Understanding Organizational Structures and Principles

Posted on Oct 30, 2024 in Other subjects

Organization Title

An organization combines technical, human, and financial resources, including buildings, machinery, equipment, and personnel. Its structure depends on its goals and the relationships between its elements. The organization’s structure should adapt to its objectives and specific circumstances.

Goals of the Organizational Structure

This system of relationships aims to:

  • Ensure everyone knows each other’s roles.
  • Clarify individual roles and responsibilities within the work process.
  • Provide information on all work activities, giving employees a clearer vision and understanding of the company’s ultimate objective.

Essential Elements Within the System

The system must include:

  • Work rules.
  • A work policy (documented, either implicitly or explicitly).
  • Training manuals and programs.
  • A company culture—a set of customs and practices that guide and influence company decisions, shaping its strategy.

Principles of Organization

These principles serve as guidelines for company management:

  1. Clearly defined business objectives.
  2. Unity of command: Each individual has only one superior and knows whom they report to, and superiors know their subordinates. This ensures clear order allocation and avoids interference.
  3. Unity of direction.
  4. Authority and responsibility: Greater authority comes with greater responsibility.
  5. Span of control: Defining the scope of authority.
  6. Uniformity of tasks.
  7. Hierarchy of authority: A clear establishment of who has the authority to order task execution.
  8. Balance within the organization.

Graphical Representation: Organizational Chart

Classes of Organizational Charts

1. Purpose

  • Informational: Provides a simplified overview of the company or institution to the public (e.g., a chart of the Ministry of Finance).
  • Analytical: Contains a detailed representation of the entire company structure.

2. Size

  • General: Covers the entire organization.
  • Partial: Reflects only a part of the structure.

3. Content

  • Structural: Shows element names, hierarchical placement, and authority relationships.
  • Functional: Reflects the functions or content assigned to different bodies.
  • Staff: Refers to work positions.

4. Graphic Layout

  • Vertical: Starts at the top center and descends in steps.
  • Horizontal: Develops from left to right.
  • Circular: Highest authority in the center, with expanding circles representing lower levels.

Organizational Structures

1. Linear or Hierarchical Structure

This model emphasizes hierarchy and unity of command. Each individual reports to their immediate superior, and authority flows from the top down.

Advantages

  • Easy maintenance of discipline.
  • Simplicity and clarity of implementation.
  • Allows lower-level management decisions in the absence of superiors.
  • Unity of control.

Disadvantages

  • Concentration of power requires specialization in many tasks, which is unrealistic for individuals.
  • Increased bureaucracy as the company and chain of command grow.
  • Rigidity and inflexibility, potentially leading to a dictatorial regime.

2. Functional Structure

Designed to address the limitations of the hierarchical structure and its inability to handle growing specialization demands. Subordinates receive orders and assistance from multiple superiors.

Advantages

  • Greater business efficiency due to specialized leaders.
  • Expert advice available to each worker.
  • Faster communication.

Disadvantages

  • Loss of unity of control.
  • Potentially contradictory orders from multiple superiors.
  • Less discipline.
  • Specialization may overshadow overall company objectives.

3. Mixed Structure (Hierarchical-Functional)

Distinguishes between chiefs with authority (hierarchical) and technical specialists (functional). Chiefs receive technical reports (staff) and are responsible for decisions. Two staff alternatives exist:

  • Personal Staff: Exclusive to the director.
  • Specialized Staff: Available to all company offices.

Advantages

  • Utilizes specialists who advise various departments.
  • Maintains unity of control.

Disadvantages

  • Staffs may give ill-considered opinions without accountability.
  • Potential conflicts between staff and formal authority.

4. Committee Structure

Decisions are made collectively, sharing responsibility.

Advantages

  • Decisions are negotiated and reached by consensus.

Disadvantages

  • Meeting dynamics can be challenging.

5. Matrix Structure

A complex structure using a double-entry matrix with two organizational variables (e.g., roles and projects). Each employee has at least two superiors: a functional head and a project manager.

6. Divisional Structure

Addresses the needs of modern multi-product, multi-market, and multi-plant companies. Divisions are based on:

  1. Product
  2. Markets
    • Geographical areas
    • Consumer types
  3. Functions or processes
  4. Mixed criteria