Chapter 4 - The dynamics of alternative organizational forms
Organizing the Vertical Structure
Organizing leads to the creation of an organizational structure. Organization structures are
defined as; First, a set of formal tasks assigned to individuals and departments; Second,
formal reporting relationships, including lines of authority, decision responsibility, number of
hierarchical levels and span of managers’ control; and third, the design of systems to ensure
effective coordination of employees across departments.
Work Specialization
Work Specialization is the degree to which organizational tasks are subdivided into separate
jobs. Employees within each department perform only the tasks relevant to their specialized
function. When organizations face new strategic issues, managers often create new
positions or departments to deal with them. When work specialization is extensive,
employees specialize in a single task. Jobs tend to be small, but they can be performed
efficiently. A great example of specialization is on an automobile assembly line, where each
employee performs the same task over and over again. It would be inefficient to have one
employee build an entire automobile. Although all the advantages, company’s are still
moving away from specialization because of the isolation, separation, and lack of
coordination can slow a company down.
Chain of Supply Command
The Chain of Supply Command is an unbroken line of authority that links all employees in an
organization and shows who reports to whom. It is associated with two underlying principles.
Unity of Command which means that each employee is held accountable to only one
supervisor. The Scalar Principle refers to a clearly defined line of authority in the
organization that includes all employees. Authority is the formal and legitimate right of a
manager to make decisions, issue orders and allocate resources to achieve organizationally
desired outcomes. Authority is distinguished by three characteristics:
1. Authority is vested in organizational positions, not people.
2. Authority flows down the vertical hierarchy.
3. Authority is accepted by subordinates.
Responsibility is the duty to perform the task or activity as assigned. Accountability is the
mechanism through which authority and responsibility are brought into alignment.
Accountability means that the people with authority and responsibility are subject to reporting
and justifying task outcomes to those above them in the chain of command. Delegation is
the process managers use to transfer authority and responsibility to positions below them in
the hierarchy.
An important distinction in many organizations is between line authority and staff authority,
reflecting whether managers work in a line or staff departments in the organization’s
structure. Line departments perform tasks that reflect the organization’s primary goal and
mission. In an internet-based company, line departments would be those that develop and
manage online offerings and sales. In a software company, line departments make and sell
the product. Staff departments include all those that provide specialized skills in support of
line departments. Staff departments have an advisory relationship with line departments and
typically include marketing, labor relations, research, accounting, and human resources. Line
Authority means that people in management positions have formal authority to direct and
control immediate subordinates. Staff Authority is narrower and includes the right to advise,
, recommend and counsel in the staff specialists’ area of expertise.
Span of Management
The Span of Management is the number of employees reporting to a supervisor. This
characteristic of structure determines how closely a supervisor can monitor subordinates.
The following list describes the factors that are associated with less supervisor involvement
and thus larger spans of control:
1. Work performed by subordinates is stable and routine.
2. Subordinates perform similar work tasks.
3. Subordinates are concentrated in a single location.
4. Subordinates are highly trained and need little direction in performing tasks.
5. Rules and procedures defining task activities are available.
6. Support systems and personnel are available for the manager.
7. Little time is required in non-supervisory activities, such as coordination with other
departments or planning.
8. Managers’ personal preferences and styles favor a large span.
The average span of control used in an organization determines whether the structure is tall
or flat. A tall structure has an overall narrow span and more hierarchical levels. A flat
structure has a wide span, is horizontally dispersed, and has fewer hierarchical levels.
Centralization and Decentralization
Centralization and decentralization pertain to the hierarchical level at which decisions are
made. Centralization means that decision authority is located near the top of the
organization. Decentralization means that decision authority is pushed downwards to lower
organizational levels.
Departmentalization
Departmentalization is the basis for grouping positions into departments and departments
into the total organization.
Vertical Functional Approach (U-Form or Unitary Structure)
In a Functional Approach, activities are grouped together by common function from the
bottom to the top of the organization. The functional structure groups are positioned into
departments based on similar skills, expertise, work activities, and resource use. The
functional approach is a strong vertical design. Information flows up and down the vertical
hierarchy, and the chain of command converges at the top of the organization. In a
functional structure, people within a department communicate primarily with others in the
same department to coordinate work and accomplish tasks or implement decisions that are
passed down the hierarchy. Grouping employees by common tasks permit economies of
scale and efficient resource use. Because the chain of command converges at the top, the
functional structure also offers a way to centralize decision-making and provide unified
direction from top managers. The main disadvantages reflect barriers that exist across
departments, because people are separated into distinct departments, communication and
coordination across functions are often poor, causing a slow response to environmental
change. Innovation and change require the involvement of several departments. Decisions
involving more than one department may pile up at the top of the organizations and be
delayed.
