Organizational Structure and Design
Chain of Command/Hierarchy of Authority
The scale of levels of hierarchical authority existing in an organization. Its length depends on the extent of the span of control.
Span of Control
The maximum number of subordinates that can be placed under the jurisdiction of a person holding a managerial post who acts as their immediate superior.
Narrow Span of Control
- Greater hierarchical level
- Lengthens the chain of commands
- Cluster structures
Advantages:
- Release of management duties and greater access to them by subordinates
- More time for management to devote to planning and control
Disadvantages:
- Lengthening of communication channels with the consequent weight on and cost of the structure
- Limited saturation of the managerial post, which increases the risk of interference in work by subordinates and also the risk of establishing short circuits
Wide Span of Control
- Shortens the chain of commands
- Rigid structures
Advantages:
- A lighter structure, with fewer hierarchical levels and consequently less cost
- Shorter information circuits, whereby the risk of mistakes and misinterpretation is reduced
Disadvantages:
- The accumulation of work in managerial posts may mean that urgent matters prevent actions being taken about what is important
- Things are over-simplified to deal with all problems, and solutions are not suitable
Departmentalization
Functional
Involves grouping company tasks by taking the basic functions of the economic activity as a basis.
Divisional
Organizational units or bodies are formed from the grouping together of tasks:
- According to products
- According to geographic areas or territories
- According to types of customer
Matrix
Coordination of the different jobs is carried out on two levels, divisional (according to product, territory, or customer) and functional (according to specialist knowledge). It involves a higher level of efficiency and a greater capacity for innovation and adaptation to the market.
Coordination Mechanisms
Mutual Adjustment
Coordination is achieved via simple informal communication.
Direct Supervision
Coordination is achieved via the hierarchy of authority defined in the body creation process.
Standardization of Work Processes
Coordination is achieved via the establishment of the sequence of tasks and activities to be developed by each person in the organization.
Standardization of Output
Coordination is achieved via the clear establishment of objectives or results to be achieved by each one within the organization.
Standardization of Skills and Knowledge
Coordination is achieved via the guarantee that the subordinate will have the know-how and skills required to suitably carry out their work.
Organizational Liaison Devices
Liaison Roles
When considerable contact is needed to coordinate the work of two units, without having to resort to vertical channels. It lacks formal authority.
Integrating Managers
When coordination between organizational units is needed at a higher level than what can be provided by liaison roles, the organization may appoint an integrating manager by creating a liaison role equipped with formal authority. (Product manager/project manager)
Committees
Collective or multi-individual in nature, they take the form of task forces that are made up of the members of different organizational units to exchange information, make decisions, or deal with problems.
Line and Staff Bodies
Line Bodies
Strategic apex, middle line, and operating core. They carry out the fundamental activities to achieve and distribute the company’s product or service.
Staff Bodies
Technostructure and staff support. They have an indirect bearing on the functioning of the line bodies by improving their level of efficiency and coordination.
Types of Staff Relationships
Advisory
When a person or unit supplies another with specialist advice and opinions, both on their own initiative and at the request of others.
Service
When a person or unit carries out a specific activity on behalf of another person or unit, rather than giving them specialist advice about how to carry out that activity.
Coordination
When a unit coordinates the work of others that may belong even to different lines of activity and are not hierarchically dependent on it.
Control
When the authority that exercises control over individuals or units is not the hierarchical superior, but rather an independent person or unit.
Functional Authority/Planning
When a unit gives orders and instructions to another unit which is not hierarchically dependent on it and which is duty-bound to respect those orders and instructions.
Technostructure
Determined by the Strategic Apex to standardize operating core behavior in specific questions. It provides support and serves as control mechanisms in many organization areas.
Support Staff
Centralize support functions to the entire structure for efficient performance. According to its specialized character, it cannot be developed by its own due to a lack of resources.
Staff Assistant
The person who is under the immediate dependency of the manager and exclusively under the latter to advise them and assist them in performing their duties. It lacks formal authority, and they do not give orders or instructions.
General Staff
It has the same functions and the same position as the staff assistant but is a multi-person body. They are only found on high levels of the hierarchy.
Specialist Staff
Assist the line in specialist areas. A multi-person group also performs a support role for the organization as a whole. They provide advice, consultation, and assistance and lack hierarchical authority.
Decentralization
Vertical Decentralization
Dispersion of power throughout the different hierarchical levels from top to bottom.
Horizontal Decentralization
Decision-making processes controlled by line bodies. Decision-making power flows from line bodies to specialists with staff bodies (technostructure). It requires high formalization and standardization.
Physical Dispersion of Services
Little or nothing to do with decision-making. (Concentrated vs. dispersed)
Advantages of Decentralization
- The quality of the decision may improve by reducing the magnitude and complexity of problems
- The decision is taken in time without loss of time resulting from having to contact superiors or queues
- The capacity to react in time to changes is improved
- Work is improved on higher levels, where time can be devoted to more important problems and long-term planning
- The managerial team is more motivated and stimulated
- Bureaucratic costs are reduced
Disadvantages of Decentralization
- Lack of uniformity
- Difficulty to control
- Danger that central staff are not fully taken advantage of decentralization
- Increase in costs
Internal Factors in Determining the Degree of Decentralization
- Knowledge of the facts (Decentralization)
- Cost of mistake in terms of the decision (Centralization)
- Availability of management (Decentralization)
- Uniformity in terms of decisions (Centralization)
- Control techniques and procedures (Decentralization)
- Desire for independence among managers (Decentralization)
- Size of the organization (Decentralization)
- Variety of the range of products/services and customers (Decentralization)
- Track record of the organization – 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)