinterpretations.
Disadvantages of a Wide Span of Control
- Accumulation of work for managers, potentially hindering timely action on important matters.
- Oversimplification of issues to manage workload, leading to inadequate solutions.
Types of Organizational Structures
Functional Structure
In a functional structure, tasks are grouped based on the basic functions of the economic activity.
Divisional Structure
In a divisional structure, organizational units are formed by grouping tasks based on:
- Products
- Geographic areas or territories
- Types of customers
Matrix Structure
A matrix structure combines divisional and functional structures, coordinating tasks 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 informal communication.
Direct Supervision
Coordination is achieved through the hierarchy of authority established during the organization’s creation.
Standardization of Work Processes
Coordination is achieved by defining the sequence of tasks and activities for each individual in the organization.
Standardization of Output
Coordination is achieved by clearly establishing objectives or results for each individual within the organization.
Standardization of Skills and Knowledge
Coordination is achieved by ensuring that subordinates possess the necessary knowledge and skills to perform their work effectively.
Organizational Liaison Devices
Liaison Roles
Liaison roles are established 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 what liaison roles can provide, an integrating manager may be appointed. This role combines liaison responsibilities with formal authority. Examples include product managers and project managers.
Committees
Committees are multi-individual groups that function as task forces, bringing together 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, indirectly contribute to the functioning of line bodies by improving their efficiency and coordination.
Types of Staff Relationships
Advisory
A person or unit provides specialist advice and opinions to another, both on their own initiative and at the request of others.
Service
A person or unit performs a specific activity on behalf of another, rather than providing advice on how to carry out that activity.
Coordination
A unit coordinates the work of others, potentially from different lines of activity, who are not hierarchically dependent on it.
Control
Control over individuals or units is exercised by an independent person or unit, rather than the hierarchical superior.
Functional Authority/Planification
A unit gives orders and instructions to another unit that is not hierarchically dependent on it, and the receiving unit is obligated to comply.
Technostructure
The technostructure, determined by the strategic apex, standardizes the behavior of the operating core in specific areas. It provides support and acts as a control mechanism in various organizational areas.
Support Staff
Support staff centralizes support functions for the entire organization, ensuring efficient performance. Due to its specialized nature, support staff cannot be developed internally due to a lack of resources.
Staff Assistant
A staff assistant reports directly 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 performs the same functions as a staff assistant but is a multi-person body. They are typically found at higher levels of the hierarchy.
Specialist Staff
Specialist staff assists the line in specialized areas. This multi-person group also provides support to the organization as a whole. They offer advice, consultation, and assistance but lack hierarchical authority.
Decentralization
Types of Decentralization
Vertical Decentralization
Dispersion of power throughout the different hierarchical levels from top to bottom.
Horizontal Decentralization
Decision-making processes are 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
This refers to the concentration or dispersion of services, with little to no impact on decision-making.
Advantages of Decentralization
- Improved decision quality by reducing the complexity of problems.
- Timely decision-making without delays caused by contacting superiors or waiting in queues.
- Enhanced capacity to react to changes.
- Improved work at higher levels, allowing for focus on 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.
- Potential underutilization of central staff.
- 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 decisions (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).