Organizing the Vertical Structure
Organizing leads to the creation of an organizational structure. Organization structures are
defined as; First, a set of formal tasks assigned to individuals and departments; Second,
formal reporting relationships, including lines of authority, decision responsibility, number of
hierarchical levels and span of managers’ control; and third, the design of systems to ensure
effective coordination of employees across departments.
Work Specialization
Work Specialization is the degree to which organizational tasks are subdivided into separate
jobs. Employees within each department perform only the tasks relevant to their specialized
function. When organizations face new strategic issues, managers often create new
positions or departments to deal with them. When work specialization is extensive,
employees specialize in a single task. Jobs tend to be small, but they can be performed
efficiently. A great example of specialization is on an automobile assembly line, where each
employee performs the same task over and over again. It would be inefficient to have one
employee build an entire automobile. Although all the advantages, company’s are still
moving away from specialization because of the isolation, separation, and lack of
coordination can slow a company down.
Chain of Supply Command
The Chain of Supply Command is an unbroken line of authority that links all employees in an
organization and shows who reports to whom. It is associated with two underlying principles.
Unity of Command which means that each employee is held accountable to only one
supervisor. The Scalar Principle refers to a clearly defined line of authority in the
organization that includes all employees. Authority is the formal and legitimate right of a
manager to make decisions, issue orders and allocate resources to achieve organizationally
desired outcomes. Authority is distinguished by three characteristics:
1. Authority is vested in organizational positions, not people.
2. Authority flows down the vertical hierarchy.
3. Authority is accepted by subordinates.
Responsibility is the duty to perform the task or activity as assigned. Accountability is the
mechanism through which authority and responsibility are brought into alignment.
Accountability means that the people with authority and responsibility are subject to reporting
and justifying task outcomes to those above them in the chain of command. Delegation is
the process managers use to transfer authority and responsibility to positions below them in
the hierarchy.
An important distinction in many organizations is between line authority and staff authority,
reflecting whether managers work in a line or staff departments in the organization’s
structure. Line departments perform tasks that reflect the organization’s primary goal and
mission. In an internet-based company, line departments would be those that develop and
manage online offerings and sales. In a software company, line departments make and sell
the product. Staff departments include all those that provide specialized skills in support of
line departments. Staff departments have an advisory relationship with line departments and
typically include marketing, labor relations, research, accounting, and human resources. Line
Authority means that people in management positions have formal authority to direct and
control immediate subordinates. Staff Authority is narrower and includes the right to advise,
, recommend and counsel in the staff specialists’ area of expertise.
Span of Management
The Span of Management is the number of employees reporting to a supervisor. This
characteristic of structure determines how closely a supervisor can monitor subordinates.
The following list describes the factors that are associated with less supervisor involvement
and thus larger spans of control:
1. Work performed by subordinates is stable and routine.
2. Subordinates perform similar work tasks.
3. Subordinates are concentrated in a single location.
4. Subordinates are highly trained and need little direction in performing tasks.
5. Rules and procedures defining task activities are available.
6. Support systems and personnel are available for the manager.
7. Little time is required in non-supervisory activities, such as coordination with other
departments or planning.
8. Managers’ personal preferences and styles favor a large span.
The average span of control used in an organization determines whether the structure is tall
or flat. A tall structure has an overall narrow span and more hierarchical levels. A flat
structure has a wide span, is horizontally dispersed, and has fewer hierarchical levels.
Centralization and Decentralization
Centralization and decentralization pertain to the hierarchical level at which decisions are
made. Centralization means that decision authority is located near the top of the
organization. Decentralization means that decision authority is pushed downwards to lower
organizational levels.
Departmentalization
Departmentalization is the basis for grouping positions into departments and departments
into the total organization.
Vertical Functional Approach (U-Form or Unitary Structure)
In a Functional Approach, activities are grouped together by common function from the
bottom to the top of the organization. The functional structure groups are positioned into
departments based on similar skills, expertise, work activities, and resource use. The
functional approach is a strong vertical design. Information flows up and down the vertical
hierarchy, and the chain of command converges at the top of the organization. In a
functional structure, people within a department communicate primarily with others in the
same department to coordinate work and accomplish tasks or implement decisions that are
passed down the hierarchy. Grouping employees by common tasks permit economies of
scale and efficient resource use. Because the chain of command converges at the top, the
functional structure also offers a way to centralize decision-making and provide unified
direction from top managers. The main disadvantages reflect barriers that exist across
departments, because people are separated into distinct departments, communication and
coordination across functions are often poor, causing a slow response to environmental
change. Innovation and change require the involvement of several departments. Decisions
involving more than one department may pile up at the top of the organizations and be
delayed.
