Understanding Organizational Structures and Design
Organization refers to the establishment and consolidation of activities and resources, interacting through horizontal and vertical coordination to fulfill objectives.
Objectives of Designing an Organizational Structure
An organizational structure is designed to:
- Determine who should perform which tasks and be accountable for results.
- Remove barriers to performance caused by confusion and uncertainty regarding the allocation of activities.
- Deploy networks for decision-making and communication that are responsive and supportive of business goals.
Types of Organizations
- Formal Organization: The intentional structure of roles in a formally organized company. It must be flexible, and individual efforts should be analyzed toward organizational goals.
- Informal Organization: A network of personal and social relationships not established or required by a formal organization but arising spontaneously from the association of people.
- Social Organizations: A group of people formally constituted to reach certain goals more efficiently together than individually.
Resources in a Company
- Human Resources: Employees whose work is primarily intellectual and service-oriented.
- Material Resources: Buildings and facilities used for productive work.
- Technical Resources: Intangible assets of the company, including stable relationships that coordinate different things, people, or those with them.
Levels of Hierarchy in a Company
- Management Level: Composed of directors, partners, shareholders, and owners. They set goals, policies, internal rules of operation, and administrative procedures.
- Executive Level: Includes general management, department managers, administrators, and counselors. They are responsible for guiding the business toward achieving its objectives.
- Mid-Level Management: Composed of executives, department heads, foremen, and plant managers. They perform tasks at the enforcement level and make decisions for business management.
- Operational Level: Consists of all personnel in different departments (administrative, accounting, marketing, finance, plant, production, service, etc.). They are responsible for implementing all tasks that run the company.
Definition of Organizational Structure and Design
Once goals are defined and established, managers must develop an effective framework to facilitate compliance. The organizational structure is the formal framework or system of communication and authority within the organization.
Organizational Design: This occurs when managers develop or change the structure of an organization. It should enable the effective and efficient achievement of goals and objectives, requiring managers to decide how to coordinate activities vertically and horizontally.
Key Aspects of Organizational Design
- Complexity: Refers to the amount of differentiation in an organization. The greater the division of labor, the more vertical levels in the hierarchy, and the more geographically dispersed the units, the more complex the organization.
- Execution: The degree to which an organization depends on rules and procedures to guide employee behavior.
- Centralization: This occurs when decision-making is concentrated at the upper levels of management. In a decentralized structure, lower-level management has more decision-making power.