What is organizational structure?
An organizational
structure defines how activities such as task allocation, coordination and
supervision are directed towards the achievement of organizational aims. It can
also be considered as
the viewing glass or perspective through which individuals see their organization and its environment. Organizations are a variant of clustered entities. Organizational structure is a system used to define a hierarchy within an organization. It identifies each job, its function and where it reports to within the organization. This structure is developed to establish how an organization operates and assists an organization in obtaining its goals to allow for future growth.
the viewing glass or perspective through which individuals see their organization and its environment. Organizations are a variant of clustered entities. Organizational structure is a system used to define a hierarchy within an organization. It identifies each job, its function and where it reports to within the organization. This structure is developed to establish how an organization operates and assists an organization in obtaining its goals to allow for future growth.
A structure depends
on the organization's objectives and strategy. In a centralized structure, the top
layer of management has
most of the decision making power
and has tight control over departments and divisions. In a
decentralized structure, the decision making power is distributed and the
departments and divisions may have different degrees of
independence. A company such
as Proctor & Gamble that sells multiple products may
organize their structure so that groups are
divided according to each product and depending on geographical area as well.
Importance of
Organization Structure
Decision Making
Organizational
structure is particularly important for decision making. Most companies either
have a tall or flat organizational structure. Small companies usually use a
flat organizational structure. For example, a manager can report directly to
the president instead of a director, and her assistants are only two levels
below the president. Flat structures enable small companies to make quicker
decisions, as they are often growing rapidly with new products and need this
flexibility. Small companies should not even worry about organizational
structure, unless they have at least 15 employees. The reason is that employees
in extremely small organizations have numerous responsibilities, some of which
can include multiple functions. For example, a product manager also might be
responsible for marketing research and advertising.
Large
organizations often have many tiers or echelons of management. As a smaller
organization grows, it can decide to add more management levels. Roles become
more defined. Therefore, it is important to know which people oversee certain
functions.
Better Communication
The importance of
organizational structure is particularly crucial for communication.
Organizational structure enables the distribution of authority. When a person
starts a job, he knows from day one to which he will report. Most companies
funnel their communication through department leaders. For example, marketing
employees will discuss various issues with their director. The director, in
turn, will discuss these issues with the vice president or upper management.
Evaluating
Employee Performance
Organizational
structure is important for evaluating employee performance. The linear
structure of functional and product organizational structures allow supervisors
to better evaluate the work of their subordinates. Supervisors can evaluate the
skills employees demonstrate, how they get along with other workers, and the
timeliness in which they complete their work. Consequently, supervisors can
more readily complete semiannual or annual performance appraisals, which are
usually mandatory in most companies.
Achieving Goals
Organizational
structure is particularly important in achieving goals and results.
Organizational structure allows for the chain of command. Department leaders
are in charge of delegating tasks and projects to subordinates so the
department can meet project deadlines. In essence, organizational structure
fosters teamwork, where everyone in the department works toward a common goal.
Prevention/Solution
Organizational
structure enables companies to better manage change in the marketplace,
including consumer needs, government regulation and new technology. Department
heads and managers can meet, outline various problem areas, and come up with a
solution as a group. Change can be expected in any industry. Company leaders
always should strive to find the best organizational structure to meet those
changes.
Smooth
flow of Information
The
flow of information is essential to an organization’s success. The organization
structure should be designed to ensure that individuals and departments that
need to coordinate their efforts have lines of communication that are built
into the structure. The financial planning and analysis department might report
to the Chief Financial Officer and the Senior Vice President of Marketing,
because both of these members of the top management team depend on information
and reports provided by financial planning.
Reporting
Relationships
Reporting
relationships must be clear so all members of the organization understand what
their responsibilities are and know to whom they are accountable. These clear
relationships make it easier for managers to supervise those in lower
organization levels. Each employee benefits by knowing whom they can turn to
for direction or help. In addition, managers are aware of who is outside the
scope of their authority, so they do not overstep their bounds and interfere
with another manager’s responsibilities.
Growth
and Expansion
Companies
that grow rapidly are those that make the best use of their resources,
including management talent. A sound organization structure ensures that the
company has the right people in the right positions. The structure may suggest
weak spots or deficiencies in the company’s current management team. As the
company grows, the organization structure must evolve with it. Many times more
layers of management are created, when one department head has too many
individuals reporting to him at one time to give each employee the attention
and direction needed for the employee to succeed.
Task
Completion
A
well-designed organization structure facilitates the completion of projects.
Project managers can better identify the human resources available to them if
the scope of each department’s responsibility -- and each team member’s
capabilities--are clear. A project to develop a new product would require
market research. The project manager needs to know who in the organization can
provide this research, and whose permission must be obtained for the research
to be done.
Fits
Company’s Needs
Companies
in different industries require different mixes of talent and a relatively
greater emphasis on certain management functions. A software company often has
a large development staff. Structuring the reporting relationships within the
development team so creativity and productivity are maximized, and deadlines
are met, is vital to that type of company’s success. Companies often have to go
through a reorganization phase in which individual positions or even whole
departments are repositioned on the organization chart in an effort to better
utilize the company’s human resources and make the operation run more smoothly.
