Organizational structure
An organization’s structure can have a significant impact on its financial performance and ability to manage
its employees (Structure dictates more than you might think)
Organizational structure: Formally dictates how jobs and tasks are divided and coordinated.
Can be relatively simple when only 5-20 employees, but grow incredibly
complex when an organization has thousands of employees
WHY DO SOME ORGANIZATIONS HAVE DIFFERENT STRUCTURES THAN
OTHERS?
Organizational chart: A drawing that represents every job in the organization and the formal reporting
relationships between those jobs. (How work is structured within the company)
Elements of organizational structure
Five key elements of an organization’s structure, which describe how work tasks, authority relationships
and decision-making responsibilities are organized within the company.
1. Work specialization: The way in which tasks in an organization are divided into separate jobs
- This categorization is referred to as a company’s division of labor
1 Chapter 15: Organizational Structure
-It is a never-ending trade-off among productivity, flexibility and worker motivation.
-Each employee might perform only a single task: Allows them to be extremely productive
Trade-offs: - Highly specialized jobs can cause organizations to lose the ability associated with
employees who can be flexible in what they do
- By spending all their time in the specialization, they fail to update or practice other
skills
-High levels of specialization:
May be acceptable in larger firms but can be problematic in smaller firms (There they need to
be more flexible in their job duties)
Struggle with employee job satisfaction: More satisfied if they perform a number of different
kinds of activities
2. Chain of Command: Within an organization essentially answers the question ‘Who reports to whom?’
Stops with the CEO (or the board of directors)
Can be seen as the flow of authority to attain order, control and predictable
performance
, 3. Span of control: Represents how many employees he or she is responsible for in the organization
Key question: How many employees one manager can supervise effectively?
Narrow spans of control: Allow managers to be much more hands-on with employees
→Directive leadership styles
→While developing close mentoring relationships
=Especially important when the manager has more skill or expertise
The narrower the span, the more productive employees would become
Narrow span requires organizations to hire many managers
Too narrow!: Resentful of their close supervision and long for more latitude
A moderate span of control is best: Performance increases as span of control increases, but only up
to the point where managers have no longer have the ability to coordinate
An organization span of control affects how ‘tall’ or ‘flat’ its organizational chart becomes
What happens when an organization becomes taller:
1. More layers of management More management salaries
2. Communication becomes more complex
3. Ability to make decisions becomes slower
2 Chapter 15: Organizational Structure
Organizations are working to become flatter: -To reduce costs of management salaries
-To increase their ability to adapt to their environment
Tall & Narrow span of control
Flat & Wide span of control
4. Centralization: Reflects where decisions are formally made in organizations
-Centralized structure: When only the top managers have the authority to make final decisions
-Decentralized Structure: When authority is pushed down to lower-level employees and these
employees feel empowered to make decisions on their own
Organizations are moving toward more decentralized structures
An organization’s structure can have a significant impact on its financial performance and ability to manage
its employees (Structure dictates more than you might think)
Organizational structure: Formally dictates how jobs and tasks are divided and coordinated.
Can be relatively simple when only 5-20 employees, but grow incredibly
complex when an organization has thousands of employees
WHY DO SOME ORGANIZATIONS HAVE DIFFERENT STRUCTURES THAN
OTHERS?
Organizational chart: A drawing that represents every job in the organization and the formal reporting
relationships between those jobs. (How work is structured within the company)
Elements of organizational structure
Five key elements of an organization’s structure, which describe how work tasks, authority relationships
and decision-making responsibilities are organized within the company.
1. Work specialization: The way in which tasks in an organization are divided into separate jobs
- This categorization is referred to as a company’s division of labor
1 Chapter 15: Organizational Structure
-It is a never-ending trade-off among productivity, flexibility and worker motivation.
-Each employee might perform only a single task: Allows them to be extremely productive
Trade-offs: - Highly specialized jobs can cause organizations to lose the ability associated with
employees who can be flexible in what they do
- By spending all their time in the specialization, they fail to update or practice other
skills
-High levels of specialization:
May be acceptable in larger firms but can be problematic in smaller firms (There they need to
be more flexible in their job duties)
Struggle with employee job satisfaction: More satisfied if they perform a number of different
kinds of activities
2. Chain of Command: Within an organization essentially answers the question ‘Who reports to whom?’
Stops with the CEO (or the board of directors)
Can be seen as the flow of authority to attain order, control and predictable
performance
, 3. Span of control: Represents how many employees he or she is responsible for in the organization
Key question: How many employees one manager can supervise effectively?
Narrow spans of control: Allow managers to be much more hands-on with employees
→Directive leadership styles
→While developing close mentoring relationships
=Especially important when the manager has more skill or expertise
The narrower the span, the more productive employees would become
Narrow span requires organizations to hire many managers
Too narrow!: Resentful of their close supervision and long for more latitude
A moderate span of control is best: Performance increases as span of control increases, but only up
to the point where managers have no longer have the ability to coordinate
An organization span of control affects how ‘tall’ or ‘flat’ its organizational chart becomes
What happens when an organization becomes taller:
1. More layers of management More management salaries
2. Communication becomes more complex
3. Ability to make decisions becomes slower
2 Chapter 15: Organizational Structure
Organizations are working to become flatter: -To reduce costs of management salaries
-To increase their ability to adapt to their environment
Tall & Narrow span of control
Flat & Wide span of control
4. Centralization: Reflects where decisions are formally made in organizations
-Centralized structure: When only the top managers have the authority to make final decisions
-Decentralized Structure: When authority is pushed down to lower-level employees and these
employees feel empowered to make decisions on their own
Organizations are moving toward more decentralized structures
