Chapter 14 - Organizational structure
Organizational structure
● The organizational structure formally dictates how jobs and tasks are divided and
coordinated between individuals and groups within an organization
● The organizational chart is a drawing that represents every job in the organization
and the formal reporting relationships between those jobs
● 5 elements of organizational structure:
○ Work specialization
○ Chain of command
○ Span of control
○ Centralization
○ Formalization
5 elements of Organizational structure (W.COC.SOC,C,F)
1. Work specialization
● Work specialization:
○ the degree to which tasks in an organization are divided into separate jobs
○ Also known as division of labor
○ Impacts productivity, training, flexibility, job satisfaction
○ Henry Ford divided tasks among the employees to such degree that each
employee might perform only a single task
○ Having only one task perform allowed those employees to be extremely
productive at doing that one thing
○ Highly specialized jobs can cause organizations to lose the ability associated
with employees who can be flexible in what they do.
■ employees fail to update or practice other skills
○ Can be acceptable in larger companies with more employees but become
problematic in smaller firms.
○ Could struggle with job satisfaction
■ How happy would you be doing same job everyday?
○ Better productivity, reduced training, reduced flexibility, reduces satisfaction
2. Chain of command
● Chain of command:
○ who reports to whom in the organization
● Illustrates formal authority relationships
○ Specific flow of authority down through the levels of an organizations
structure
,● Helps maintain order, control, and predictable performance
3. Span of control
● # of employees each manager in the organization has responsibility for
● The span of control can be narrow (2 subordinates) or wide (10 employees), with
different benefits for each
● Affects how “tall” or “flat” the organizational chart becomes
● Narrow span:
○ Allows managers to be much more hands on with employees, using directive
leadership style while developing close mentorship relationship.
○ Especially important if manager has substantially more skill or expertise than
subordinates
○ Narrower the span of control, more productive employees would
become
○ Requires organization to hire many managers, which can significantly
increase labour costs.
○ Communication becomes more complex
○ Decision making becomes slower, has to be approved at every step
○ Research suggests that a moderate span of control is best for an
organization’s productivity.
○ Organizational performance increases as span of control increases, but
only up to the point that managers no longer have the ability to
coordinate and supervise the large numbers of employees underneath
them.
○ Tall→many hierarchical lvls and narrow SOC
○ Flat → few levels and wide SOC
, 4. Centralization
● Centralization: dictates where decisions are formally made in organizations
● Where decisions are formally made
● If only top managers have authority to make final decisions → organization has a
highly centralized structure
● If lower-level employees are given authority to make decisions, an organization has a
“decentralized” structure
● Decentralization becomes necessary as a company grows
● Centralized structures tend to concentrate power in tighter groups of individuals in
the firm
● Decentralized structures are becoming more popular, as manager can’t keep up and
make all decisions on their own
5. Formalization
● the degree to which rules and procedures are used to standardize behaviors and
decisions in an organization
● Formalization is a necessary coordination mechanism to get a standardized product
or deliver a standardized service
● Research: a manager might try to make employees feel more empowered by
decentralizing decision making, but evidence suggests this effect is ineffective when
the employee’s job roles have a high level of formalization.
Mechanistic vs organic organizations
Organizational structure
● The organizational structure formally dictates how jobs and tasks are divided and
coordinated between individuals and groups within an organization
● The organizational chart is a drawing that represents every job in the organization
and the formal reporting relationships between those jobs
● 5 elements of organizational structure:
○ Work specialization
○ Chain of command
○ Span of control
○ Centralization
○ Formalization
5 elements of Organizational structure (W.COC.SOC,C,F)
1. Work specialization
● Work specialization:
○ the degree to which tasks in an organization are divided into separate jobs
○ Also known as division of labor
○ Impacts productivity, training, flexibility, job satisfaction
○ Henry Ford divided tasks among the employees to such degree that each
employee might perform only a single task
○ Having only one task perform allowed those employees to be extremely
productive at doing that one thing
○ Highly specialized jobs can cause organizations to lose the ability associated
with employees who can be flexible in what they do.
■ employees fail to update or practice other skills
○ Can be acceptable in larger companies with more employees but become
problematic in smaller firms.
○ Could struggle with job satisfaction
■ How happy would you be doing same job everyday?
○ Better productivity, reduced training, reduced flexibility, reduces satisfaction
2. Chain of command
● Chain of command:
○ who reports to whom in the organization
● Illustrates formal authority relationships
○ Specific flow of authority down through the levels of an organizations
structure
,● Helps maintain order, control, and predictable performance
3. Span of control
● # of employees each manager in the organization has responsibility for
● The span of control can be narrow (2 subordinates) or wide (10 employees), with
different benefits for each
● Affects how “tall” or “flat” the organizational chart becomes
● Narrow span:
○ Allows managers to be much more hands on with employees, using directive
leadership style while developing close mentorship relationship.
○ Especially important if manager has substantially more skill or expertise than
subordinates
○ Narrower the span of control, more productive employees would
become
○ Requires organization to hire many managers, which can significantly
increase labour costs.
○ Communication becomes more complex
○ Decision making becomes slower, has to be approved at every step
○ Research suggests that a moderate span of control is best for an
organization’s productivity.
○ Organizational performance increases as span of control increases, but
only up to the point that managers no longer have the ability to
coordinate and supervise the large numbers of employees underneath
them.
○ Tall→many hierarchical lvls and narrow SOC
○ Flat → few levels and wide SOC
, 4. Centralization
● Centralization: dictates where decisions are formally made in organizations
● Where decisions are formally made
● If only top managers have authority to make final decisions → organization has a
highly centralized structure
● If lower-level employees are given authority to make decisions, an organization has a
“decentralized” structure
● Decentralization becomes necessary as a company grows
● Centralized structures tend to concentrate power in tighter groups of individuals in
the firm
● Decentralized structures are becoming more popular, as manager can’t keep up and
make all decisions on their own
5. Formalization
● the degree to which rules and procedures are used to standardize behaviors and
decisions in an organization
● Formalization is a necessary coordination mechanism to get a standardized product
or deliver a standardized service
● Research: a manager might try to make employees feel more empowered by
decentralizing decision making, but evidence suggests this effect is ineffective when
the employee’s job roles have a high level of formalization.
Mechanistic vs organic organizations
